'Poor Performance' Samsung Electro-Mechanics... Sharp Decline in Core 'MLCC' Amid Smartphone Demand Drop

Poor Performance of IT MLCC (Multilayer Ceramic Capacitor) Business with High Dependence on China

[Asia Economy Reporter Park Sun-mi] Samsung Electro-Mechanics' announcement of weak fourth-quarter results last year was largely due to a sharp decline in the IT MLCC (Multilayer Ceramic Capacitor) business, which is highly dependent on China, caused by a slowdown in set demand and seasonal off-season effects.

In the fourth-quarter business segment results disclosed by Samsung Electro-Mechanics on the 25th, the sales decline in the core Component division was steep. The Component division's fourth-quarter sales were 833.1 billion KRW, down 10% from the third quarter and shrunk by 29% compared to the fourth quarter of 2021. The Component division handles Samsung Electro-Mechanics' core products such as MLCC, inductors, and chip resistors. It has a higher dependence on China than other divisions and was directly hit by the decline in IT device demand within China.

In fact, due to delayed recovery in demand for IT products such as smartphones and PCs and inventory adjustments, overall MLCC sales decreased. Although sales of automotive MLCC increased due to higher supply of high-value MLCCs for ADAS and electric vehicles, it was not enough to offset the overall performance decline. Samsung Electro-Mechanics plans to secure profitability through productivity improvement and operational efficiency and to focus on improving results by expanding its lineup of high-end automotive products that can withstand high temperature and high pressure.

The Optical Communication Solutions division recorded sales of 655.5 billion KRW, down 27% from the third quarter and 16% compared to the fourth quarter of 2021. Although supply to overseas clients of automotive camera modules expanded, supply of IT camera modules decreased due to seasonal off-season effects. As demand for high-performance camera modules is expected to increase, Samsung Electro-Mechanics plans to increase supply of products applying new technologies such as high-resolution and high-zoom. Additionally, the company intends to expand its automotive camera module business by diversifying its client base.

However, the Package Solutions division's fourth-quarter sales grew by 0.2% year-on-year to 479.8 billion KRW. This was due to increased supply of network and automotive FCBGA. Although some applications such as smartphones and PCs may see demand declines this year, there is strong expectation that the high-end package substrate market for servers and automotive will continue to grow. Samsung Electro-Mechanics plans to expand supply of high-value products with differentiated technologies such as high-layer count and fine circuit implementation, led by the server package substrates it began mass-producing domestically for the first time last year.

Meanwhile, Samsung Electro-Mechanics' full-year 2022 results recorded sales of 9.4246 trillion KRW and operating profit of 1.1828 trillion KRW. Compared to the previous year, sales decreased by 3% and operating profit by 20%.

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