Analysts in the securities industry have suggested that Samsung Electro-Mechanics is entering a phase where the supplier holds the upper hand in negotiations, as it continues to secure long-term supply contracts for multi-layer ceramic capacitors (MLCCs) used in AI servers. Beyond a simple increase in volume, profitability improvements are expected to materialize as the company converts its general-purpose product manufacturing lines to high-value server-grade products.

iM Securities Maintains Target Price of 3 Million Won

On July 24, 2026, iM Securities maintained its 'Buy' investment opinion and a target price of 3 million won for Samsung Electro-Mechanics, unchanged from its previous target. Earlier, on July 1, the firm had raised the target price from 2.3 million won to 3 million won.

The analysis is based on the additional long-term supply contract for AI server MLCCs secured by Samsung Electro-Mechanics. On the 23rd, Samsung Electro-Mechanics announced that it had signed an MLCC supply contract worth 295.12 billion won with a major global corporation. The contract period runs from January 1 to December 31, 2027, and the contract amount equals 2.6% of the company's consolidated revenue for 2025. This follows an earlier contract worth 453.9948 billion won signed at the end of June.

"Securing Both Volume and Price Conditions... Evidence of Strengthened Bargaining Power"

iM Securities assessed that while the previous contract confirmed global customers' concerns over MLCC supply shortages, this contract demonstrates that Samsung Electro-Mechanics' pricing power has strengthened further. Generally, long-term supply contracts are structured so that buyers receive price preferences in exchange for guaranteed supply volumes. However, the analysis indicates that Samsung Electro-Mechanics is simultaneously securing both volume and favorable price conditions.

General-Purpose to Server-Grade Conversion: 2.4x Revenue, 9x Profit Effect

The expanding demand for AI server MLCCs is likely to lead to a reduction in general-purpose product manufacturing. As of the first quarter of this year, Samsung Electro-Mechanics' MLCC utilization rate reached 95%, meaning the company has limited capacity to meet high-value product demand with existing facilities alone.

iM Securities estimated that the server-grade MLCC production volume included in the two long-term supply contracts is equivalent to the capacity needed to produce approximately 12.49 billion general-purpose MLCCs. This accounts for about 10.4% of Samsung Electro-Mechanics' projected ceramic production capacity in 2027. As the proportion of server-grade products grows, the supply of general-purpose products will decrease, which could also impact the overall supply and demand balance of the MLCC market.

The economics of converting production capacity are also highly favorable. iM Securities estimated the per-unit profit of general-purpose MLCCs at approximately 0.2 won, compared to about 5.4 won for server-grade MLCCs. Even after accounting for differences in production capacity consumption by product type, allocating the same ceramic production capacity to server-grade products can increase revenue by about 2.4 times and profit by about 9 times compared to general-purpose production.

Key Variables Going Forward

As the performance of AI accelerators and servers becomes more advanced, the number of small, high-capacity MLCCs required for power stability will increase, thereby strengthening the market position of companies that can stably supply high-spec products. This signals a structural shift in Samsung Electro-Mechanics' MLCC business, moving from a focus on smartphones and home appliances to high-value components for AI data centers and servers.

Key variables to monitor going forward include the signing of additional long-term supply contracts, MLCC capacity expansion plans, and the actual extent of reduction in general-purpose product supply. Whether the expansion of server-grade proportions leads to improvements in average selling price and operating profit, as well as how quickly production capacity can be expanded amid high utilization rates, will be critical factors shaping earnings forecasts.

[This article was written with the assistance of AI. This article is an informational resource based on securities firm reports and public disclosures and does not recommend buying or selling any specific stock. Target prices and earnings forecasts may change depending on market conditions and corporate management environments, so investment decisions and responsibilities lie with the individual investor.]