Samsung Electro-Mechanics signs 450 billion won MLCC supply deal with global tech giant

Contract covers January–December next year; North American CSP suspected as buyer

Large-scale order seen as rare, reflecting surging AI server demand

Ultra-compact, high-capacity, high-reliability components

Up to 600,000 units per AI data center server rack

Shortage expected to persist, pushing up prices next year

President Jang Deok-hyeon: 'Our technology recognized as core to the AI era'

Samsung Electro-Mechanics MLCC [Provided by Samsung Electro-Mechanics]

Samsung Electro-Mechanics announced Tuesday it has signed a supply agreement worth 450 billion won ($292 million) with a global tech giant to provide multilayer ceramic capacitors, or MLCCs, for AI servers. Once used almost exclusively in smartphones, MLCCs — often called "the rice of the electronics industry" — have reached a new inflection point with the rise of AI, emerging as a critical component inside AI data centers at a scale far beyond their earlier applications.

Prices are rising alongside demand. High-capacity MLCCs for server use are known to cost more than three times as much as general-purpose equivalents. Samsung Electro-Mechanics said it plans to leverage its technological edge and production capacity in high-value MLCCs to capture demand from major tech companies.

The company disclosed Tuesday that it signed the 454 billion won MLCC supply contract with a global tech firm, with the counterparty believed to be a North American cloud service provider. The contract runs from January through the end of December next year.

Large-scale supply contracts of this kind are considered rare in the MLCC industry, and analysts say the deal reflects both the acute shortage and surging demand for AI server MLCCs.

An MLCC stores electrical charge and releases it steadily to semiconductors, ensuring stable operation. While the component was historically used mainly in smartphones and PCs, AI data centers have emerged as a major new source of demand. Momentary power fluctuations inside a server can degrade performance, making stable power control increasingly critical in AI server environments.

AI data centers consume MLCCs at a scale comparable to semiconductors. AI servers carry more than 10 times as many MLCCs as conventional servers — typically more than 20,000 per GPU, and up to 600,000 per server rack. Usage is expected to climb further in next-generation GPUs.

It is not just the volume that is rising. The demanding performance requirements of AI servers call for high-reliability components, which command premium prices. Server MLCCs must withstand harsh conditions — temperatures above 105 degrees Celsius, voltages of 100 volts, and high bending stress — driven by the intense heat generated by AI servers' heavy computational workloads.

These stringent technical requirements create high barriers to entry. More than 50 MLCC suppliers operate worldwide, but only a handful can supply server-grade MLCCs.

Aerial view of Samsung Electro-Mechanics' Suwon campus [Provided by Samsung Electro-Mechanics]

Samsung Electro-Mechanics holds about 25 percent of the global MLCC market, ranking second behind Japan's Murata — but in the AI server MLCC segment, the company leads with a share of more than 40 percent.

A shortage that began in high-reliability MLCCs is now pushing up prices across the broader MLCC market. Factory utilization reached 95 percent in the first quarter as the company worked to meet AI server demand, yet shortages have persisted, intensifying upward pressure on prices.

Securities analysts expect the trend to continue into next year. Yang Seung-su, a researcher at Meritz Securities, said the average selling price of MLCCs is expected to rise by more than 30 percent next year. He added that a deepening shortage of ultra-compact, high-capacity MLCCs for AI applications is making it increasingly likely the industry will enter a price-hike cycle.

Samsung Electro-Mechanics said its strategy is to strengthen its competitive position in the AI server market by building on its strengths in ultra-compact, high-capacity and high-reliability products. The company is expanding its server product lineup using proprietary materials and process technology.

The company said it is also using the contract as a springboard for broader discussions with major global tech firms, including potential supply expansion beyond next year, and plans to consistently grow the share of high-value products — including those for AI and automotive applications — in its overall supply mix.

Samsung Electro-Mechanics President Jang Deok-hyeon said the deal "is the result of Samsung Electro-Mechanics' MLCC being recognized for its technological capabilities as a core component of the AI era," adding that the company will "develop next-generation leading-edge products ahead of the market to secure a first-mover advantage."

jeongwan@heraldcorp.com