LG Innotek's Corporate Tax Burden Soars Amid Semiconductor Boom

LG Innotek's corporate tax expense for the first half of this year has exceeded 81.6 billion won, more than six times the amount from the same period last year. As Samsung Electronics and SK Hynix report improved earnings due to the semiconductor boom, the electronic components industry is also experiencing increased tax burdens due to rising profits.

According to LG Innotek's semi-annual report released on September 7, the company's corporate tax expense for the first half of this year was 81.6 billion won, a 523% increase from 13.1 billion won in the same period last year. This marks a 6.2-fold increase in just one year, surpassing last year's total corporate tax expense of 49.1 billion won by 1.6 times.

The increase is significant compared to trends over the past few years. LG Innotek's corporate tax expense for the first half was 135.7 billion won in 2022, dropping to 3.2 billion won in 2023 and 2.4 billion won in 2024. After rising to 13.1 billion won last year, it jumped to 81.6 billion won this year, reaching the highest level for the first half since 2022.

The rise in corporate tax burden is attributed to improved performance. The company's revenue for the first half reached 1.1 trillion won, surpassing 1 trillion won for the first time. The recovery of its core optical solutions business and increased supply of high-value semiconductor substrates significantly boosted profits. Despite the seasonal off-peak period, demand for mobile camera modules from major clients like Apple continued, and strong sales of high-value semiconductor substrates, such as FC-BGA (Flip Chip Ball Grid Array), supported profitability.

In particular, increased demand for substrates due to expanded investment in artificial intelligence (AI) and growth in the memory semiconductor market contributed to the improved performance. LG Innotek's packaging business recorded sales of 935.6 billion won and operating profit of 99.6 billion won in the first half, marking increases of 18% and 94%, respectively, compared to the previous year. The operating rate for semiconductor substrates rose from 75.7% in 2024 to 80.8% last year, reaching 94.0% in the first half of this year. In response to the demand for AI and memory semiconductor substrates, LG Innotek is making additional investments in Gumi, North Gyeongsang Province, and Vietnam. The company plans to invest 600 billion won in Gumi by the end of this year and approximately 1 trillion won in Vietnam by 2028.

The increase in corporate tax burdens is also evident across the electronics and semiconductor industries. Samsung Electronics and SK Hynix have seen significant profit increases due to the AI-driven memory semiconductor boom, with their corporate tax payments totaling 11 trillion won in the first half of this year alone. The rise in memory prices and the expansion of high-value products like high-bandwidth memory (HBM) have led to improved profitability.

The benefits of the AI and semiconductor boom appear to be spreading beyond memory manufacturers to materials and components companies. LG Innotek's positive performance is expected to continue into the second half of the year. The second half is traditionally a peak season with major clients launching new products, and demand for AI and memory semiconductor substrates is anticipated to remain strong. The contribution of high-value semiconductor substrates to profits is increasing within the company's business structure, which has primarily focused on smartphone camera modules. The company has set a goal to grow its packaging solutions business revenue to over 3 trillion won by 2030 and to achieve an operating profit of around 1 trillion won by 2031.

Meanwhile, the government expects that corporate tax revenue from the semiconductor boom will exceed 200 trillion won next year. Ryu Deok-hyun, a senior economic advisor at the Blue House, stated on September 2, "We expect that corporate tax revenue from the semiconductor boom will exceed 200 trillion won next year," adding, "Even if only 100 trillion won comes in, it would be considered a 'windfall,' but based on tax revenue forecasts, corporate tax is expected to exceed 200 trillion won."