Global big tech demand for Samsung Electro-Mechanics' high-capacity "1005 (1.0 mm wide, 0.5 mm long) 47㎌ (microfarad)" multilayer ceramic capacitors (MLCCs), used in artificial intelligence (AI) servers, is expected to surge more than sevenfold next year compared with this year. Judging that existing products alone cannot handle the orders, the company has decided to preemptively roll out ultra-high-capacity products of 68㎌ and 150㎌. As the power consumption and heat generation of AI chips soar, even the small electronic components around chips have entered a "high-capacity war."
Samsung Electro-Mechanics (009150.KS) said during its second-quarter earnings conference call on the 30th, "The 1005-format 47㎌ product has been adopted in large volumes for big tech's new platforms," adding, "We expect demand in 2027 to increase more than sevenfold from this year." The 1005 is an ultra-compact format measuring 1.0 mm wide and 0.5 mm long. Since more electricity must be stored within a narrow area, the core competitiveness lies in the technology of increasing capacity while making the product smaller.
MLCC demand is already being confirmed in the numbers. Samsung Electro-Mechanics' second-quarter shipments of industrial and automotive MLCCs increased by double digits (more than 10%) from the previous quarter. Even though it sold more, overall inventory declined, and the average selling price (ASP) rose as the proportion of high-value-added products grew. This is because the higher the computing performance of AI servers becomes, the more MLCCs—which stabilize power supply and filter out unnecessary electrical signals—are required, along with higher specifications. Samsung Electro-Mechanics is also expanding customer approvals for high-voltage products of 1 kV (kilovolt) or higher and products that withstand high-temperature environments of 125°C and 150°C.
Big tech orders are also flooding in for semiconductor package substrates. In the second quarter, Samsung Electro-Mechanics began supplying "flip-chip (FC) ball grid array (BGA)" for AI data center networks to a new North American big tech customer. In the second half, it will also mass-produce new products for major customers' server central processing units (CPUs) and AI accelerators.
Yang Seung-soo, a researcher at Meritz Securities, analyzed Samsung Electro-Mechanics' earnings that day, saying, "As AI chips grow larger and the adoption of high-bandwidth memory (HBM) increases, the ultra-large-area and high-multilayer trend of FC-BGA is accelerating," adding, "The resulting erosion of production capacity will further worsen the shortage of high-value-added substrate supply."
Customers are responding with long-term contracts that lock in Samsung Electro-Mechanics' production capacity in advance. Samsung Electro-Mechanics has signed long-term agreements (LTAs) for MLCCs with about 10 companies, including top-tier hyperscalers. For FC-BGA as well, it is holding strategic long-term supply discussions—including investment support—with most of the top-class semiconductor companies related to AI data centers. This goes beyond simple purchase contracts to a "capacity preemption battle," in which customers participate in expansion investments and Samsung Electro-Mechanics guarantees supply volumes.
Camera modules are also rapidly expanding their territory beyond smartphones. Samsung Electro-Mechanics is expanding its lineup of high-pixel sensing products and high-value-added cameras for robotaxis in line with a global electric vehicle customer's next-generation autonomous driving platform. High-pixel sensing modules for humanoid robots will enter initial mass production within the year. The company also plans to develop long-range autofocus (AF) and 3D sensing technologies to gain an early lead in the physical AI market.
Samsung Electro-Mechanics management said, "In the third quarter as well, the tight supply-demand situation for high-value-added products such as MLCCs and FC-BGA will intensify, and the effects of expanding long-term supply contracts and rising average selling prices will continue," adding, "We expect to achieve record-high earnings through significant earnings growth compared with both the previous quarter and the same period last year."
