Samsung Electro-Mechanics is expected to deliver a sharp jump in performance next year. Demand for AI servers has been concentrated in multilayer ceramic capacitors (MLCC) and package substrates. Customers, worried about supply shortages, have secured volumes they plan to use in 2027 through long-term contracts signed this year. With production capacity limited until new plants start operating, component selling prices are also rising. As contracted volumes are combined with price increases, 2027 is expected to be the year Samsung Electro-Mechanics confirms this year’s order buildup in its results.

Industry forecasts on Oct. 28 put Samsung Electro-Mechanics’ sales next year at more than 18 trillion won. Supply contracts signed in advance with customers this year will start to be booked as revenue from January next year, with component price increases added. The company has signed seven supply contracts since starting with a silicon capacitor contract in May through a package substrate contract on the 18th of this month. The combined value of the seven contracts is about 4.3 trillion won, and all start on Jan. 1, 2027.

The contracted items have also broadened from silicon capacitors, MLCCs and inductors to semiconductor package substrates. Customers have moved to secure volumes for next year regardless of component type.

Customers are locking in volumes a year early because supply is failing to keep up with demand. Mirae Asset Securities said 2027 MLCC production capacity at Samsung Electro-Mechanics and global rivals will increase by only about 20 percent. High-capacity products for AI servers are difficult to make, so supply does not rise as much as the increase in capacity.

The substrate supply situation is similar. As substrate makers’ capacity has been concentrated in FC-BGA, a high-performance substrate, customers have also secured FC-CSP, a general-purpose substrate, through long-term agreements (LTA). Samsung Electro-Mechanics’ announced 360.5 billion won substrate contract is understood to have a high share of FC-CSP. Hana Securities said that although Samsung Electro-Mechanics has brought forward the start-up timing for a new production facility in the Philippines to the first half of 2027, it would be difficult to expand capacity sharply in the short term due to manpower issues.

Most of the contracted volume is concentrated in 2027. Only one silicon capacitor contract runs through 2028, while the rest are contracts to supply during 2027. Samsung Electro-Mechanics has secured about 3.5 trillion won of 2027 long-term supply contract volume. The share of AI products in MLCC sales is expected to exceed 40 percent. AI servers use more MLCCs than general servers, and as chip power increases, the share of high-capacity and high-voltage products also rises.

With further selling price increases also expected, Samsung Electro-Mechanics’ sales are forecast to rise further. The company is reported to have raised MLCC prices for distribution channels twice, in June and August this year. Hana Securities said tighter supply-demand conditions raise the likelihood of price negotiations for volumes outside distribution channels as well.

Substrate prices are also rising. iM Securities forecast Samsung Electro-Mechanics’ 2027 FC-BGA sales would rise 42 percent from the previous year, with 20 percent of that attributed to price increases. That figure was also set low. TrendForce expects ABF substrate prices to rise every quarter through the fourth quarter of 2027. ABF substrates are package substrates used for mounting high-performance semiconductors such as GPUs and CPUs for AI servers, and fall into the same category as FC-BGA.

As both volumes and prices rise, profit estimates for Samsung Electro-Mechanics in 2027 are also being revised up. IBK Investment & Securities raised its 2027 operating profit forecast for Samsung Electro-Mechanics to 4.4 trillion won from 3 trillion won, citing that price increase effects would stand out further amid tight supply. It also reflected a view that the package and component divisions are expanding both size and profitability through an improved product mix and higher unit prices. Mirae Asset Securities also raised its 2027 operating profit estimate to reflect price increases for direct-delivery MLCC customers and rising BGA substrate prices. It said contracts underpin volumes and supply shortages support prices.

Samsung Electro-Mechanics decided on Sept. 28 to expand package substrate production facilities at its Sejong site and its Vietnam unit to handle increased volumes. The Sejong expansion runs through May 2028, and the planned date to acquire equipment at the Vietnam plant is April 30, 2028.

Given that mass production at new plants will ramp up in the second half of 2028, profit for a year depends on output growth from existing lines. iM Securities said it expects capacity to increase 20 to 30 percent in 2027 through supplementary investment in existing lines.