On the 1st, Hana Securities raised its target price for Samsung Electro-Mechanics by about 76%, to 3 million won from 1.7 million won. It said a prolonged shortage of multilayer ceramic capacitors (MLCC) and flip chip ball grid array (FCBGA), driven by expanded investment in artificial intelligence (AI) data centers, will extend earnings growth centered on high value-added products. It maintained its "buy (BUY)" rating.
Hana Securities assessed that the spread of AI data centers has pushed the MLCC and FCBGA markets into a structurally supplier-favorable phase. In particular, it said ultra-small, high-capacity MLCCs and high-layer-count FCBGAs for AI servers face high technical barriers, making it difficult to expand supply, so earnings improvement focused on high-margin products is expected to continue.
Kim Min-kyung, an analyst at Hana Securities, said, "Supply shortages of MLCCs and FCBGAs are deepening on demand centered on AI data centers, and steep earnings growth is expected to continue through 2028," adding, "With rising demand for embedded FCBGAs that incorporate silicon capacitors and passive components, the sales share of high-profitability product lines is expanding, so we see no issue in applying a premium compared with global IT component makers."
It also cited the roughly 450 billion won MLCC supply contract disclosed the previous day as an example showing medium- to long-term supply-demand instability.
Samsung Electro-Mechanics disclosed the previous day that it signed a supply contract for ultra-small, high-capacity MLCCs for AI data centers. Hana Securities analyzed that the deal appears to be a long-term contract for 2027 supply volumes and said it means customers are moving preemptively to secure core components for AI servers.
Kim said, "The fact that a large-scale long-term contract for 2027 supply volumes has been signed at this point suggests that, amid surging demand for high value-added MLCCs for AI servers, customers' medium- to long-term concerns over MLCC supply are growing," adding, "Ultra-small, high-capacity MLCCs for AI servers are an area dominated by Samsung Electro-Mechanics and Murata, and latecomers' entry will remain limited going forward."
It also projected a favorable environment to continue for the FCBGA business. With sustained demand for accelerators and central processing units (CPUs) for AI data centers, and as substrates adopt higher layer counts due to larger semiconductor die sizes, it said real supply shortages are intensifying.
Kim said, "Despite large-scale capacity expansions by global substrate makers, the actual increase in supply is highly likely to fall short of expectations," adding, "Amid a tight supply-demand environment, selling prices for FCBGAs not only for servers but also for PCs and automotive electronics are rising rapidly, so steep profitability improvement is expected to continue."