Securities analysts have suggested that Samsung Electro-Mechanics (009150) is entering a new growth phase, as rising MLCC (multi-layer ceramic capacitor) and ABF substrate prices combine with the expanding effect of long-term supply contracts with hyperscalers.

Prices and volumes improving simultaneously... "The upcycle begins in earnest"

Hyundai Motor Securities assessed that Samsung Electro-Mechanics' rising MLCC and ABF substrate price curves are coinciding with an increase in B2B long-term supply contracts with hyperscalers, and that the related upcycle has now entered its full-fledged beginning stage.

The key point is a structure in which prices and volumes improve at the same time. As MLCC and ABF substrate selling prices continue to rise, long-term supply contracts with global hyperscalers are increasing, which is expected to expand the shipment base as well.

FC-BGA prices rising on supply-demand fundamentals... "Pricing power strengthening"

Notably, FC-BGA price increases are meaningful in that they are not merely a pass-through of raw material costs into sales prices, but are based on actual supply-demand conditions. With the supply shortage persisting and demand expanding for high-performance semiconductors and AI server substrates, the pricing power of high-spec FC-BGA is strengthening, according to the analysis.

Hyundai Motor Securities projected that Samsung Electro-Mechanics' FC-BGA business, backed by securing major customers, will also accelerate its production capacity expansion. It viewed that future capacity expansion could grow to the largest level among ABF substrate suppliers.

Expanding AI data center investment as a driver... Toward a B2B-centered earnings structure

The expansion of AI data center investment is also cited as a major backdrop. As global big tech companies increase investments in AI servers and data centers, demand for high-performance semiconductor substrates and high-capacity MLCCs is rising simultaneously.

Accordingly, Samsung Electro-Mechanics' earnings structure is expected to expand from its existing smartphone and automotive focus toward B2B areas such as AI servers and data centers. In particular, if the share of long-term supply contracts grows, it is expected to lower sensitivity to short-term demand fluctuations while enhancing mid- to long-term revenue visibility.

Hyundai Motor Securities views the defining feature of this cycle as a simultaneous rise in prices and volumes. With FC-BGA price increases stemming from improved supply-demand conditions, alongside the securing of major customers and growing long-term supply contracts, the firm evaluates this as a structural growth phase different from the past.

Future stock price variables

Key variables for Samsung Electro-Mechanics' future stock price movement include: whether MLCC and ABF substrate price increases continue; whether long-term supply contracts with hyperscalers translate into actual revenue growth; and how concretely FC-BGA capacity expansion plans and new customer acquisitions materialize.

[※ This article is intended for informational purposes, based on securities firm analyses and company disclosures, and does not recommend the purchase or sale of specific stocks or guarantee investment returns. Securities firms' earnings and industry forecasts may change depending on market supply-demand conditions and customer investment plans, and the final judgment and responsibility for investments rest with the investor. This article was written with AI assistance.]