[Edaily Reporter Kim Kyung-eun] On the 5th, KB Securities raised its target price for #LG Innotek to 2 million won, a 25% increase from the previous level. The firm maintained its “Buy” rating. This adjustment reflects the structural supply shortage in the artificial intelligence (AI) substrate market and the resulting long-term growth potential.

Kim Dong-won, Head of Research at KB Securities, stated in a report released that day, “The supply shortage of AI substrates is expected to persist for at least two years until 2028.”

Kim analyzed, “Currently, major U.S. clients in the AI substrate market are offering favorable terms, such as support for capital investment and long-term supply contracts.” He added, “This indicates that, unlike in the past, client demand is expanding beyond short-term orders and is evolving into a competition to secure long-term production capacity, similar to the memory semiconductor industry.”

He continued, “LG Innotek’s expansion of AI substrate production is not merely an increase in production capacity; it is a key factor that will significantly enhance the long-term earnings visibility of the packaging solutions business, as it is highly likely to lead to full-scale operation immediately upon completion.” “In particular, LG Innotek’s FC-BGA sales—which are currently being expanded in response to customer requests—are estimated to grow from approximately 140 billion won in 2026 to over 2 trillion won by 2030, representing a 14-fold increase in just four years,” he emphasized.

LG Innotek’s second-quarter operating profit is expected to reach 178.7 billion won, a 1,469% increase year-over-year. Even during the second quarter, which is typically the off-season for the substrate business, the packaging solutions division is expected to maintain a 100% utilization rate, and the optical solutions division is also projected to exceed market expectations due to strong mobile sales from North American clients.

In the second half of the year, as both the Packaging Solutions and Optical Solutions businesses enter their peak seasons, operating profit is projected to reach 769.5 billion won, a 46% increase year-over-year. Operating profit for the third and fourth quarters is estimated at 337.4 billion won and 432.2 billion won, respectively.

“We understand that numerous AI data center companies and the three major memory semiconductor firms are currently strongly urging LG Innotek to make new investments in AI substrates and to expand production capacity as soon as possible,” said Head Kim. “This is because, amid an explosive increase in demand for high-performance boards from AI data center operators, the demand for CSP boards required for SOCAMM2 and GDDR7—which will be incorporated into NVIDIA’s Vera Rubin platform (VR 200)—far exceeds LG Innotek’s production capacity.”

He further noted, “Currently, the components facing the most severe supply bottlenecks in AI infrastructure construction are memory and substrates,” and concluded, “Considering this supply shortage, it is estimated that LG Innotek will need to execute over 2 trillion won in new investments in AI substrates over the next two years.”

He added, “Investment in AI substrates is positive for LG Innotek’s mid- to long-term earnings improvement,” explaining, “This is because the structure allows LG Innotek to secure utilization rates and profitability early on through full capacity utilization and sell-out immediately upon expanding AI substrate production, while clients mitigate expansion risks early through investment cost support and long-term supply contracts.”