[Edaily Reporter Kim Kyung-eun ] On the 2nd, Daol Investment & Securities projected that a price increase cycle for SamsungElectroMechanics(009150)would begin in earnest as the supply and demand balance for multilayer ceramic capacitors (MLCCs) used in artificial intelligence (AI) servers tightens. Accordingly, the firm maintained its “Buy” rating, a target price of 2.8 million won, and its status as the top pick within the sector.

Kim Yeon-mi, an analyst at Daol Investment & Securities, stated in a report released that day, “MLCCs for AI servers are still in the early stages of a price-hike cycle,” adding, “Improvements in selling prices and product mix are expected to drive growth in SamsungElectroMechanics’ MLCC earnings.”

SamsungElectroMechanics announced the previous day that it had signed an MLCC supply contract worth 1.0722 trillion won with a major global company. This is an additional contract following supply agreements worth 454 billion won in June and 295.1 billion won in July. The contract period runs from January through December of next year. Including this latest contract, the total value of MLCC supply contracts secured by SamsungElectroMechanics for next year amounts to 1.8213 trillion won.

Notably, unlike previous contracts, this agreement is understood to be a “bundled” arrangement that supplies MLCCs of various sizes and capacities in addition to 47 microfarad (μF) products. The company explained that as customer specifications diversify, demand for high-specification products—such as 10 μF and 100 μF—is also increasing.

Daol Investment & Securities analyzed that as the shortage of MLCCs for AI servers worsens, there is an increasing trend of end customers managing procurement directly, bypassing server original equipment manufacturers (OEMs) and original design manufacturers (ODMs). Although MLCCs account for a small portion of the total server cost, they can disrupt server production in the event of a supply shortage, making the secure procurement of stable volumes increasingly important.

The low cost share of MLCCs was cited as a favorable factor for future price increases. This is because, even if prices rise, it is difficult for customers to respond by lowering specifications or reducing usage.

Attention was also drawn to the structure of this contract. It is understood that SamsungElectroMechanics signed the contract in a manner that secures long-term supply for two to three years in advance without fixing the price. Analysts note that, given the current situation where MLCC capacity utilization rates have risen to the high 90s, limiting additional supply capacity, this contract structure enhances the supplier’s bargaining power.

Regarding this contract, Analyst Kim commented, “We have simultaneously confirmed the deepening shortage of AI MLCCs, the expansion of direct procurement by end customers, a contract structure that locks in only one year’s worth of volume while leaving the upper price limit open, and the potential for improvements in both selling prices and the mix of high-specification products.”