Samsung Electro-Mechanics "Q4 Will Be More Challenging"... Focus on Automotive Components (Comprehensive)

Performance Decline Due to IT Demand Slowdown
Expansion of High-Value MLCC Supply... Server FCBGA Scheduled for Launch Next Month

[Asia Economy Reporter Han Yeju] Samsung Electro-Mechanics received a disappointing performance report for the third quarter of this year due to demand contraction caused by the global economic downturn. The problem lies in the fourth quarter. The seasonal off-season is added to the ongoing slowdown in IT demand. Samsung Electro-Mechanics plans to focus its capabilities on high-growth potential businesses such as automotive products to expand profitability.

Samsung Electro-Mechanics announced on the 26th that its consolidated sales for the third quarter of this year reached 2.3837 trillion KRW, with an operating profit of 311 billion KRW. These figures represent decreases of 6.4% and 31.8%, respectively, compared to the same period last year.

Sales of related components such as high-resolution camera modules and automotive multilayer ceramic capacitors (MLCC) increased due to growth in the automotive product market, but performance declined due to reduced demand for IT sets such as smartphones and PCs and inventory adjustments.

By segment, the components division recorded third-quarter sales of 929.8 billion KRW, down 30% year-on-year and 18% quarter-on-quarter. The optical communication solutions division achieved sales of 901.4 billion KRW, up 14% year-on-year and 16% quarter-on-quarter, driven by expanded supply of high-performance camera modules for new flagship smartphones from major domestic and overseas clients and high-reliability automotive camera modules. The package solutions division posted third-quarter sales of 552.5 billion KRW, up 26% year-on-year and 3% quarter-on-quarter, due to increased supply of 5G, network, and automotive package substrates.

The outlook for the fourth quarter is even less favorable. Sales, product shipments, and operating rates are all expected to decline compared to the third quarter. During the third-quarter earnings conference call, Samsung Electro-Mechanics stated, "In the fourth quarter, due to external environmental uncertainties, continued slowdown in IT set demand, and year-end seasonal effects, overall company sales are expected to decrease compared to the third quarter."

They added, "In 2023, despite difficult external business conditions, weak demand for IT sets such as smartphones and PCs is expected to continue. However, future growth markets such as 5G, networks, and servers are expected to remain relatively robust, so we will focus our capabilities on industrial automotive MLCC, automotive camera modules, and high-value-added package substrates."

Accordingly, Samsung Electro-Mechanics expects this year's investment scale to be reduced from the original plan, and this trend is expected to continue next year. Samsung Electro-Mechanics said, "This year's investment is expected to decrease slightly compared to the original plan. Although the investment plan for next year is still being established, it is expected to be somewhat smaller than this year. We will do our best to improve investment efficiency, focusing on high-growth and high-value-added areas."

Meanwhile, flip chip-ball grid array (FC-BGA) demand is expected to remain solid, mainly for high-value-added products such as servers, networks, and automotive applications. Samsung Electro-Mechanics stated that it will continuously secure sales through mass production of server FC-BGA. "Server FC-BGA is progressing smoothly as planned," Samsung Electro-Mechanics said, adding, "Mass production will begin in November." They further noted, "We will focus on expanding production capacity (CAPA) until next year and continue to achieve steady sales growth."

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