Thanks to high value-added products... Samsung Electro-Mechanics posts highest quarterly sales since establishment in 2Q (Comprehensive)

Q2 Operating Profit Increases 230%... Record High for Q2
Sales Growth of High-Value Products Like MLCC and Semiconductor Package Substrates
Mass Production Begins at Tianjin Factory in China... "No Decision Made on Wi-Fi Module Business Sale"

[Image source=Yonhap News]

[Asia Economy reporters Jeong Hyunjin and Kim Heungsun] Samsung Electro-Mechanics recorded its highest-ever sales in the second quarter since its founding. Sales of high value-added products such as multilayer ceramic capacitors (MLCC) and high-spec semiconductor package substrates increased significantly, leading to the highest operating profit on a second-quarter basis. With the demand for related parts in IT and automotive sectors expected to rise in the second half, there is growing anticipation that the annual operating profit will exceed 1 trillion KRW.

On the 28th, Samsung Electro-Mechanics announced that its consolidated sales for the second quarter of this year reached 2.4755 trillion KRW, and operating profit was 339.3 billion KRW, up 41% and 230% respectively compared to the same period last year. The sales figure is the largest since Samsung Electro-Mechanics was founded in 1973, and the operating profit is the highest ever for a second quarter. It is the second highest on a quarterly basis after the third quarter of 2018 (operating profit of 404.9 billion KRW).

Samsung Electro-Mechanics explained that the significant improvement in performance compared to the same period last year was due to increased sales of high value-added products such as small and high-capacity MLCCs for IT, industrial and automotive MLCCs, and high-spec semiconductor package substrates.

By segment, the components division recorded 1.1952 trillion KRW, up 42% year-on-year and 10% quarter-on-quarter. The module division's second-quarter sales increased 47% year-on-year but decreased 3% quarter-on-quarter to 813.7 billion KRW. The substrate division posted sales of 466.6 billion KRW, up 27% year-on-year and 6% quarter-on-quarter.

In the module division, sales decreased quarter-on-quarter due to a seasonal downturn in strategic customers leading to reduced camera module supply, but sales increased year-on-year thanks to expanded supply of multi-camera, folded zoom, and high-resolution optical image stabilization (OIS) camera modules to Chinese customers. In the substrate division, semiconductor package substrates maintained full operation with continued expansion of supply for high-spec APs, high value-added solid-state drive (SSD) memory BGA, and PC CPU FCBGA, improving performance through increased proportion of high value-added products.

Samsung Electro-Mechanics MLCC

Samsung Electro-Mechanics expects that despite increased market volatility due to the prolonged COVID-19 situation and some uncertainties related to set market conditions, demand for related parts will continue to grow with flagship model launches by major smartphone manufacturers and recovery in automotive demand in the second half.

The components division plans to expand supply of high value-added products such as small and ultra-high capacity MLCCs as IT-related demand from mobile, PC, TV, and gaming consoles is expected to continue in the second half. With automotive demand recovery and continued automotive electrification, shipments of automotive MLCCs are expected to show double-digit growth in the second half. Samsung Electro-Mechanics stated it will respond promptly to market demand by expanding the automotive product lineup and improving production capacity.

Notably, Samsung Electro-Mechanics announced during the second-quarter earnings conference call that the new factory in Tianjin, China has started mass production. The company said, "The Tianjin factory was completed in the second quarter, underwent trial production, and is now in mass production. We plan to gradually expand production and utilize it as a main production base in line with increasing demand for IT and automotive MLCCs." Accordingly, Samsung Electro-Mechanics' MLCC production capacity is expected to expand.

In the module division, demand for camera modules is expected to recover in the second half with new flagship smartphone launches by major domestic and overseas customers, but uncertainties remain in the Chinese market due to semiconductor supply issues and adjustments in set production plans. Samsung Electro-Mechanics also stated it plans to secure a leading position in the flagship market with high-performance camera modules for new smartphones and continue expanding supply of camera modules for mid- to high-spec budget smartphones.

Samsung Electro-Mechanics Cleanroom

Samsung Electro-Mechanics emphasized, "From the third quarter, supply of high-spec OIS modules mounted on new foldable phones of strategic customers has begun in earnest, and adoption of high-resolution OIS and folded zoom cameras is expanding even in budget smartphones. We will strive to secure performance exceeding that of the same period last year in the second half."

The substrate division also expects continued demand for high-spec package substrates such as AP, 5G antennas, and thin CPU substrates in the second half. In particular, it stated, "Market demand for package substrates is continuously expanding, and supply is tight from high-spec to low-spec products. Considering this market situation, prices are expected to continue rising in the second half."

Samsung Electro-Mechanics recorded sales of 4.8474 trillion KRW and operating profit of 670.8 billion KRW in the first half of this year. Although the company achieved record-high sales of 8.193 trillion KRW and operating profit of 1.0181 trillion KRW in 2018, annual operating profits were 734 billion KRW and 829.1 billion KRW in 2019 and last year respectively. Having exceeded consensus in the first half and with strong performance expected in the second half, there is a forecast that annual operating profit could surpass 1 trillion KRW this year.

A Samsung Electro-Mechanics official said, "We plan to enhance profitability by expanding the proportion of high value-added products and strengthen competitiveness through differentiated technologies such as embedded components and fine circuits."

Meanwhile, regarding the sale of the Wi-Fi module business, Samsung Electro-Mechanics stated, "The Wi-Fi module business was amicably terminated by mutual agreement before the transaction closing date. No future plans have been decided yet, and we will communicate with the market once specific details are finalized."

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