LG Innotek Expected to Benefit from AI Substrate Supply Shortage [Click e-Stock]

Direct Benefits Expected from AI Substrate Supply Shortage, Similar to Memory Semiconductors

On May 28, KB Securities maintained its "Buy" rating on LG Innotek and raised its target price from 1.2 million won to 1.6 million won.

Changmin Lee, a research analyst at KB Securities, recently stated, "It is expected that the cost share of substrates in Nvidia's Vera Rubin platform will more than double compared to the previous Blackwell platform, so LG Innotek's substrate business is expected to directly benefit from the shortage of AI substrate supply, similar to memory semiconductors."

The substrate business is already contributing to LG Innotek's performance. Last year, sales from this business reached 1.7 trillion won, and are expected to increase by about 1 trillion won to 2.7 trillion won by 2027 in just two years. While the substrate business is projected to account for around 10% of the company's total revenue in 2027, its share of operating profit is estimated to reach 30%. The operating profit contribution is expected to expand nearly threefold from 11% in 2024 to 30% in 2027 over three years.

Lee expects the substrate business's performance to continue to grow in the future. Notably, even in the second quarter, which is typically the lowest season for substrate production lines, the business is operating at a 100% utilization rate. He emphasized, "In particular, it appears that major big tech companies are not only providing advance payments to support new facility investments for LG Innotek's substrate division, but are also discussing long-term supply contracts. These factors are likely to enhance the long-term performance visibility of the substrate business going forward."

This content was produced with the assistance of AI translation services.