Samsung Electro-Mechanics, an electronic component company owned by Samsung Group, is expected to post worse-than-expected third quarter earnings. The company lags behind Japanese companies in the fast-growing artificial intelligence (AI) market amid a broader IT sector slowdown.
While demand for multilayer ceramic capacitors (MLCCs) for servers is surging with the AI boom, Japan’s Murata continues to dominate the market. Samsung’s newer ventures into flip-chip (FC) and ball grid array (BGA) technology—critical components for AI servers—are also trailing behind Japanese competitor Ibiden.
MLCCs, which account for about 40% of Samsung Electro-Mechanics’ total revenue, are used in electronic devices to eliminate signal interference and ensure stable power supply to semiconductor components. FC-BGAs are critical next-generation semiconductor substrates widely used in PCs, servers, cloud computing, and electric vehicles. These substrates connect chips to mainboards, allowing for high-performance computing.
Samsung Electro-Mechanics’ third-quarter operating profit forecast has been revised down by more than 10% from the previous market consensus, dropping from over 250 billion won to around 220 billion won ($162 million), according to analysts on Oct. 10.
Earlier this week, Samsung Electronics said its third-quarter operating profit is estimated to log 9.1 trillion won, falling short of market expectations by around 1 trillion won. Given that Samsung Electronics is a major client of Samsung Electro-Mechanics, accounting for roughly 30% of its total sales, these disappointing results raise concerns for both companies.
Initially, the industry had expected a sharp rise in Samsung Electro-Mechanics’ MLCC shipments, driven by growing demand for AI servers. According to Murata, the leading MLCC manufacturer, AI servers require 10 to 20 times more MLCCs than conventional servers. In March, Samsung Electro-Mechanics CEO Chang Duckhyun identified AI as a next-generation growth driver during the company’s shareholder meeting, forecasting that AI-related sales would more than double.
However, Japanese companies such as Murata and Taiyo Yuden are leading the AI-related MLCC market, and Samsung Electro-Mechanics has struggled to keep up. “Servers account for only 4.9% of Samsung’s total MLCC sales,” said Park Sang-hyun, a Korea Investment & Securities analyst. “Although sales have doubled year-on-year, their overall share in the market is still small.”
