The LED business unit of LG Innotek has been seeing a low capacity utilization rate, hence Digitimes Research expects its 2012 profit margin to be negative 4-6%. Despite the negative figure, the 2012 profit margin forecast would still be an improvement from the 2011 profit margin of negative 18%. The business unit aims to return to profitability in 2013.
In 2011, LG Innotek's LED business unit had an average capacity utilization rate of 31.3%. However, the firm forecasts a utilization rate in second-half 2012 to reach above 50%. This figure is comparatively lower than utilization rates of 80-90% of Taiwan-based peers in recent months. Hence, LG Innotek has been aiming to lower production costs and increase shipments of LED products.
To lower production costs, LG Innotek decreased the business unit's 2012 capex to KRW67.5 billion (US$59 million), down by 76% on year. Furthermore, the firm moved some LED packaging production lines to China and has been planning to merge LG Display LED business unit into LG Innotek.
In May 2012, LG Innotek completed the development of LED backlight components for direct-lit LED TVs and began mass production in June. In addition, LG announced termination of CCFL-backlit LCD TVs in August. Due to these factors, the market believes utilization rate for LG Innotek's LED business unit is likely to increase.
LED lighting is one of the products that LG Innotek has been aggressively promoting. In 2011, revenues from LED lightings accounted for 4% of total revenues, nevertheless, with an expanding customer base and increasing involvement of government projects, 2012 revenues from LED lightings have been forecasted to account for 12-16% of total revenues.
