Samsung Electro-Mechanics is forecast to achieve a sharp increase in operating profit for Q2, driven by AI server component demand. Yonhap Infomax compiled reports from 15 major domestic securities firms that issued forecasts within the last month, projecting Q2 revenue of 3.3237 trillion won and operating profit of 410.4 billion won, representing year-on-year increases of 19.36% and 92.72% respectively. The Q2 operating profit forecast of 410.4 billion won would mark the highest level since Q1 2022, when the company recorded 410.5 billion won. Both the substrate (package) business and component business are driving performance growth, with increased sales of AI server components across both segments. The semiconductor packaging industry faces tight supply conditions as AI chip demand accelerates, with Samsung Electro-Mechanics and Japanese competitor Murata dominating supply of high-value MLCC capacitors for server applications.
Securities Firms Project 93% Operating Profit Surge for Q2
Samsung Electro-Mechanics exceeded 3 trillion won in quarterly revenue for the first time in company history during Q1, but operating profit remained at 280.6 billion won due to retirement benefit provisions. The Q2 operating profit forecast represents a four-year high, approaching the Q1 2022 figure of 410.5 billion won. The substrate business saw the proportion of server flip-chip ball grid array (FC-BGA) sales expand while general BGA product sales proportion decreased. FC-BGA products are used for high-specification chips including central processing units (CPUs), neural processing units (NPUs), and graphics processing units (GPUs) that serve as the brain of servers. FC-BGA sales surpassed general BGA sales in Samsung Electro-Mechanics' package business starting from Q3 last year.
FC-BGA Sales Surpass Traditional BGA in Substrate Business
According to Daishin Securities, Samsung Electro-Mechanics' Q1 FC-BGA sales reached 422 billion won while BGA sales totaled 303 billion won. In Q2, FC-BGA sales increased to 479 billion won and BGA sales rose to 306 billion won, widening the gap between the two product categories. The component business is expected to record high profitability as the proportion of AI server-oriented multilayer ceramic capacitor (MLCC) sales increases. Supply of high-value server MLCCs is limited to Japan's Murata and Samsung Electro-Mechanics, creating a supply shortage relative to demand.
MLCC Average Selling Price Rises on AI Server Demand
Production lines are converting to high-value applications, resulting in shortages of general-purpose MLCCs and sequential price increases across the product range. Meritz Securities estimates that Samsung Electro-Mechanics' MLCC average selling price (ASP) rose from approximately 4 won per unit last year to the late 4 won range this year. The market is experiencing supply constraints as manufacturing capacity shifts toward premium products for AI applications.
Analysts Highlight Profitability Improvement from High-Value Products
Park Kang-ho, researcher at Daishin Securities, stated that "FC BGA and MLCC, which are critical components in AI semiconductors and data centers, have reached parity between Samsung Electro-Mechanics and Japanese competitors," adding that "the operating profit margin is at a point where it will rise steeply due to the expansion of high-value product proportions." Choi Bo-young, researcher at Kyobo Securities, noted that "package solutions continue to face tight supply conditions due to the larger area and higher layer count of AI semiconductors, with price increases for server FC-BGA continuing," predicting that "profitability is entering a phase where it will step up to the next level." Samsung Electro-Mechanics' stock price closed at 1.275 million won in the previous trading session, down 0.16%, as AI-related stocks underwent correction.
FAQ
What is Samsung Electro-Mechanics' Q2 operating profit forecast?
Securities firms forecast Samsung Electro-Mechanics' Q2 operating profit at 410.4 billion won, representing a 92.72% year-on-year increase. This would mark the highest quarterly operating profit since Q1 2022, when the company recorded 410.5 billion won.
Why is Samsung Electro-Mechanics' profitability improving?
The profitability improvement is driven by increased sales of high-value products for AI servers, specifically FC-BGA substrates and MLCC capacitors. FC-BGA sales reached 479 billion won in Q2, surpassing traditional BGA products, while MLCC average selling prices rose from 4 won per unit last year to the late 4 won range this year due to tight supply conditions.
