As Samsung Electro-Mechanics expands supplies of flip chip (FC)-ball grid array (BGA), a high value-added semiconductor substrate, to global big tech corporations and profitability improves at its substrate business unit, expectations are rising that volumes will increase as Tesla begins mass production of its next-generation artificial intelligence (AI) chips in earnest. Samsung Electronics' foundry (contract chip manufacturing) unit will mass-produce Tesla's AI chips next year at its Taylor fab in Texas, and Samsung Electro-Mechanics is set to supply the required FC-BGA, driving the increase.
FC-BGA holds semiconductors securely and transmits electrical signals, and as a next-generation high value-added substrate suited for increasingly large AI chips, demand is surging in step with growth in the AI industry. According to Fujikamera Sogo Kenkyujo, the global FC-BGA market is expected to grow more than twofold from $8 billion in 2022 to $16.4 billion in 2030.
On the 11th, industry sources said Samsung Electro-Mechanics is expected to supply FC-BGA for Tesla's next-generation AI chips, the AI5 and AI6, which will be mass-produced next year by Samsung Electronics' foundry unit. Last year, Samsung Electronics' foundry unit signed a $16.5 billion (about 23 trillion won) contract manufacturing deal with Tesla. At the time, Tesla CEO Elon Musk said the company would mass-produce next-generation AI chips and noted that the disclosed contract amount was only a minimum.
Tesla's AI chips mass-produced by Samsung Electronics' foundry unit are not only expected to be used in the next-generation Autonomous Driving system, but their applications will expand to AI data centers to run Tesla's Humanoid Robot and in-house AI models. They are said to be used in Tesla's Humanoid Robot "Optimus," as well as to run Grok from xAI, the Generative AI corporations Musk founded.
Park Jun-seo, an analyst at Mirae Asset Securities, said, "Tesla's AI6 will be installed simultaneously across three platforms—FSD (Full Self-Driving), Humanoid Robot, and in-house AI data centers," adding, "Substrate performance will also expand significantly from existing chip levels to PC-class central processing unit (CPU) levels, and unit prices are expected to rise sharply."
There is also analysis that Samsung Electro-Mechanics will make FC-BGA facility investments to meet Tesla's AI chip volumes. Samsung Electro-Mechanics has secured Broadcom, Google, Tesla, Amazon and Apple as FC-BGA customers. It has already wrapped up this year's contracted volumes that can be delivered with current capacity. With domestic production bases for FC-BGA reportedly running at maximum utilization, the company is also expected to raise utilization at its Vietnam production lines to the maximum to respond.
With the FC-BGA business entering a growth phase alongside its core multilayer ceramic capacitor (MLCC) business, Samsung Electro-Mechanics' operating profit is projected to top 1 trillion won again this year. After recording 1.1828 trillion won in operating profit in 2022, Samsung Electro-Mechanics had remained below 1 trillion won. According to FnGuide, the securities industry's operating profit forecast for Samsung Electro-Mechanics this year is 1.3293 trillion won.
Oh Kang-ho, an analyst at Shinhan Investment & Securities, said, "FC-BGA entered an accelerated growth phase starting in the second half of last year due to increased demand from big tech," adding, "Next year, sales at the Package Solution division (which handles the FC-BGA business) are expected to rise about 23% from a year earlier."