The Semiconductor Package Substrate Business Becomes a Profit Driver... Samsung Electro-Mechanics to Reach 1 Trillion KRW Operating Profit This Year

Package Substrate Business, Q1 Performance Improvement 'Profit Driver'
Substrate Prices Expected to Rise in Second Half Due to Supply Shortage
Operating Profit Consensus for This Year 1.2 Trillion Won... Expected to Surge 53%

[Asia Economy Reporter Suyeon Woo] As the semiconductor industry experiences a boom, supply shortages have extended to the raw material package substrates, rapidly improving the profitability of Samsung Electro-Mechanics' substrate business. The package substrate business played a key role in improving performance in the first quarter, and with substrate prices expected to rise in the second half of the year, there are forecasts that Samsung Electro-Mechanics' annual operating profit could surpass 1 trillion won this year.

According to FnGuide on the 6th, Samsung Electro-Mechanics' annual performance consensus for this year is sales of 9.1652 trillion won and operating profit of 1.2721 trillion won. This represents an increase of 11.6% in sales and 53.4% in operating profit, respectively. The industry expects the substrate business division to maintain stable performance through next year due to the recently intensified supply shortage of semiconductor package substrates.

In the first quarter, the substrate business division's sales reached 442.2 billion won, a 15% increase compared to the same period last year. Among these, the sales proportion of semiconductor package substrates significantly expanded from 78% in the first quarter of last year to 81% in the first quarter of this year. This is due to the explosive non-face-to-face demand after COVID-19, which expanded the supply of semiconductor substrates such as mobile Ball Grid Array (BGA) and PC Flip Chip Ball Grid Array (FCBGA).

Samsung Electro-Mechanics FCCSP Structure / Photo by Samsung Electro-Mechanics Website

Moreover, recent consecutive fires at Taiwanese competitor Unimicron have tightened the supply and demand situation for semiconductor substrates further, causing prices to rise by about 30-40%. Unimicron, which mainly produces Flip Chip Scale Package (FCCSP) substrates for smartphones, is expected to take time to fully resume operations after the accidents, allowing competitors like Samsung Electro-Mechanics to gain a windfall benefit.

Samsung Electro-Mechanics is the leading company with the highest market share in the FCCSP market and is accelerating technology development and investment expansion, actively developing new server products to increase the sales proportion of high value-added products such as FCBGA. At a recent conference call, a Samsung Electro-Mechanics official stated, "We have received participation requests from multiple clients and are continuously developing core technologies such as large-area and high-layer substrates required for servers based on PC FCBGA technology," adding, "In response to the overall industry demand recovery this year, we will proceed with the planned expansion of facility investment focused on high value-added products without delay."

However, in the second quarter, a seasonal issue is expected to cause a slowdown in the camera module business division's performance, but the strong performance of the semiconductor substrate business is expected to offset this. Kyungtak Noh, a researcher at Eugene Investment & Securities, said, "Although the module division's performance will slow down in the second quarter, the overall company performance will show strength due to product mix improvement such as price increases caused by the shortage of high-performance package substrates."