Samsung Electro-Mechanics and LG Innotek are riding the artificial intelligence (AI) boom, with evenly growing sales portfolios that are not only driving a rebound in results but also lifting the companies into a higher weight class, analysts said. Sales that used to swing with demand for camera modules and substrates from major customers such as Samsung Electronics and Apple are being reshaped starting this year, changing their positions in the global AI supply chain.
According to the securities industry on the 14th, both Samsung Electro-Mechanics and LG Innotek are expected to post record-high results this year. Daishin Securities estimated Samsung Electro-Mechanics' operating profit this year at 1.143 trillion won (up 26.1% from a year earlier), while Meritz Securities projected LG Innotek's operating profit at 1.0849 trillion won. If LG Innotek's operating profit tops 1 trillion won, it would return to the "1 trillion club" for the first time in four years since 2022.
◇ Samsung Electro-Mechanics changes its fundamentals as the quality of demand shifts
For Samsung Electro-Mechanics, the change in the sales structure is significant not as a simple increase in demand but as a shift in the "quality" of demand. The share of industrial and automotive multilayer ceramic capacitors (MLCCs) is increasing, and as demand for high-voltage, high-capacity products for AI data centers and servers rapidly expands, the product mix itself is moving toward higher value-added offerings.
Samsung Electro-Mechanics' MLCC plant utilization rate is currently known to be close to the 90%–95% level. With virtually no room to raise utilization further, price hikes are essential to lift results. Given that Japan's Murata, a competitor in the MLCC market, has hinted at price increases, Samsung Electro-Mechanics is also expected to set a policy to raise supply prices soon.
Flip-chip ball grid array (FC-BGA), a semiconductor package substrate for AI servers, is also forecast to enter a phase of deepening structural supply shortages starting in the second half. That is because demand for AI accelerators and server central processing units (CPUs) is surging simultaneously. Samsung Electro-Mechanics is operating a new FC-BGA plant in Vietnam to meet demand. Daishin Securities forecast Samsung Electro-Mechanics' FC-BGA sales this year at 1.43 trillion won (up 25.5% from a year earlier).
It has also installed a new growth engine. By making a full-fledged push into glass substrates, the next-generation semiconductor substrate, the company is fleshing out a strategy to preempt next-generation packaging demand from big tech through synergies with FC-BGA. It is expected to supply MLCCs, camera modules and packaging substrates together for Tesla's Humanoid Robot, and to begin substrate supply to four new AI server customers starting in the second half.
◇ LG Innotek is transforming from an "Apple subcontractor" into an "AI components" company
LG Innotek's changes also warrant attention. Camera modules supplied to Apple accounted for about 80% of total sales, but the company is expanding semiconductor substrates and robot components as levers to rebalance.
Earlier, LG Innotek President Moon Hyuk-soo publicly set a goal of raising the package solutions division's contribution to operating profit to the level of optical solutions (camera modules) within five years. The package solutions division's share of LG Innotek's total operating profit rose from 10% in 2024 to 19.4% last year, and is expected to surpass the low-20% range this year. Some in the securities industry project the figure could approach 30% next year.
Its presence in the Robotics market is also growing. It is reportedly set to begin supplying vision sensing modules this year to three U.S. Humanoid Robot companies—Figure AI, Boston Dynamics and Tesla. A vision sensing module combines an RGB camera with a 3D sensing module and is a core component that enables robots to perceive their surroundings. KB Securities projected that sales in this division will surge from 4.2 billion won this year to 210.2 billion won in 2030. As the United States–China AI power struggle reshapes the China-centric global supply chain, some expect LG Innotek, a Korean company, to benefit.
Kim Dong-Won, head of research at KB Securities, said, "LG Innotek is currently significantly undervalued compared with the average corporate value of global AI substrate makers, and for Samsung Electro-Mechanics, additional earnings upgrades are inevitable once MLCC price hikes begin to be reflected in second-half results," adding, "Both companies are highly likely to be re-evaluated as core infrastructure partners, not just simple parts suppliers, as AI and Humanoid industries spread."