Samsung Electro-Mechanics to benefit from soaring MLCC price

By Kim Bo-eun

Samsung's electronics component manufacturing unit is expected to see robust earnings this year, driven by expected price hikes of multilayer ceramic capacitors (MLCCs), a key component in smartphones.

Taiwan-based Yageo, which manufactures MLCCs, is set to raise prices beginning in the second quarter, according to NH Investment & Securities. Yageo has not unveiled the specifics but prices are expected to see a 10 percent to 20 percent hike.

Global MLCC manufacturers such as Japan's Murata, TDK as well as Samsung Electro-Mechanics raised prices of high-value added MLCCs in late February. Yagyeo's price hike is set to lead to rises in prices of mid- to low-priced capacitors as well.

In addition to MLCC price hikes, the Samsung affiliate is set to enjoy an earnings boost backed by soaring demand in China for 5G phones.

According to a report by Hana Financial Investment, China shipped 21.34 million smartphone devices in February, a 234 percent jump from the previous quarter. Among the handsets, China shipped 15.1 million 5G devices in February, up 50 percent from the previous month, as the use of 5G phones there expands rapidly.

This is set to benefit Samsung Electro-Mechanics, as the boom for 5G phones in China drives demand for MLCCs. The capacitors, a key component used in smartphones, regulate current flow in a circuit and prevent electromagnetic interference between components. Demand is set to surge as 5G phones need 20 percent to 40 percent more MLCCs than 4G handsets, and the capacitors will also be needed for the expansion of 5G base stations.

China accounts for the largest percentage of Samsung Electro-Mechanics' sales overseas. It saw sales in China reach 2.82 trillion won in 2020, a 30.1 percent increase from the previous year, and 49.9 percent of the Samsung affiliate's total sales abroad.

Southeast Asia accounts for the second-largest portion of sales generated overseas, at 2.08 trillion won last year, up 4.3 percent from 2019. The growth rate illustrates the rapid rise of sales in China.

The momentum is set to accelerate based on the company's technological advancements. In January, it unveiled a 0.65 millimeter thin 3-terminal MLCC, which is 18 percent thinner than the previous 0.8 millimeter MLCC, the affiliate said.