A stronger won and rising memory prices prompted Korean component makers to successively cut their third-quarter operating profit forecasts. The impact of Apple’s new-product cycle and exchange-rate fluctuations is directly affecting earnings.
The won-dollar exchange rate fell sharply, immediately affecting the earnings outlook for Korean component makers with high overseas sales ratios. The rate fell from KRW 1,559.1 to the dollar on 1 July to KRW 1,334.7 on 9 September, and stood at KRW 1,359.0 on the 26th.
LG Display is expected to fall well below the previous third-quarter consensus of KRW 429.1 billion, which was sharply revised down to KRW 257.2 billion. LG Innotek’s forecast was cut substantially from KRW 311.2 billion to KRW 150.1 billion, while Samsung Electro-Mechanics also revised its forecast down from approximately KRW 700 billion to around KRW 650 billion.
The launch of the 256GB model of the foldable smartphone “iPhone Duo” at an exceptionally high price of KRW 3.29 million has also become a concern for the market, increasing earnings pressure on high-value-added components, particularly in the display segment. Small and mid-sized suppliers of camera modules and printed circuit boards are also expected to be affected by the falling exchange rate and pressure to lower unit prices.
Market participants had expected the Apple effect to boost performance in the second half, but said that the simultaneous impact of exchange-rate fluctuations and higher costs is making the deterioration in business conditions increasingly apparent. Component makers are being forced to pursue additional cost reductions and reorganize their portfolios with a focus on profitability.