[Edaily Reporter Kim Kyung-eun ] On the 31st, Hana Securities projected that SamsungElectroMechanics(009150)will continue to see improved earnings in the second half of the year, driven by the rising price cycle for multilayer ceramic capacitors (MLCCs). Accordingly, the firm maintained its “Buy (BUY)” investment rating and target price of 3 million won.

Kim Min-kyung, an analyst at Hana Securities, stated in a report released that day, “Although there has been a sharp stock price correction recently, the supplier-dominated market conditions are strengthening further.”

SamsungElectroMechanics’ second-quarter revenue this year reached 3.4572 trillion won, up 24% year-over-year and 8% quarter-over-quarter. Operating profit reached 440.4 billion won, up 107% year-over-year and 57% quarter-over-quarter, resulting in an operating margin of 12.7%. Amid continued favorable exchange rate conditions, the Components and Optical Solutions divisions are assessed to have outperformed market expectations.

In the Components division, ahead of the peak IT season, sales of general-purpose MLCCs rose by more than 10% compared to the previous quarter, followed by a more than 30% increase in sales of industrial MLCCs. This was driven by increases in both volume and selling prices.

The outlook suggests that earnings improvement will accelerate further in the second half of the year as price hikes driven by concerns over MLCC supply shortages intensify. The package substrate business is also expected to continue benefiting from favorable market conditions. For flip-chip ball grid array (FCBGA), sales are estimated to have increased by approximately 8% compared to the previous quarter due to higher utilization rates and selling prices. Growth is expected to expand in the second half as factory utilization rates reach near-full capacity.

For Ball Grid Array (BGA) substrates, the company analyzed that a supplier-dominated market will persist as the supply of BT substrates decreases due to major manufacturers’ realignment of production capacity. In the optical solutions segment, the company assessed that sales prices remained better than expected despite increased cost pressures faced by major customers.

Notably, SamsungElectroMechanics announced during this earnings release that it had signed long-term supply agreements (LTAs) for MLCCs with 10 customers, including cloud service providers (CSPs) and global semiconductor companies. The company explained that while demand for high-capacity MLCCs is surging due to rising power density in AI servers, the number of manufacturers capable of producing them is limited, leading to growing concerns about supply shortages.

Analyst Kim stated, “Demand for 1005-size 47μF MLCCs is expected to increase sevenfold year-over-year by 2027,” adding, “Prices for general-purpose products are also rising due to the erosion of production capacity resulting from the expansion of high-capacity product manufacturing.”

He continued, “We are currently in discussions with more than 10 clients regarding additional LTAs, and the structure allows for further price increases depending on market conditions,” adding, “With the price hike trend intensifying for FCBGA and BGA due to worsening supply shortages, additional price negotiations are expected to continue in the second half of the year.”

He also noted that while the stock price has recently undergone a significant correction, the company’s fundamentals are actually improving.

Analyst Kim noted, “With no plans for large-scale capacity expansions among MLCC suppliers, the utilization rates of leading manufacturers are already exceeding the mid-90s,” and analyzed, “As competition among customers to secure supplies intensifies due to the surge in demand for MLCCs for AI servers, profitability in the components division is highly likely to surpass its all-time high.”

He added, “Since Chinese manufacturers are still struggling to implement even low- to mid-range MLCCs, it is not easy to find alternative suppliers; therefore, the supplier-dominated market is expected to strengthen further.”