LS Cable's Donghae factory expansion expected to lift earnings from next year

Taihan Cable's second submarine cable plant in Dangjin targets mass production next year

Both companies wrapping up record investments of around 1 trillion won each

Submarine cables carry operating margins roughly double those of underground cables

High-margin turnkey contracts seen driving further profitability gains

LS Cable & System employees inspect submarine cables at the company's Donghae plant. [Provided by LS Cable & System]
LS Cable & System employees inspect submarine cables at the company's Donghae plant. [Provided by LS Cable & System]

South Korea's two leading cable makers are nearing the end of a record-scale investment drive in submarine cable facilities — a key piece of infrastructure for AI data centers. Submarine cable is a high-margin business in which a single contractor handles everything from design to installation, and analysts expect both companies to sustain steep earnings growth next year.

LS Cable, Taihan Cable near completion of 1 trillion won submarine cable investments

A rendering of Taihan Cable & Solution's second submarine cable factory under construction in Dangjin, South Chungcheong Province. [Provided by Export-Import Bank of Korea]
A rendering of Taihan Cable & Solution's second submarine cable factory under construction in Dangjin, South Chungcheong Province. [Provided by Export-Import Bank of Korea]

Jang Nam-hyeon, a researcher at Korea Investment & Securities, wrote in a report that LS Cable & System's expanded production capacity in buildings four and five of its Donghae plant is set to be fully reflected in earnings from the fourth quarter. He added that the completion of building five would triple the company's HVDC cable production capacity and that revenue recognition from a project for TenneT would begin in earnest. TenneT, a German power company, has a long-term supply contract with LS Cable & System worth 3 trillion won ($2.22 billion).

LS Cable & System is also building a submarine cable factory in the United States, scheduled for completion in 2027 and expected to contribute to sales from the following year. A bus duct factory in Mexico is set to begin mass production in 2027 as well.

Taihan Cable & Solution's second submarine cable plant within its Dangjin factory complex is targeting mass production next year. Son Hyeon-jeong, a researcher at Yuanta Securities Korea, said that once the second plant begins operation, the company's capabilities across production, transport and installation will be strengthened, describing the move as a shift away from general-purpose cables toward a higher-value business structure.

Both expansion projects have been described as the largest investments in their respective companies' histories. LS Cable & System's submarine cable factory in Virginia, which cost 1 trillion won, will become the largest submarine cable production facility in the United States upon completion. At the Donghae plant, the company invested 155.5 billion won in the building four expansion and 100 billion won in the building five expansion.

Taihan Cable & Solution is also targeting a total investment of 1 trillion won by next year and has so far deployed roughly half of that amount.

Submarine cables: a high-margin business with double the operating profit margin

Submarine cable is a high-margin, oligopolistic business that requires advanced technical expertise. Only five companies worldwide are capable of manufacturing submarine cables, including LS Cable & System and Taihan Cable & Solution.

While neither company discloses segment-level profit margins in detail, LS Cable & System revealed during its first-quarter conference call this year that its submarine cable division carries an operating profit margin of 15 percent — roughly double that of its legacy underground cable business.

Jang Jae-hyeok, a researcher at Meritz Securities, said the advantages of a supplier-dominated market are increasingly showing up in both companies' earnings.

Turnkey capability proven through contractor acquisitions and cable-laying vessels

A cable-laying vessel operated by LS Marine Solution. [Provided by LS Marine Solution]
A cable-laying vessel operated by LS Marine Solution. [Provided by LS Marine Solution]

Both companies' ability to take on turnkey contracts — covering everything from design to installation — is another factor boosting profitability. LS Cable & System operates LS Marine Solution, a submarine cable installation specialist, as a subsidiary. The company deployed a 7,000-ton cable-laying vessel (CLV) on a Malaysian power grid project earlier this month, and a next-generation HVDC cable-laying vessel is currently under construction.

Taihan Cable & Solution operates two CLVs — one rated at 6,200 tons and another at 11,000 tons. Last year, the company acquired Ocean C&I, a submarine cable installation specialist, to bolster its turnkey contracting capabilities. Through that acquisition, it secured turnkey contracts for the Anma offshore wind project and the Yeonggwang Nagwol offshore wind project, both of which are currently under construction.


klee@heraldcorp.com