Samsung Electro-Mechanics Q1 Operating Profit Doubles YoY... "Non-Face-to-Face Demand Recovery Continues" (Comprehensive)

[Asia Economy Reporter Kim Heung-soon] Samsung Electro-Mechanics announced on the 28th that its consolidated operating profit for the first quarter of this year was preliminarily estimated at 331.5 billion KRW, a 99.4% increase compared to the same period last year. Sales reached 2.3719 trillion KRW, up 11.2% year-on-year. Net profit increased by 82.2% to 242.7 billion KRW.

Samsung Electro-Mechanics explained that operating profit surged significantly due to increased sales of high-value-added products such as small, high-capacity IT multilayer ceramic capacitors (MLCCs) and semiconductor package substrates driven by the rise in non-face-to-face demand. They also added that the recovery in demand from the automotive market, along with expanded supply of automotive MLCCs and high-spec camera modules for strategic customers, supported the overall performance improvement.

This year, the company expects the recovery trend in demand for IT devices such as smartphones and PCs to continue, and the automotive market to improve. They also forecast that the decrease in MLCC demand due to the semiconductor supply shortage will not be significant. During the earnings conference call, Samsung Electro-Mechanics stated, "There is a possibility of reduced MLCC demand due to set (finished product) production disruptions caused by semiconductor supply shortages," but added, "The need to secure inventory of all components is increasing, and the semiconductor supply situation is expected to gradually stabilize in the second half of the year, so the impact on annual MLCC demand will be limited."

According to Samsung Electro-Mechanics, the current MLCC operating rate is running at full production capacity for the first quarter of this year, following the previous quarter. Accordingly, they plan to improve productivity and manufacturing efficiency and gradually expand supply capacity through the end of the year. They also mentioned plans to flexibly respond to market demand by utilizing the new plant in Tianjin. Based on this, they aim to secure stable supply capacity to meet the growing market demand for MLCCs and high-performance semiconductor package substrates, and to continue the growth trend by expanding sales of high-spec camera modules.

Performance and Outlook by Business Division

Looking at the performance by business division, the Components division achieved sales of 1.0884 trillion KRW, up 27% year-on-year and 13% quarter-on-quarter, driven by expanded sales of IT MLCCs and increased product supply due to the recovery in automotive demand. For the second quarter, with continued demand in IT and automotive markets expected, the company plans to actively respond to market demand through productivity improvement, manufacturing efficiency enhancement, and supply capacity expansion.

The Modules division recorded first-quarter sales of 841.3 billion KRW, a 49% increase quarter-on-quarter due to expanded supply of camera modules for strategic customers, but a 6% decrease year-on-year due to the early launch of flagship new products affecting module pre-supply. Samsung Electro-Mechanics explained that although a seasonal decline in camera module demand is expected in the second quarter, they plan to diversify customers including those in China and expand supply of camera modules for mid- to high-spec budget smartphones.

The Substrates division’s first-quarter sales were 442.2 billion KRW, down 21% quarter-on-quarter due to seasonal demand decline for flexible printed circuit boards (RFPCBs) for OLEDs, but up 15% year-on-year thanks to expanded supply of package substrates for mobile applications processors (AP) and PC central processing units (CPU). For the second quarter, the plan is to increase production capacity focusing on high-value-added products to enhance profitability.

Meanwhile, as of the end of the first quarter this year, Samsung Electro-Mechanics held cash and cash equivalents of 1.6237 trillion KRW, nearly double the 803.8 billion KRW held at the end of 2019. Samsung Electro-Mechanics stated, "The cash on hand will be primarily invested in facility investments to expand growth and strengthen competitiveness of existing businesses," and added, "In the short term, we will prioritize maintaining net cash, and thereafter consider pursuing various new businesses including mergers and acquisitions (M&A)."

This content was produced with the assistance of AI translation services.