iPhone 7 Plus dual camera module supplier LG Innotek profitability to drive up.
According to the Korea Times, the lukewarm response to the new iPhone series will not aggravate LG Innotek's profitability in the second half, as the firm is expected to have higher margins backed by its dual-camera modules supplied to iPhone 7 Plus, analysts said Friday.
This comes as the company needs to turn around the underperformance in the first half of the year. The camera module manufacturer posted a whopping operating loss of some 34 billion won ($30.98 million) in the second quarter, turning to deficit from a year ago, hit hard by weak demand for components due to the global smartphone market slowdown.
But experts said the company may be able to offset this later this year, as the firm is the exclusive module supplier for the dual camera, which Apple CEO Tim Cook called the major draw for the new Apple smartphone. Dual-camera modules are known to generate more than one and a half the profit margins compared with a normal camera module.
"LG Innotek will stand to benefit from the new iPhone introduction, as the firm is the only vendor for the highly profitable dual-camera modules," Kevin Lee, an analyst at Korea Investment & Securities, said.
"Global sales for the new iPhone series is estimated to reach some 62 million this year, up 21 percent from its predecessors ― iPhone 6S and 6S Plus," he said, forecasting that customers disappointed with the previous models are likely to change their handsets this year. Chinese mobile carriers' aggressive subsidy expansion drive will also help drive up sales for the iPhone 7 and 7 Plus, according to the analyst.
Despite the bright market prediction, shares of LG Innotek continued to fall after Apple unveiled the new iPhone series and the Apple Watch 2 on Thursday. LG Innotek closed at 79,300 won, down 2.46 percent from a day ago.
But Kim Ji-san, an analyst at Kiwoom Securities, also maintained the rosy outlook for Innotek's potential rebound in the second half, hinting that the falling stock value would be temporary due to the unsurprising features of the iPhone 7.
"Chances are low for the success of the iPhone 7 and iPhone 7 Plus, as they come with no innovative change," he said. But the new handsets will help Apple lift its earnings in the second half, compared with the first half, as the company suffered from weak handset sales in the period, he said. In April, Apple said it sold some 51.2 million iPhones in the first quarter, down 16 percent from a year ago. Kim said Innotek will enjoy outstanding profit growth in the fourth quarter of the year.
Ian Fogg of IHS Technology said: "We expect the new iPhone 7 camera design will successfully convince consumers to upgrade their older iPhones, despite the lack of headphone sockets."