According to company officials, increased competition from Chinese rivals is causing LG Innotek and Samsung Electro-Mechanics to struggle with their high-density interconnect (HDI) printed circuit board (PCB) component business.
Smartphones and other electronic devices such as laptops, touch-screen devices, network equipment, and digital cameras possess an HDI PCB where the components are positioned nearer to each other on a higher density than conventional circuits.
Officials said that low entry barriers to the market allowed for Samsung and LG to not only have to compete with long-standing companies from Taiwan and Japan but also with Chinese companies and even small firms in Korea.
Samsung Electro-Mechanics announced it would transfer its main production line of HDI PCB from Busan to Vietnam to lower production costs and raise price competitiveness. LG Innotek, meanwhile, is also considering restructuring its HDI PB business to seek a breakthrough.
A Samsung Electro-Mechanics official said, “Samsung Electro-Mechanics has decided to transfer its HDI PCB manufacturing line from Busan to Vietnam. The Busan factory has produced a small number of HDI PCB while concentrating on the research and development activities of the product. But to improve our competitiveness, the Vietnam factory will be responsible for mass-producing the product.”
However, the Samsung official said the company would not relinquish its business because there is a projected increase in the number of opportunities in the growing fifth-generation (5G) technology in the components of systems for vehicles and network equipment.
“The PCB business is something that we cannot withdraw from as more circuit boards will be increasingly used in other devices such as equipment for 5G networks and electrical systems of vehicles,” the official said.
LG Innotek was also suspected that it would halt its operation in the HDI PCB business but instead says that it is considering implementing measures to improve its production efficiency.
A company official said, “Regarding the speculation, we notified the Financial Supervisory Service on Sept. 27 that the company hasn’t decided whether it will close down its HDI PCB business or not. LG Innotek is considering reorganizing its HDI PCB business to improve efficiency.”
The official added, with the stagnant smartphone market, there is a decreased performance in the global share in HDI PCBs. According to an LG half-year report, the company shares declined in the first half of 2019 to 1.3 percent from 2.7 percent.
Increasing competition in the business led to the average prices of LG and Samsung’s HDI PCBs to drop by 16.8 percent and 9.2 percent in two years, respectively.