LG Innotek to up capex on camera modules ahead of new iPhone launch

South Korea’s LG Innotek Co., a major camera module supplier for Apple iPhones, will spend 80% of its 2020 operating profit, or 547.8 billion won ($495 million), on facility investment for its camera module producing unit this year, ahead of the 2021 iPhone lineup release.

The capital expenditure plan, announced on Feb. 18, accounts for a quarter of its equity capital. It will mark its largest facility spending since 2018 when LG Innotek allocated 873.7 billion won for facility investment to bolster its 3D sensing modules used for facial recognition.

The LG Group unit is the exclusive supplier of sensor-shift optical image stabilizers (OIS) for Apple iPhones. The aggressive investment plan comes as Apple Inc. is widely expected to significantly upgrade the camera capabilities for its 2021 iPhone models expected to launch in the second half of this year. The entire iPhone 13 lineup, Apple’s next-generation iPhones, will reportedly feature sensor-shift OIS. In comparison, only high-end models of the iPhone 12 Pro Max are equipped with the sensor-shift OIS system.

Sensor-shift OIS helps the camera stabilize an image by rapidly adjusting its optical path in real time to correct for a shaky hand or bumpy car. The sensor-shift OIS modules are more expensive than other modules. Market observers said Apple is likely to add a new vendor for the sensor-shift camera modules to the existing supplier of LG Innotek.

The sensor-shift OIS is produced at LG's Optics Solution Business unit, which mainly produces camera modules used for smartphones and tablet PCs. Industry watchers expect LG Innotek to spend this year's capex on expanding the production lines of sensor-shift camera modules, structured light (SL) 3D sensing modules for facial recognition and time of flight (ToF) modules used to measure flight-time distance.

3D sensing modules are mobile camera modules for facial recognition. In particular, the ToF module is a high-tech 3D sensing component that perceives three-dimensionality, spatial information, and movement of an object by using the distance calculated based on the return time of light traveling to and bouncing off a target object. The module is increasingly becoming a key component of electronic gadgets and used for motion sensing, artificial reality and virtual reality.

ToF modules are installed in the Apple iPhone 12 series. Samsung Electronics Co. is considering adopting the module for its smartphones this year. LG Innotek began mass-producing ToF modules since it launched its own brand "Innosensing" for the module in 2019.

For its part, SL 3D sensing module can detect specific features and movements of one’s face or hands to carry out certain commands, such as switching the screen. 

LG Innotek has been bolstering its 3D sensing module technology, which can be applied to PCs, wearable devices, home electronics and automobiles. 

Its aggressive investment plan could serve as a predictor for the company's sales this year. Back in 2018, LG Innotek posted its largest-ever annual sales of 8 trillion won, after it announced a heavy facility investment plan of 873.7 billion won at the beginning of the year.

In a positive response to this year's capex plan, shares of LG Innotek jumped by 8.49% to close at 230,000 won in the flat broader market, near its historic high of 238,000 won reached late last month when it unveiled strong 2020 results. 

Last year, it earned 681 billion won in operating profit, up 43% from a year earlier, buoyed by brisk shipments to Apple.

Write to Su-Bin Lee at lsb@hankyung.com


Yeonhee Kim edited this article.