[Yonhap]
[Yonhap]

Optimism surrounding AI semiconductors is spilling over into the semiconductor substrate market, drawing sustained buying from foreign investors even as LG Innotek's share price has fallen nearly half from its recent peak.

LG Innotek closed Thursday at 953,000 won ($620), down 0.42 percent from the previous session, according to Korea Exchange. The stock had surged to an intraday high of 1,788,000 won on June 1 before retreating to roughly half that level in less than a month.

Foreign investors have continued buying through the decline. They net purchased LG Innotek shares for four consecutive trading sessions from Monday through Thursday, accumulating 179.8 billion won — the largest net foreign buying of any stock this week.

LG Innotek is widely regarded as a prime beneficiary of iPhone demand. The company has long been discounted by the market for its heavy reliance on Apple, but sentiment is shifting as its core optical solutions business shows signs of earnings recovery and expectations grow for its semiconductor substrate segment.

Financial data provider FnGuide puts LG Innotek's operating profit forecast for this year at 1.1116 trillion won, a 69.6 percent increase from 665 billion won last year. If realized, that would mark the first time annual operating profit has exceeded 1 trillion won since 2022.

The outlook for the second quarter has also improved sharply. The market expects second-quarter operating profit to reach 145 billion won, more than 10 times the 11.4 billion won posted in the same period last year. Although the second quarter is typically the slow season for the optical business, expectations for iPhone 17 series sales have raised the possibility of a second consecutive earnings surprise.

Analysts are paying particular attention to the package solutions segment, which includes semiconductor substrates. The unit accounted for just 7.9 percent of first-quarter sales, but contributed around 13 percent of operating profit — high margins that analysts say position it as a key growth driver going forward.

"In the past 15 years — from 2010 to 2025 — LG Innotek has posted operating profit exceeding 200 billion won in the second and fourth quarters, its weakest seasons, only once, in 2022," said Kim Dong-won, an analyst at KB Securities. "We expect operating profit to surpass 200 billion won in both the second and fourth quarters this year, which would signal the start of a genuine earnings recovery."

The company is also aggressively expanding its next-generation FC-BGA (flip-chip ball grid array) substrate business. LG Innotek entered the market as a latecomer in 2022, but rapidly growing demand from major US technology companies has prompted it to accelerate capacity expansion.

The company committed 600 billion won to investment at its factory in Gumi, North Gyeongsang Province, last year and plans to invest more than 1 trillion won this year to scale up a new factory in Vietnam. KB Securities forecasts FC-BGA-related sales will grow from 140 billion won this year to 1.2 trillion won by 2028. LG Innotek aims to begin mass production of AI semiconductor substrates for training and inference applications next year and targets operating profit of around 1 trillion won from its package solutions segment by 2031.

Brokerages have been raising their price targets in quick succession. KB Securities set a target price of 2 million won for LG Innotek, implying more than double the current share price. Yang Seung-su, an analyst at Meritz Securities, said that while Samsung Electro-Mechanics faces growing concerns about a short-term correction since June, the direction of its core growth strategy remains unchanged.

As the AI semiconductor market expands beyond memory chips into substrates and packaging technology, attention is increasingly focused on the growth prospects of companies in the space. Industry watchers expect demand for high-value-added semiconductor substrates to rise steadily, making LG Innotek's earnings trajectory — backed by both its optical business and package solutions segment — a key variable for its share price going forward.


rainbow@heraldcorp.com