LG Innotek may buy the LG Electronics A3 factory in Gumi

LG Innotek may buy an LG Electronics factory in a move to cover growing camera module orders from Apple.

“LG Innotek is planning to acquire the LG Electronics A3 Plant, one of the company’s production factories in Gumi, [North Gyeongsang],” said a source. “It is currently in the price negotiation process, and [the deal] will be finalized by the first half of next year.”

The electronics maker owns three plants in Gumi — the A1 Plant, A2 Plant and A3 Plant. LG Innotek, 41 percent owned by LG Electronics, has been using production lines of the Gumi factories to manufacturer camera modules, and it now plans on buying one of the plants.

The expansion follows a surge in smartphone camera module orders, especially from Apple.

LG Innotek logged revenue of 9.2 trillion won ($7.8 billion) through the third quarter this year, up 59.5 percent on year. Of the total revenue, 6.7 trillion won was earned from its Optics Solution division, which deals with camera modules used for smartphones and augmented reality (AR) and virtual reality (VR) gadgets.

An estimated 60 to 70 percent of the company's manufactured camera modules are supplied to Apple.

The global supply crisis is a nightmare to some, but was an opportunity to LG Innotek. An industry insider said “Apple requested LG Innotek to increase production after it faced problems getting parts supplied from factories in Southeast Asia due to Covid-19.”

Sharp’s factory in Ho Chi Minh, Vietnam, was shut in September due to rising Covid-19 cases. The Osaka-based company was considered a rival of LG Innotek, and orders for camera modules increased as Apple needed to keep up production.

LG Innotek shares have been on the rise. The company traded at 288,000 won on Nov. 19, up 1.05 percent from the previous day and up 46.2 percent on month.

LG Electronics moved the production of TVs and digital signs at two of its Gumi factories to Indonesia in May.

LG Electronics can't fully utilize the plants to manufacture its products due to a global chip shortage, but LG Innotek needs space and facilities to ramp up production.

Since LG Electronics exited the smartphone market in July, it has been working more closely with Apple.

A total of 160 out of some 440 LG Best Shops in Korea started selling Apple products, such as iPhones, iPads and Apple Watches in August. Although the stores don't sell MacBooks and AirPods due to LG Electronics selling laptops and wireless earphones, the two are expanding cooperation in areas where they don't compete with each other. LG Chem and LG Display supply batteries and organic light-emitting diode (OLED) panels to Apple.

LG Innotek makes camera modules for AR and VR products, which could also help with Apple's business in the metaverse.

“With trends in technology rapidly changing, strengthening and developing the intermediate goods sector is becoming more promising,” said Lee Seong-yeob, a professor teaching data and technology at Korea University’s Graduate School of Management and Technology. “LG strengthening its parts business is also seen as a move with similar intentions.”

BY KIM KYUNG-JIN, LEE TAE-HEE [lee.taehee2@joongang.co.kr]