LG Innotek posts record Q3 sales, but profit misses forecasts

LG Innotek’s record third-quarter sales failed to cushion a sharp currency hit, with operating profit more than halving as higher material costs eroded gains from strong demand for smartphone cameras.

The Apple supplier said Tuesday that operating profit fell 53.4 percent from a year earlier to 94.8 billion won ($71.5 million), less than half the 197.3 billion won forecast compiled by financial data provider FnGuide. Revenue rose 18.6 percent to 6.37 trillion won, a third-quarter record.

Its operating margin shrank to 1.5 percent from 3.8 percent a year earlier.

The company blamed a sharp decline in the won-dollar exchange rate between raw-material purchases and product shipments. Materials bought when the dollar was stronger inflated costs relative to sales booked after the won strengthened.

Optical solutions, dominated by smartphone camera modules, accounted for nearly 85 percent of revenue. The division’s sales rose 20.6 percent to 5.40 trillion won as customers ramped up new smartphone production and automotive camera shipments to a North American customer increased.

The results highlight LG Innotek’s reliance on cameras as it pushes into semiconductor substrates used in artificial intelligence computing.

Package solutions revenue rose 10.1 percent to 481.8 billion won, supported by demand for high-value substrates and increased shipments of flip-chip ball grid array, or FC-BGA, substrates for PC processors. The business contributed just 7.6 percent of total sales.

LG Innotek plans to enter the market for more complex substrates used in AI accelerators and servers in stages through 2028. It is pursuing factory expansion and considering additional investment in South Korea and overseas.

The company also aims to cut camera production costs through AI-assisted automation, in-house manufacturing of key components and diversification of production sites.

Analysts expect cost pressure to ease in the fourth quarter as materials purchased at lower exchange rates enter production. Longer term, expanding earnings from semiconductor substrates will be critical to reducing its dependence on smartphone cameras.