UPDATED. 2019-11-20 06:22 (수)
LG Innotek's substrate factory production facility being reduced by 70%
LG Innotek's substrate factory production facility being reduced by 70%
  • Gijong Lee
  • 승인 2019.05.24 12:10
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Smartphone substrate production capacity 50.4M sheets → 15.6M sheets
Another variable is relocation of LGE's smartphone production line to Vietnam
LG Innotek's Cheongju factory
LG Innotek's Cheongju factory

The smartphone substrate factory production capacity of LG Innotek has plunged by 70%. As LG Electronics has decided to relocate its smartphone production line in Pyeongtaek to Vietnam, it is unlikely that LG Innotek's PCB factory will survive.

According to a report by LG Innotek filed to the Financial Supervisory Service in the first quarter, the company's annual smartphone substrate (HDI) production capacity has dropped from 504,000 sheets last year to 156,000 sheets this year. Last year, LG Innotek's HDI production capacity, including Cheongju and Osan sites, was 504,000 sheets. After the Osan factory was integrated into the Cheongju factory, the production capacity of substrates significantly decreased to 30% of last year's total. LG Innotek said, "The overall HDI business is not good. So we are reducing the capacity. We have unified the Osan factory and Cheongju factory for management efficiency."

Most of the LG Innotek's substrates are applied to LG Electronics smartphones. In recent years, the sluggish sales of LG Electronics' smartphones contributed to the downtrend of LG Innotek's substrate production capacity. The yearly production capacity that was once 564,000 sheets in 2013~2016 has decreased on 504,000 sheets since 2017. Last year, the factory utilization rate also plummeted. The utilization rate, which had been 80% for many years until 2017, dropped to 51% last year. The utilization rate of substrate factories in Cheongju and Osan was 61.9% in the first half, which fell to 39.3% in the second half of that year. The rate was 37.3% in the third quarter and 41.3% in the fourth quarter. The Osan factory stopped operating in the fourth quarter of last year, and the factory site was sold to OST Partners on January 31st.

In addition, as LG Electronics is relocating the Pyeongtaek smartphone production lines to Haiphong, Vietnam, the fate of the Cheongju site became uncertain. An industry official said, "If the monthly production capacity is around 10,000 sheets, it amounts to operating just one production line. Still, due to various considerations for each product's specifications, it's difficult to come to a conclusion."

When asked about the possibility of selling the business, an official from LG Innotek said, "It is true that the HDI business has been reduced to some extent. However, it has not reached the point of an official announcement. At the current level, we should assume that the HDI business will continue." He also added, "And you can see this as we are investing and supplying where it makes profits via efficiency. For the relocation of LG Electronics production line to Vietnam, I think we should keep an eye on it."

Meanwhile, the capacity utilization rate at the substrate factory in the first quarter rose to 97.3%. Quarterly production capacity (39,000 sheets) was reduced to 30% level of the previous year, and production amount (38,000 sheets) decreased to 45% of the same period. The high capacity utilization rate was the result of these changes. The number of employees of the substrate material division, which HDI belongs to, is 1,899, reduced over 200 people from the first quarter (2103) last year.

In the substrate materials division, production capacity and production results are similar to those of the same period last year, excluding HDI. The capacity utilization rate in the first quarter was 84.7% for photomasks, 97.9% for tape substrates, and 84.9% for semiconductor substrates. All of these items except HDI are produced at the Gumi factory.



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