Goldman Sachs meeting feedback: Neutral maintained on both LG Electronics and LG Innotek, with AI cooling, robotics, iPhone camera modules, and package substrates as key highlights

Overview

This report summarizes key discussion points from Goldman Sachs' meetings with LG Electronics and LG Innotek during the Asia Communacopia + Technology conference in Hong Kong. The core topics for LG Electronics were AI data center cooling, robotics, the impact of memory costs, and potential tariff refunds; the core topics for LG Innotek were the resilience of camera module demand and growth in the package substrate business. The overall conclusion is neutral: both companies have clear structural growth drivers, but cyclical demand, costs, exchange rates, and margin pressures still limit rating upgrades.

Core views

Goldman Sachs believes LG Electronics is extending its traditional HVAC capabilities into AI data center cooling and is attempting to build an integrated solution through air cooling, liquid cooling, energy storage batteries, and AI data center management; robotics could also become a long-term growth driver. However, weak TV demand and limited margin improvement remain the reasons for maintaining a Neutral rating. For LG Innotek, Goldman Sachs is positive on shipments from key smartphone customers, camera module specification upgrades, and the cost competitiveness brought by Vietnam capacity, while also seeing solid trends in package substrate businesses such as ABF, RF-SiP, and FC-CSP; however, smartphone demand, memory costs, and KRW strength versus USD remain risks.

Analysis framework

The report distills management discussions and Goldman Sachs' analytical views in the form of meeting notes, and evaluates the stocks of both companies using business segment trends, cost impacts, tariff refund assumptions, revenue and margin forecasts, and an EV/EBITDA SOTP valuation framework. For LG Electronics, the analysis focuses on AI data center cooling, robotics, cost pressure in TVs and PCs, and the potential operating profit sensitivity to tariff refunds; for LG Innotek, the analysis focuses on Apple iPhone camera module demand, ASP upgrades, Vietnam capacity, ABF supply-demand, and package substrate margins.

Methodology notes

• Valuation methodsEV/EBITDA SOTP

  sum-of-the-parts valuation

  LG Electronics' 12-month target price of W122,000 is based on 2026E EV/EBITDA SOTP; LG Innotek's 12-month target price of W550,000 is based on 2026E-2027E EV/EBITDA SOTP.

• Factor AnalysisGS Factor Profile

  growth, financial returns, valuation multiples, and composite factors

  The Goldman Sachs Factor Profile compares stocks with the market and industry peers using growth, financial returns, valuation multiples, and composite percentiles, with related metrics calculated using Goldman Sachs analyst forecasts.

• M&A ScenarioM&A Rank

  acquisition probability score

  Goldman Sachs uses M&A Rank levels 1 to 3 to assess the probability that a company becomes an acquisition target, where 1 represents high probability, 2 medium probability, and 3 low probability; typically only Rank 1 or 2 would include an M&A component in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LG Electronics

  Company covered in the meeting, Neutral-rated name

  Strengths

  Has more than 15 years of experience in data center cooling, many local customer references, HVAC capabilities, a global manufacturing footprint, expertise in home appliances and home environments, and experience as a large motor company; potential tariff refunds may provide upside to operating profit.

  Weaknesses

  TV demand is weak and margin improvement is limited; the PC business is more sensitive to rising memory prices; robotics and AI data center cooling still need to prove commercialization and customer certification progress.

  Comparison

  Compared with traditional TV and home appliance businesses, AI data center cooling and robotics represent higher-growth directions, but the current rating is still constrained by cyclical pressure in mature businesses.

  Risks

  OLED TV demand above or below expectations, H&A margins above or below expectations, and automotive component revenue growth faster or slower than expected.

• LG Innotek Co. (011070.KS)

  Company covered in the meeting, Neutral-rated name

  Strengths

  Core supplier of Apple iPhone camera modules, supported by key customer shipments, camera specification upgrades, cost improvements from Vietnam capacity, and healthy supply-demand for package substrates.

  Weaknesses

  The business is highly dependent on smartphone shipments from key customers, and weaker smartphone demand, rising memory costs, and KRW strength versus USD could pressure earnings.

  Comparison

  Compared with LG Electronics, LG Innotek's growth is more concentrated in camera modules and package substrates, with more direct earnings leverage, but customer concentration and end-market smartphone cycle risk are also more prominent.

  Risks

  iPhone shipments above or below expectations, LGI's share in Apple camera modules above or below expectations, and camera module ASP above or below expectations.

Key data

• Report date2026-05-20 11:24PM KSTReport cover timestamp.
• Meeting locationHong KongAsia Communacopia + Technology conference.
• LG Electronics rating and target priceNeutral, 12-month target price W122,000Based on 2026E EV/EBITDA SOTP.
• LG Innotek rating and target priceNeutral, 12-month target price W550,000Based on 2026E-2027E EV/EBITDA SOTP.
• LG Electronics memory cost impactMemory accounts for a single-digit percentage of TV BOM; PC prices raised 15%-20%The company believes the TV business is only limitedly affected by rising memory prices, while the PC business is more affected but has a lower revenue contribution.
• Potential tariff refundPreviously quantified U.S. tariff burden at W600bn; relative to expected operating profit of about W4tn this may imply roughly 15% upsideThe company has not confirmed the refund amount or timing, but Goldman Sachs believes it could be confirmed over the next few quarters.
• LG Innotek camera module revenueExpected to grow 11% YoY in 2026, with operating margin around 4%Compared with 3% YoY revenue growth and 2.6% operating margin in 2025.
• LG Innotek ABF businessLast year's revenue was about W40bn-W50bnIt accounts for a low single-digit percentage of packaging solution revenue, but the company expects strong future growth and healthy supply-demand to continue at least until 2028.
• LG Innotek packaging solutionsRevenue expected to grow 15% YoY this year, with operating margin around 12%Compared with a 2025 operating margin of 7%, supported by trends in RF-SiP, FC-CSP, and ABF.

Impact & implications

The investment implication is that Korea's technology hardware chain is extending from the traditional consumer electronics cycle toward AI infrastructure and high-end electronic components. LG Electronics' AI data center cooling and robotics businesses provide long-term optionality, but near-term earnings are still constrained by TV demand, home appliance margins, and the pace of growth in automotive components; LG Innotek has more direct revenue and margin improvement drivers in Apple camera modules and package substrates, but it is also highly sensitive to iPhone shipments, camera module share, ASP, and exchange rates. Therefore, Goldman Sachs acknowledges business catalysts but has not turned positive on the rating.

Risks

• LG Electronics' OLED TV demand may come in below expectations, weighing on revenue and margins.
• LG Electronics' H&A margins may underperform expectations.
• LG Electronics automotive component revenue growth may be slower than expected.
• The amount and timing of potential tariff refunds for LG Electronics are uncertain.
• There is execution risk around LG Electronics' AI data center cooling customer certification and expansion into liquid cooling.
• LG Innotek's key customer iPhone shipments may come in below expectations.
• LG Innotek's market share in Apple camera modules may be below expectations.
• LG Innotek's camera module ASP may be below expectations.
• Rising memory costs and KRW strength versus USD may pressure LG Innotek's profits.

What to watch

• Progress in LG Electronics obtaining global hyperscaler supplier certification.
• Execution of LG Electronics' expansion from air cooling to liquid cooling in products and orders.
• Initial production of LG Electronics' self-developed Axium actuators in 1H26 and product line expansion in 2H26.
• Whether U.S. tariff refunds are confirmed over the next few quarters and the actual amount.
• Smartphone shipments from LG Innotek's key customers and the pace of camera upgrades in the iPhone 18 Pro series.
• The contribution of LG Innotek's Vietnam plant capacity ramp-up to cost competitiveness and margins.
• Whether ABF supply-demand remains tight through 2028 and whether pull from AI/server customers strengthens.
• The impact of KRW/USD moves and memory prices on the profits of Korean electronic component companies.