Samsung Electro-Mechanics' quarterly revenue topped 3 trillion won for the first time since its founding. Operating profit also jumped sharply, delivering a "surprise earnings" result that beat market expectations. The first quarter is typically the off-season for the electronic components industry because finished goods corporations begin inventory adjustments, but the company posted "record earnings" on the back of growing demand for artificial intelligence (AI). Samsung Electro-Mechanics said demand for its key products continues to rise and noted it is reviewing price increases.
Samsung Electro-Mechanics disclosed on the 30th that first-quarter revenue came to 3.2091 trillion won. Operating profit during the period totaled 280.6 billion won. Compared with a year earlier, revenue rose 17% and operating profit climbed 40%. The company said, "Operating profit increased significantly even after reflecting 71.4 billion won in one-off expenses such as retirement benefits," adding, "It was the result of responding to solid demand for high value-added products for industrial and automotive applications."
◇ AI demand expansion lifts MLCC and FC-BGA sales
Samsung Electro-Mechanics' main products are multilayer ceramic capacitors (MLCC), flip-chip ball grid array (FC-BGA), and camera modules. MLCCs store electricity in electronic circuits and supply it stably when needed, while removing electromagnetic interference (noise), earning the nickname "the rice of the electronics industry." FC-BGA refers to high-performance, high-density semiconductor package substrates. Both products saw strong demand even in the first quarter, considered an off-season, as AI services expanded. Camera modules are also seeing higher demand as the physical AI market, including Humanoid Robot, grows.
In its first-quarter earnings conference call on the 30th, Samsung Electro-Mechanics said, "As MLCC demand for AI-related applications continues to expand, supply-demand tension in the market is rising," adding, "First-quarter shipments increased from the previous quarter, driven by expanding industrial demand such as AI servers and power modules for data centers, and growth in the automotive sector." It added, "For MLCCs as well, as demand is expanding for high-end products, we are proceeding with long-term agreement (LTA) discussions."
On FC-BGA, it said, "Demand exceeds production capacity," adding, "Existing customers are requesting more supply, and demand from new customers set to begin in the second quarter is also increasing compared with previous projections."
Samsung Electro-Mechanics is reviewing price hikes for key products in line with the heightened demand. On MLCC pricing, the company said, "We are monitoring market conditions, taking into account factors such as higher raw material prices," adding, "We will respond strategically on pricing." For FC-BGA as well, it said, "We are discussing increases with major clients, reflecting higher raw material costs and supply-demand conditions."
In the first quarter, revenue for the Component division, which oversees the MLCC business, totaled 1.4085 trillion won, up 16% from a year earlier. The Package Solution division, which handles FC-BGA and more, recorded 725 billion won during the period, a 45% increase from a year earlier. The Optics Solution division, which oversees camera modules, posted first-quarter revenue of 1.0756 trillion won, up 5% year over year.
◇ Zeroing in on the space and robotics markets
Samsung Electro-Mechanics projected that in the second quarter the industrial and automotive components market will continue to grow on expanded global AI investment and Autonomous Driving. It expects demand to rise for high value-added products as data center infrastructure advances and AI server power consumption increases.
Samsung Electro-Mechanics is pushing to expand production capacity accordingly. The company said, "AI-related demand is increasing rapidly compared with previous expectations, requiring a swift response," noting that investment for expanding production facilities could more than double from a year earlier. It added, "Over the next three years, the scale of investment will also increase significantly compared with the past."
It is also working to secure new growth engines. On the conference call, the company said, "For aerospace-related MLCCs, we are participating as a key supplier for ground terminals that use products similar to AI servers," adding, "Low Earth orbit satellites use more than 100,000 MLCCs—more than electric vehicles—and demand high reliability, so we will secure the market early and strengthen the foundation for mid- to long-term growth."
Regarding camera modules, it said, "We are developing high-resolution recognition modules with major global Humanoid Robot customers," adding, "We will also preemptively secure technologies such as small, thin cameras for precise object gripping and push to gain an early lead in the humanoid market."