The Sejong plant of Samsung Electro-Mechanics, which primarily produces semiconductor package substrates. [Samsung Electro-Mechanics]
The Sejong plant of Samsung Electro-Mechanics, which primarily produces semiconductor package substrates. [Samsung Electro-Mechanics]

Samsung Electro-Mechanics expects to post record earnings in the third quarter, riding surging demand for multilayer ceramic capacitors (MLCC) and high-value semiconductor substrates driven by global hyperscalers' expanding AI data center investment. Having already set an all-time quarterly sales record in the second quarter, the company said it expects to surpass that mark almost immediately.

The company said the momentum is not limited to this year. It said the trend will continue through year-end and strengthen further in 2027. Samsung Electro-Mechanics also highlighted plans to push into new markets including automotive electronics and physical AI, in addition to AI data centers.

AI MLCC: long-term supply deals signed with over 10 hyperscalers, chipmakers

During a conference call Thursday to discuss its second-quarter results, Samsung Electro-Mechanics said it expects to achieve record earnings in the third quarter, citing tightening supply and demand for high-value products such as MLCC and FC-BGA (flip-chip ball grid array), expanding long-term supply agreements and continued average selling price increases. "This trend is expected to continue into the fourth quarter and strengthen further in 2027," the company said.

Samsung Electro-Mechanics rode the AI supercycle in the first half of the year, posting sharp earnings growth. Second-quarter sales reached 3.46 trillion won ($2.38 billion), with operating profit of 440.4 billion won — up 24 percent and 107 percent, respectively, from a year earlier.

Growth in the components division was driven by higher MLCC shipments for data centers and automotive applications. The division's second-quarter sales rose 29 percent year-on-year to 1.65 trillion won, from 1.28 trillion won in the same period last year.

The company said it posted double-digit shipment growth on the back of expanding demand for AI servers, networking and power applications in data centers, as well as electric vehicles. Average selling prices continued to rise from the previous quarter, reflecting a higher share of high-value industrial and automotive products.

For the third quarter, the company said it expects MLCC demand for AI servers, led by hyperscalers, to keep growing. It also said the automotive market is expected to maintain solid demand, citing external forecasts of double-digit electric vehicle shipment growth compared with the second quarter.

Samsung Electro-Mechanics said it has signed long-term supply agreements with more than 10 of the world's top hyperscalers and major chipmakers for its MLCC business, and added that it is actively responding to additional requests for such deals.

Glass substrate JV with Dongwoo Fine-Chem to be established this year, targeting 2028 operations

Long-term supply agreement requests are not limited to MLCC. Samsung Electro-Mechanics is actively expanding its FC-BGA supply capacity in preparation for an era of larger and more complex semiconductor substrates, and strategic LTA negotiations that include investment commitments are ongoing.

The company said global Big Tech firms are developing increasingly large proprietary chips optimized for AI inference, and that growing HBM adoption is driving a corresponding increase in package substrate size. "We are in strategic LTA negotiations with top-tier semiconductor customers, including investment support," it said.

Building on that, the company plans to expand its semiconductor substrate production capacity. Earlier this month, Samsung Electro-Mechanics announced at a national briefing on the Chungcheong region's advanced industry development vision that it would invest 8 trillion won to expand package substrate facilities at its Sejong plant.

Particular attention has focused on a glass substrate joint venture for which Samsung Electro-Mechanics signed a definitive agreement earlier this month with Dongwoo Fine-Chem, a subsidiary of Sumitomo Chemical. Samsung Electro-Mechanics will contribute 480 billion won for a 66.2 percent stake, with the legal entity set to be established before year-end.

The company said it has been collaborating with Big Tech data center customers on developing large-area, high-layer-count glass substrates, and that it is in the technology approval and sample evaluation stages with some customers. "We aim to begin full-scale operations in 2028 and will move quickly to meet customer needs and capture an early lead in the market," it said.

The company also said silicon capacitors, which it is cultivating as a new growth engine for the AI era, offer strong competitive advantages because they can be integrated alongside MLCC and package substrates. Silicon capacitors are mounted closest to the semiconductor substrate within AI server chip packages, supporting system performance and stability.

Samsung Electro-Mechanics said it is currently negotiating additional supply agreements with major AI-related chipmakers. "We are the only company in the world capable of supplying MLCC, silicon capacitors and package substrates as a turnkey solution, and we intend to leverage that strength to capture the early market," it said.

Optical sales slip on smartphone slowdown; physical AI seen as way forward

In contrast to MLCC and semiconductor substrates, the optical solutions division posted a sequential sales decline. Second-quarter sales fell 4 percent quarter-on-quarter to 1.04 trillion won, from 1.08 trillion won in the first quarter, though they were up 10 percent from a year earlier.

The decline was driven by stagnating smartphone demand as rising component costs weighed on the market. Samsung Electro-Mechanics is looking to automotive electronics and physical AI as a way forward.

The company said advances in autonomous driving technology are fueling demand for high-precision sensing and high-reliability cameras, with new applications such as robotaxi and driverless autonomous driving services expanding the addressable market. It said it would strengthen its product competitiveness by expanding its high-value lineup for robotaxi applications.

The company is also preparing to supply cameras for humanoid robots. "We plan to begin initial mass production supply before year-end and will expand next-generation product development collaboration with top-tier customers to actively address the physical AI market," it said.


jeongwan@heraldcorp.com