[Edaily Reporter Song Jae-min] Bottlenecks in the semiconductor industry caused by expanding investment in artificial intelligence (AI) infrastructure are spreading beyond high-bandwidth memory (HBM) to semiconductor substrates. As demand for semiconductor substrates for AI servers surges, expectations for improved earnings at Samsung Electro-Mechanics and LG Innotek are also rising. The securities industry forecasts that both companies will exceed 1 trillion won in annual operating profit this year, marking their return to the “1 trillion club” for the first time in four years since 2022.

AI-Driven Supply Shortages… Substrates Follow HBM in Shortage

According to industry sources on the 8th, the product currently attracting the most attention in the semiconductor substrate market is the flip-chip ball grid array (FC-BGA). Known as the next-generation semiconductor substrate, FC-BGA reduces signal loss compared to existing substrates and can quickly process large volumes of data, making it essential for AI servers and AI accelerators. While it was previously used primarily in PCs, demand has surged recently alongside expanded investment in AI data centers, elevating it to a core component in the industry.

As competition over AI semiconductor performance intensifies, demand for substrates is also surging. With global tech giants such as NVIDIA, AMD, Broadcom, and Google moving to build AI data centers, industry analysts suggest that substrates could become the next “shortage item” following HBM.

Recently, securities firms have also been successively raising their earnings forecasts for both companies. Mirae Asset Securities projected Samsung Electro-Mechanics’ operating profit for this year at 1.5622 trillion won. This reflects the growing demand for non-Chinese sourcing from major North American tech clients and the prolonged shortage of FC-BGA supplies. Some analysts even predict that this year’s operating profit could exceed 1.6 trillion won.

KB Securities has raised its operating profit forecast for LG Innotek this year to 1.244 trillion won. The firm analyzed that as competition to secure production capacity (CAPA) in the AI substrate market intensifies, the effects of capacity expansion will lead to improved earnings.

Kim Dong-won, Head of Research at KB Securities, explained, “In the current AI board market, major U.S. clients are offering favorable terms such as support for capital investment and long-term supply contracts.” He added, “This indicates that, unlike in the past, client demand is expanding beyond short-term orders into a competition to secure long-term production capacity, similar to the memory semiconductor industry.”

The Race to Expand Capacity in Vietnam

To meet surging demand, both companies are accelerating their efforts to expand production capacity.

Samsung Electro-Mechanics is currently reviewing additional investments in its Vietnamese production subsidiary. Market estimates suggest the investment could reach approximately $1.2 billion (about 1.8 trillion won). Jang Deok-hyun, President of Samsung Electro-Mechanics, previously explained at a shareholders’ meeting, “Customer demand for FC-BGA exceeds our current production capacity by more than 50%.”

LG Innotek has also recently decided to invest in expanding its Haiphong plant in Vietnam. Construction is set to begin this July and is scheduled for completion in May 2027. In the first quarter of this year, LG Innotek’s semiconductor substrate equipment utilization rate stood at 91.8%, effectively at full capacity.

An industry insider stated, “With the expansion of AI data center investments and the continued launch of next-generation AI semiconductors, it is highly likely that the tight supply of substrates will persist until at least 2028,” adding, “Most of the production capacity from the current expansion projects will also be absorbed by the market.”