LG Innotek is pushing back its plans to completely shut down its PCB manufacturing plant in Cheongju a month later to November according to industry sources on Sept. 19.
The delay is being caused by LG Innotek’s foreign car clients that have yet to give their verification for the 4M checklist – Man, Machine, Material and Method – for improving costs and delivery. The end clients must verify the work being done in all four categories before manufacturers can begin supplying.
Even existing PCB suppliers must receive verifications on the 4M when they switch production lines. When clients delay such verification, the suppliers are unable to close down their existing lines until the process is over.
"Putting the shut-down at November means that the firm is looking for a full closure by the end of this year,” said one source close to the matter.
PCBs that go into smartphones are expected to attain speedy verification, according to market watchers. “Since LG Electronics, a major client for mobile PCBs, is a sister company, it won’t be too difficult to attain 4M verification,” said one source. LG Electronics is the biggest shareholder in LG Innotek with a 40.79% stake.
The problem is automobile PCBs. Because cars are much more expensive and last longer than smartphones, not to mention more closely linked to user safety, carmakers are never happy about too many changes to parts production lines.
"This is why the Cheongju facilities will have to continue producing automobile PCBs,” said the source.
At one point, LG Innotek considered keeping the Cheongju lines intact until the first quarter of 2020 due to the delay in the 4M verification.
One option may be to supply a year’s worth of PCBs in advance, but this could pose a big risk since should anything go wrong, LG Innotek might lose the trust of its clients. This would be detrimental, market experts say, since LG needs the favor of carmakers if it wants to advance into the electric vehicle market that on average use more PCBs.
LG Innotek’s PCB business has been suffering in the aftermath of LG Electronics’ sluggish smartphone sales. After producing an annual 564,000 sheets between 2013 and 2016, the firm now produces just 156,000 sheets. Consequently, LG Innotek shut down its Osan PCB business last year. Once the 4M verification has been completed, the Cheongju facilities will be merged with those in Gumi.
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