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The author is an analyst of NH Investment & Securities. He can be reached at — Ed.

Sekonix boasts technological expertise and a solid delivery track record for projection modules (mounted on AR glasses) and eyepieces (mounted on the viewing side of VR devices). Expectations look valid for both supply expansion for core XR parts (high ASP) and recovery at the main business towards smartphones.

Recovery expected at main business; XR to be future growth engine

Specializing in optical parts, Sekonix previously focused on the production of lenses for smartphone cameras. However, faced with fierce competition in the smartphone lens market, it has shifted its business focus towards automotive cameras and lamps. Amid expectations for recovery at the main business, the company is forecast to benefit over the mid/long term on the securing of core XR component technologies.

At the main automotive camera and lens business, margins have slowed significantly due to the sharp rise in the dollar/won rate witnessed in 2H22, as raw materials are purchased in dollars and sales are recognized in the won. In 2023, however, with car shipments expanding and the dollar/won rate stabilizing, an earnings turnaround is expected from 1Q23.

At Sekonix, XR-related optical components are expected to serve as the future growth engine. In possession of key projection module and eyepiece technologies for core XR components, the firm is currently supplying projection modules to US AR glasses maker Vuzix. For reference, projection modules are essential to projecting objects onto transparent AR glasses, while eyepieces are special VR lenses mounted on a device’s viewing side.

XR parts (high value-added products) set to be supplied for SEC’s XR devices

Sekonix stands particularly well-positioned to benefit from XR market growth, as ASPs for XR parts are between US$2 and US$30—levels which represent a significant increase compared to that for existing smartphone lenses (less than US$1)—and margins should prove solid.

In addition, given the firm’s past track record in supplying lenses for Samsung Electronics (SEC)’s Gear VR devices, it is highly likely that future supply towards SEC will materialize.



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