With Apple's iPhone sales showing little signs of rebound, its parts suppliers in Korea are expected to suffer setbacks in their second-quarter earnings.

In a quarterly earnings report in April, Apple said it sold some 51.2 million iPhones in the first quarter this year, down 16 percent from a year ago.

The dwindling supply for iPhones, however, is coming as a significant blow to its parts manufacturers here, which are mostly Samsung and LG affiliates, according to industry sources.

"Local iPhone parts manufacturers cannot be free from the impact of reduced iPhone shipments, but the extent of the damage will vary from how much they rely on Apple," said a source, asking for anonymity,

In particular, LG Innotek, the camera module manufacturing subsidiary of LG Group, posted some 400 million won in operating profit in the first quarter, down 99.4 percent from a previous year. Apple is the subsidiary's biggest client, taking up some 30 percent of its sales.

Oh Sae-joon, an analyst from Heungkuk Securities, said in a report that LG Innotek will continue the poor performance for the rest of the first half of this year. But LG Innotek may offset this by winning an exclusive contract with Apple over supplying its camera modules to the iPhone 7, as Sony has recently withdrawn its camera module business, according to the analyst.

Samsung Electro-Mechanics, the electronic components unit of Samsung which also manufactures camera modules for smartphones, will also be hit by the iPhone sales decline, though its losses won't be as massive as its LG counterpart.

The Samsung affiliate posted 42.9 billion won in operating profit in the first quarter, down 50 percent from the previous year. But the company dispelled concerns over poor iPhone sales, as its major revenue source comes from sales of Galaxy S7.

The company said it plans to roll out new camera modules as early as July, in a bid to cut heavy reliance on some clients and diversify its distribution channels into China. The company recently signed a camera module supply contract with Chinese handset manufacturers whose new products, equipped with the modules, are expected to be launched within the third quarter.

LG Display, which supplies LCDs to iPhones, is another parts manufacturer hit hard by the iPhone sales decline.

The company said in a first-quarter earnings report that its mobile panel business took up 23 percent of its total sales, down 9 percentage points from the previous quarter.

Critics and market analysts voiced their consensus that its mobile display business would continue to face a bumpy road in the coming quarters. LIG Investment & Securities analyst Shin Hyun-joon said, "Apple's sluggish performance adds to gloomy pictures for a potential rebound of LG Display."

Local chipmakers ¯ including Samsung Electronics and SK hynix ¯ supply mobile DRAMs and NAND flash memory chips to Apple.

Bae Seong-young, an analyst from Hyundai Securities, said: "Foreign investors' concerns over iPhone sales can be interpreted as concerns over Samsung Electronics."

A semiconductor industry official said, "The iPhone sales decline may affect Samsung's chip sales to some extent, but the company is expected to offset this with sales of its flagship handset, the S7."

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved