Samsung Electro-Mechanics Q1 Operating Profit Down 66%... "Q2 Performance Improvement with FC-BGA and Automotive MLCC" (Comprehensive)

Samsung Electro-Mechanics announced on the 26th that it recorded sales of 2.0218 trillion KRW and an operating profit of 140.1 billion KRW in the first quarter of this year. Orders for high value-added server flip-chip ball grid array (FC-BGA) substrates are increasing, and the growth potential of automotive multilayer ceramic capacitors (MLCC) is also high, so performance is expected to improve from the second quarter onward.

Samsung Electro-Mechanics' first-quarter sales and operating profit increased by 3% and 38%, respectively, compared to the previous quarter, but decreased by 23% and 66% compared to the same period last year. Due to the continued weak demand for IT devices such as PCs amid the global economic downturn, sales and operating profit significantly declined compared to a year ago.

The Components Division recorded sales of 825.5 billion KRW in the first quarter, down 1% from the previous quarter and 33% from the same period last year. Although MLCC shipments to China increased and supply of new electronic components expanded, overall weak set demand and exchange rate effects worsened performance. In the second quarter, the company plans to expand supply of high value-added products such as small and ultra-high capacity MLCCs in response to new smartphone launches for China, and strengthen the lineup of automotive products with expected steady demand to enhance customer responsiveness.

The Optical Communication Solutions Division recorded sales of 798.6 billion KRW, a 22% increase from the previous quarter, driven by the launch of flagship new models by strategic customers, increased supply of high-performance camera modules such as high-resolution OIS and 10x folded zoom, and sales of automotive camera modules. The decline compared to the same period last year was limited to 8%. Although the second quarter is a seasonal low for the Optical Communication Solutions Division, the company plans to respond by expanding supply of high-performance camera modules and automotive products such as autonomous driving to overseas customers.

The Package Solutions Division posted sales of 397.6 billion KRW in the first quarter, down 17% from the previous quarter and 23% from the same period last year. The decline in package substrate supply was due to weak demand for IT sets such as smartphones and PCs and continued memory inventory adjustments. In the second quarter, the company plans to expand supply of package substrates for mobile APs and memory and increase the business proportion of high value-added products such as servers and automotive.

A Samsung Electro-Mechanics official said, "In the second quarter, we plan to focus on expanding the proportion of automotive products by business and diversifying customers," adding, "We expect sales to increase compared to the first quarter by expanding sales of high value-added products such as small and ultra-high capacity MLCCs following new product launches by overseas customers including China."

Samsung Electronics Chairman Lee Jae-yong (center) inspecting the MLCC production plant at Samsung Electro-Mechanics' Tianjin facility in China on the 24th of last month (local time). Samsung Electro-Mechanics President Jang Deok-hyun (left) is explaining the equipment.
[Photo by Samsung Electro-Mechanics]

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Samsung Electro-Mechanics stated that orders for server FC-BGA semiconductor substrates are increasing. During the first-quarter earnings conference call, Samsung Electro-Mechanics said, "Additional supply of server substrates is continuing this year," and "Expansion of the server-dedicated substrate line is progressing as planned."

They added, "In the mid to long term, server substrates are expected to continue growing due to the emergence of AI models like ChatGPT."

The company also emphasized the high growth potential of automotive MLCCs. They plan to increase market share and diversify product lineups in areas such as advanced driver assistance systems (ADAS) and infotainment for vehicles.

During the conference call, Samsung Electro-Mechanics said, "Major institutions expect the installation rate of ADAS level 2 or higher in vehicles to exceed 30%," and "The automotive MLCC market and our automotive division's growth trend will continue." They added, "(Samsung Electro-Mechanics) will continuously secure market share in ADAS and infotainment and expand the lineup of high-growth electric vehicle high-temperature and high-pressure powertrain products."

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