AI Components to Drive Samsung Electro-Mechanics' Profitability Despite Declining Exchange Rate

[Financial News] Samsung Electro-Mechanics is expected to report third-quarter operating profit well above the market consensus, supported by growing demand for high-value components used in AI servers and improved profitability despite the decline in the won-dollar exchange rate. The company plans to continue improving profitability by strengthening its product portfolio around high-value MLCCs and FC-BGAs in response to growth in the AI and server markets.
According to industry sources on the 28th, several securities firms recently raised their third-quarter operating profit forecasts for Samsung Electro-Mechanics to above KRW 650 billion. KB Securities forecast KRW 660.1 billion, while iM Securities estimated KRW 650 billion. As a result, Samsung Electro-Mechanics' third-quarter operating profit consensus, compiled by financial information provider FnGuide, has risen above the previous estimate of around KRW 600 billion.
The key driver of Samsung Electro-Mechanics' improved third-quarter profitability is Multilayer Ceramic Capacitors (MLCCs) for AI servers.
Demand is rapidly increasing, particularly for high-capacity, high-reliability products, as investment in AI servers and data centers expands. The ongoing supply shortage of high-value MLCCs for AI servers is also raising expectations for improved product prices and profitability. Samsung Electro-Mechanics is strengthening the foundation for stable supplies of AI server MLCCs by expanding long-term supply contracts with major global companies.
Demand for Flip Chip Ball Grid Arrays (FC-BGAs) is also expanding, particularly for large-area, high-layer-count products, as AI accelerators and semiconductors for data centers become more advanced.
As AI semiconductor performance improves, package substrates are becoming larger and incorporating more layers, increasing supply constraints for high-performance FC-BGAs. This has raised market expectations for improved prices and profitability. Securities analysts recently forecast that Samsung Electro-Mechanics' FC-BGA business will see improved profitability, supported by supply shortages and a growing share of high-value products.
Samsung Electro-Mechanics plans to reduce the profitability pressure caused by the declining won-dollar exchange rate by strengthening its product portfolio around high-value MLCCs and FC-BGAs. The company is also expanding long-term supply contracts related to AI servers to secure volumes over the medium to long term, further improving visibility into future earnings. Analysts have also said that Samsung Electro-Mechanics is pursuing a strategy to secure a significant portion of next year's production capacity through long-term supply contracts, which could extend the period covered by its earnings forecasts.
A Samsung Electro-Mechanics official said, "Demand for high-value MLCCs and package substrates continues to rise as the AI server and data center markets grow." The official added, "We plan to proactively respond to market demand centered on high-performance, high-reliability products and strengthen our differentiated product competitiveness."

[email protected] Park So-hyun Reporter