Samsung Electro-Mechanics Q3 Operating Profit Falls 41%... Seeking Breakthrough in Automotive Sector (Comprehensive)

Amid overall weak demand for IT devices and the depreciation of the yen, Samsung Electro-Mechanics' operating profit in the third quarter nearly halved compared to a year ago. The company is preparing a breakthrough by strengthening product competitiveness and lineup, focusing on high value-added products such as automotive and industrial sectors.

Samsung Electro-Mechanics announced on the 26th that it recorded consolidated sales of 2.3609 trillion KRW and an operating profit of 184 billion KRW in the third quarter of this year. Compared to the same period last year, sales decreased by 22.8 billion KRW (1%) and operating profit fell by 127 billion KRW (41%). The operating profit margin dropped to 7.8% from 13.0% in the third quarter of last year. Profitability declined due to continued weak demand for IT devices, yen depreciation, and intensified competition among suppliers.

Looking at the performance by division, the component division, which accounts for the largest share of sales, recorded third-quarter sales of 1.0959 trillion KRW, an 18% increase compared to the same period last year. This was due to steady demand in global smartphone new product launches and markets such as automotive and servers, leading to increased MLCC supply across all applications including IT, industrial, and automotive sectors. However, MLCC demand is expected to slow down in the fourth quarter due to year-end seasonality. Samsung Electro-Mechanics is expanding sales focusing on high value-added products such as small-sized and high-capacity MLCCs for IT use and increasing supply of high-reliability automotive MLCCs.

Third-quarter sales of the optical communication solutions division, which includes camera module products, and the package solutions division, which includes substrates, decreased by 8% and 20% respectively compared to the same period last year, recording 825.4 billion KRW and 439.6 billion KRW.

Samsung Electro-Mechanics Suwon Plant Exterior View

Samsung Electro-Mechanics expects some product sales to decline in the fourth quarter due to reduced component demand and is preparing a breakthrough. As demand for high-performance products used in automotive applications is expected to continue growing, the company plans to strengthen product competitiveness and lineup focusing on high value-added products such as automotive and industrial sectors.

In a conference call following the earnings announcement, Samsung Electro-Mechanics stated, "Demand for major sets such as PCs and smartphones is expected to gradually recover from next year after hitting a low this year, so we anticipate better performance next year compared to this year." They added, "To improve performance, we will continuously expand business in promising fields such as automotive, server, and network, and innovate the business structure focusing on high-growth, high value-added products."

They continued, "In the case of automotive MLCCs, the adoption of advanced driver assistance systems (ADAS) of level 2 or higher is expanding, and MLCCs mounted are about three times that of internal combustion engines, so sales volume is expected to increase next year compared to this year." They added, "The automotive MLCC market is expected to show steady growth next year as well."

Capital investment is expected to decrease somewhat next year. Samsung Electro-Mechanics said, "After the large-scale investment projects related to the expansion of the package substrate business conducted over the past two years are somewhat completed this year, the investment scale next year is expected to decrease compared to this year." However, they added, "Investments in MLCCs and inductors, including industrial, automotive, and special products that have been expanded so far, will continue."

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