LG Innotek Aims for $2.3 Billion in Package Solutions Revenue by 2031

LG Innotek has set a target to grow its high-value semiconductor substrate business into a $750 million operation by 2031. The company aims to rapidly expand its business in response to increasing demand for high-value semiconductor substrates driven by the growth of artificial intelligence (AI) and high-performance computing (HPC) markets, beyond just smartphones and telecommunications.

During Media Tech Day held on June 16 at its headquarters in Magok, Seoul, LG Innotek unveiled three types of high-value semiconductor substrates, referred to as 'Hero products': wireless radio frequency system-in-package (RF-SiP), flip-chip chip-scale package (FC-CSP), and flip-chip ball grid array (FC-BGA).

The package solutions business accounted for about 10% of the company's total revenue last year, but its operating profit share reached 19%, marking it as a key high-profit segment. Last year's revenue was approximately 1.72 trillion won, an 18% increase from the previous year, while operating profit surged by 82% to 128.9 billion won, demonstrating its growth potential.

The expansion of the AI market is structurally driving growth in the semiconductor substrate industry. Substrates used in AI servers and high-performance semiconductors are significantly larger than traditional mobile products, with layer counts increasing from the previous 6-7 layers to over 20 layers. As the demand for production capacity to meet this rapid growth rises, companies with stable supply capabilities are seeing increased demand from clients.

To address this, LG Innotek is expanding its investments in production capacity. The company plans to invest an initial 1 trillion won in its Vietnam plant for PS business (RF-SiP and FC-CSP) and will gradually increase this investment. Additionally, a confirmed investment of 600 billion won will be made in the Gumi plant, which includes optical solution camera modules and FC-BGA.

The company is accelerating its market penetration, particularly with its highly automated Gumi FC-BGA plant. As substrates become larger and more layered, automation in the production process becomes essential. LG Innotek aims to build a stable supply chain with its differentiated manufacturing capabilities in collaboration with clients.

George Tae, head of LG Innotek's Package Solutions Division, stated, "The rapid growth of the S-curve based on AI has just begun. We will leverage our differentiated technology to quickly expand our market share in the newly emerging semiconductor substrate market and grow the package solutions business into a 1 trillion won operating profit segment by 2031." He added, "By 2030, we aim to shed our image as a latecomer in the FC-BGA market and become a global leader."
 
LG Innotek's RF-SiP substrate, introduced first, is regarded as a product that encapsulates the company's unique technological expertise accumulated over more than 50 years. RF-SiP integrates various components necessary for wireless communication, such as power amplifiers and chipsets, into a single package. LG Innotek develops and produces the core substrate that connects this to the mainboard.

The company has developed high-density, ultra-precision substrate technology that compactly integrates various components and microcircuits into a small area. It holds 1,868 related technology patents. Notably, in 2011, LG Innotek became the first in the world to develop and mass-produce coreless RF-SiP substrates, reducing thickness by 20% compared to existing products and decreasing signal loss by over 70% through the use of low-loss materials and special copper processes. Since 2016, LG Innotek has maintained its position as the global leader in the RF-SiP substrate market, with a market share of approximately 65% last year, expected to rise to 80% this year.

With the advent of 5G, the demand for slimmer smartphones has highlighted LG Innotek's technological competitiveness. Smartphones must support both LTE and 5G, leading to an increase in the number of components while requiring a thinner profile. LG Innotek addressed this challenge by applying a method that first establishes copper pillars (Cu-Post) on the semiconductor substrate and then connects solder balls, making it the first to implement this on RF-SiP substrates.

The Cu-Post method allows for closer spacing of solder balls, enhancing circuit integration while reducing substrate thickness by about 20%. This innovation has enabled LG Innotek to create the thinnest 5G RF-SiP substrate in the world, successfully integrating over 100 communication components within a substrate the size of two grains of rice. The company is currently developing next-generation Cu-Post technology that further reduces solder ball spacing by an additional 10%, aiming to maintain its technological leadership in the high-value communication substrate market for the upcoming 6G era.
 
FC-CSP is a core semiconductor substrate that LG Innotek is developing as a new growth engine in the AI era. FC-CSP connects semiconductor chips such as mobile application processors (AP) and low-power DRAM (LPDDR) to the mainboard using a flip-chip method that allows for high integration and excellent electrical characteristics. LG Innotek has established global top-tier competitiveness in the FC-CSP market based on its high-density, ultra-precision substrate technology.

As the AI market transitions from learning-based AI to inference-based and agentic AI, the application range of FC-CSP is expanding beyond mobile to memory sectors. The increasing adoption of high-performance memory like GDDR in AI accelerators and servers is driving rapid growth in demand for FC-CSP substrates used in memory semiconductor packaging.

Leveraging its experience in mass-producing mobile FC-CSP, LG Innotek plans to seize opportunities in the newly emerging AI FC-CSP market. Hwang Jeong-ho, head of marketing for the Package Solutions Division, stated, "LG Innotek has recently secured orders for GDDR7 FC-CSP substrates for global semiconductor customers, and with new orders for memory FC-CSP substrates coming in, our Gumi semiconductor production line is operating at full capacity." He added, "We plan to expand the production lines for FC-CSP and RF-SiP substrates at our new semiconductor substrate factory in Vietnam, which will begin construction this month, to meet domestic and international customer demand."
   
As the application areas for high-performance, high-spec semiconductor chips expand beyond smartphones to larger devices like PCs, laptops, vehicles, AI servers, and data centers, the need for FC-BGA substrates has emerged. FC-BGA substrates are specialized semiconductor substrates for large devices, similar in function to mobile AP FC-CSP substrates.

Compared to FC-CSP substrates, FC-BGA substrates are over 18 times larger in area and can have layer counts ranging from 16 to 22, requiring advanced technology. LG Innotek has secured mass production technology for large-area FC-BGA substrates measuring 85mm on each side and is also developing ultra-large products over 120mm.

Since announcing its entry into the FC-BGA business in 2022, LG Innotek has established a smart factory called 'Dream Factory' at its Gumi Plant 4, applying AI, deep learning, robotics, and digital twin technologies. Given that yield for large-area substrates is significantly affected by minute foreign substances, the company has automated and intelligentized the entire process to secure productivity and quality competitiveness.

The business results are becoming visible. LG Innotek has begun mass production of FC-BGA substrates for network and modem applications, as well as for digital TVs, and has started producing products for PC chipsets for global big tech customers at the end of last year. Starting in the third quarter of this year, the company plans to supply FC-BGA substrates for PC CPUs to the same customers and aims to expand its business into the CPU and GPU markets for autonomous vehicles and AI servers by 2028.

The shift in the AI market from learning-based to inference-based AI is also driving rapid growth in demand for CPUs and memory, supporting the expansion of the FC-BGA market. LG Innotek is in discussions with global big tech customers regarding the supply of FC-BGA substrates for CPUs and is considering additional domestic expansion investments. The company aims to establish itself as a key supplier in the rapidly growing FC-BGA market, leveraging its smart factory-based production competitiveness.

George Tae stated, "LG Innotek will continue to develop FC-BGA substrates that can be applied across various fields, including edge computing and defense, while actively seeking new global big tech customers to grow the FC-BGA business into a core segment of the company."