Camera vendors will make the most of the growing self-driving market
LG Innotek is once again attracting investors’ attention with the news that the company is in negotiations with Tesla for a massive supply of automotive camera modules. We recommend focusing on the overall automotive camera industry as well as LG Innotek, which is expected to experience strong growth with the advent of fully/semi-autonomous vehicles.
The global camera parts market is dominated by Korean and Chinese companies. With increasing trade disputes between the United States and China, Korean suppliers are more likely to enter into supply agreements with North American and European automakers, as seen with other computer parts.
Smartphone Camera Market (KRW45tr) vs Automotive Camera Market (KRW27tr)
We see strong growth potential for the automotive camera industry for the following reasons.
First, ASP levels are higher for automotive cameras (30,000-50,000 KRW per unit) than for smartphone cameras (5,000-10,000 KRW per unit).
Second, the number of cameras mounted on a vehicle is expected to increase to 10-15 units in the future from three to four cameras in smartphones.
Based on the above, the annual smartphone camera market is estimated to be around 45 tr KRW (1.4 billion smartphones x 4 cameras x ASP of KRW 8,000). By comparison, the annual automotive camera market is expected to reach around KRW27tr (90mn vehicles x 10 cameras x KRW30,000 ASP).
Selection based on sales, share of sales and growth
The market is expected to focus on camera parts companies as Tesla and Apple are said to be organizing their supply chain for electric vehicles. We believe companies supplying parts for smart/autonomous vehicles deserve higher valuations. They are currently trading at a PER of around 10x, similar to other computer parts makers, but should see a stock revaluation based on strong growth potential. Domestic automotive camera parts suppliers include LG Innotek, Sekonix, Mcnex, Samsung Electro-Mechanics, Partron, and OPTRON-TEC.
We recommend you to focus on: 1) LG Innotek with the highest absolute car camera parts sales at around KRW 300 billion among its domestic peers; 2) Sekonix has the largest share of automotive camera parts sales (35%), which should lead to a strong improvement in overall profits; and 3) Partron, which is expected to experience the strongest growth in car camera parts sales in 2022.