LG Innotek cuts CAPEX to improve cost competitiveness

[Courtesy of LG Innotek]

LG Innotek has significantly scaled back its capital expenditure for 2024 after investing to expand its optical solutions production capacity over the past two years. The reduction also reflects the company’s shift towards enhancing cost competitiveness.

According to LG Innotek’s report for the first quarter of 2024 that was released on Monday, the company’s capital investment amounted to 178.9 billion won ($132 million). The optical solutions division took the highest investment at 89.7 billion won, followed by substrate materials at 61.9 billion won and automotive components at 27.4 billion won.

Compared to the same period in 2023, where LG Innotek spent 331.6 billion won, the 2024 expenditure is a 46 percent decrease and investment in optical solutions saw a significant drop of 60.3 percent from 2023’s 225.8 billion won.

“After sufficiently investing in capacity expansion over the past years, we reduced our investment scale for 2024,” Moon Hyuk-soo, the company’s CEO, explained at a shareholders’ meeting.

LG Innotek has also significantly downsized its annual investment plans. It plans to invest 383 billion won in the optical solutions sector in 2024, a stark reduction from 2022’s 1.79 trillion won figure and 2023’s 1.78 trillion won.

But the company has increased its investment in the automotive components sector, which is considered a new growth driver. The company invested 11.9 billion won in this sector during the first quarter of 2023, which has more than doubled to 27.4 billion won a year later. Moon also set an ambitious goal to boost automotive business revenue to 5 trillion won within the next five years.

LG Display (LGD) similarly announced a reduction in its capital investment, aiming to cut it down to 2 trillion won in 2024 from the previous year’s 3.6 trillion won. The company plans to focus its investments on order-based projects and essential ongoing operations.

LGD CFO Kim Sung-hyun emphasized during a conference call in April 2024 that the company aims to keep its improved quarterly performance going.

“We are aiming for a turnaround in the second half of 2024 by leveraging our increased share in high-end OLED products.”