LG Innotek dwarfs Korean rivals with hefty investment plan

LG Innotek Co., a major supplier of camera modules for Apple iPhones, is the only South Korean company to announce a billion-dollar facility investment plan in the first half of this year, in stark contrast with other listed Korean firms that saw a double-digit fall in their spending.

During the first half, the LG Group arm unveiled a plan to invest 1.8 trillion won ($1.4 billion) in facilities, three times its spending plan announced the year previous.

Last week, the company disclosed another hefty investment of 1.4 billion won to expand its domestic production lines in Gumi, 200 km southeast of Seoul. It accounts for 70% of camera module supplies for iPhones

Buoyed by a record-high operating profit of 1 trillion won in 2021, LG Innotek will continue to spend more than 10% of its net profit for dividend payouts from this year through 2024, up from 8% in 2021, the company said in its 2021-2022 sustainability report released on Tuesday.

Overall, South Korean manufacturers plan to sharply cut back on facility investments in the coming months, as they are grappling with higher borrowing costs, soaring consumer prices and the weakening local currency, according to the regulatory Financial Supervisory Service (FSS).

A total of 87 listed Korean companies saw a 35.2% decline to 8.3 trillion won ($6.4 billion) in their combined investment plans from a year earlier, based on their regulatory filings made in the first half of this year.

That compares to a combined 12.8 trillion won investment plan by a total of 59 listed companies announced in the year-earlier period. The data exclude the purchase of land or buildings.

BATTERY MAKERS, SHIPPING COMPANIES

Rechargeable battery maker LG Energy Solution Ltd. and battery parts supplier POSCO Chemical Co. are among a handful of other Korean companies, which disclosed several hundreds of dollars of facility investment plans in the first half.

LG Energy, the world’s No. 2 electric vehicle battery maker, is planning to spend 581.8 billion won to expand its domestic production lines on the back of strong demand.

POSCO Chemical is pouring 351.2 billion won into the construction of a cathode material facility.

Container shipping companies – HMM Co., Pan Ocean and Hyundai Glovis Co. – earmarked between 254 billion and 528 billion won in the first half to buy new vessels on the back of the rise in cargo demand and freight rates.

ECONOMIC DATA

Painting a grim picture of the world’s 10th largest economy, however, South Korea’s trade deficits snowballed to $15.9 billion as of July 10 since the beginning of this year. The figure outweighed the surplus of $13.9 billion in the year-earlier period.

The business sentiment index for all industries, compiled by the Bank of Korea, declined to the lowest level in one year and four months in June. The index dropped by four points to 82, compared with the May reading.

The Bank of Korea (BOK)’s steep interest rate hikes mean the end of low-cost funding amid escalating inflation as well. The central bank delivered its first-ever interest rate hike on Wednesday, lifting the policy rate by 50 basis points to 2.25%.

Inventory assets held by the country’s top 30 companies by market capitalization, excluding financial firms and holding firms, reached a record-high 148.4 trillion won as of March 31, up 39.3% on-year, another FSS data shows.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article