The semiconductor rally driven by increased investment in artificial intelligence (AI) is spreading beyond memory chips to high value-added electronic components such as multilayer ceramic capacitors (MLCC) and flip-chip ball grid array (FC-BGA). The trend in which Samsung Electronics and SK hynix led the stock market on the back of AI memory gains is extending to semiconductor component stocks such as Samsung Electro-Mechanics and LG Innotek.
On the 28th, according to the Korea Exchange (KRX), Samsung Electro-Mechanics and LG Innotek both hit record highs the previous day. Samsung Electro-Mechanics topped 1.7 million won intraday, and LG Innotek also surpassed 1.3 million won.
From the 20th through the previous day, Samsung Electro-Mechanics surged 65.1% in about a week, far outpacing the KOSPI's 13.2% gain. On the 20th, the share price again topped 1 million won, returning to "emperor stock" status, and the rally continued, breaking through the 1.2 million won and 1.3 million won levels in succession. LG Innotek also rose 31.7% over the same period, recently becoming the 12th emperor stock.
Market capitalization also jumped during this period. On the 22nd, based on the closing price, Samsung Electro-Mechanics' market cap surpassed 100 trillion won, overtaking LG Energy Solution, and it is currently No. 5 on the KOSPI by market cap after Hyundai Motor. LG Innotek, boosted by a steep share-price rise, also climbed quickly in market cap ranking, moving from 45th on the 22nd to 37th the previous day.
The market sees the expansion of AI data centers as raising expectations for an improvement in the semiconductor components cycle. In particular, AI servers require far more MLCCs and high-spec semiconductor substrates than general information technology (IT) devices. MLCCs are key components that stably control current flow and are widely used in servers, smartphones, and vehicle electronics. As power efficiency and stability become more important in the expansion of AI servers, demand for high value-added MLCCs is also rising rapidly, analysts say.
Recently, the expansion of production of AI-use MLCCs is instead spilling over into price increases for general-purpose MLCCs. Until now, the market thought that while prices of high value-added MLCCs for AI servers could rise, price hikes for general-purpose MLCCs would be difficult due to weak demand for IT devices such as smartphones and PCs.
However, as production of AI server volumes increases, capacity to produce general-purpose products has decreased, and some customers, concerned about future supply shortages, are reportedly moving to secure inventory in advance or place orders larger than actual needs, a "double-booking" trend. The industry believes that if this trend continues, the uptrend in general-purpose MLCC prices could also gain traction.
Yang Seung-su, an analyst at Meritz Securities, said, "Recent long-term supply agreements (LTAs) for AI-use MLCCs are less about simple price negotiations and more about securing limited volumes first," adding, "As supply shortages become structural, the downside for MLCC prices is blocked while the upside opens, a trend that is likely to continue."
The semiconductor substrate market is also said to have entered a supply bottleneck phase similar to memory semiconductors. In particular, with demand surging for FC-BGA, a high-spec package substrate for AI, there are concerns that supply shortages could be prolonged.
Kim Dong-Won, head of research at KB Securities, said, "Facing severe supply shortages, the substrate industry is showing a trend similar to the memory semiconductor industry, which is experiencing supply bottlenecks due to increased AI investment," adding, "Supply of AI substrates next year is expected to be even tighter than this year, so for the time being, the pace of upward revisions to earnings forecasts will outstrip the pace of share-price gains."
Brokerages are also raising their target prices one after another. KB Securities set a target price of 2.2 million won for Samsung Electro-Mechanics and 1.6 million won for LG Innotek. The expansion of long-term supply agreements and the possibility of prolonged supply shortages are seen to be enhancing earnings stability. There is also talk that the two companies will both join the "1 trillion won operating profit club" for the first time in four years since 2022.