Samsung Electro-Mechanics (009150.KS), one of South Korea's leading exporters of artificial intelligence components, is expected to post sharply improved third-quarter results despite the recent decline in the won-dollar exchange rate. While a stronger won had raised concerns that the company's momentum would slow as dollar-denominated export sales are booked in won, analysts expect gains from the boom in AI data centers to more than offset that drag.
The consensus estimate for Samsung Electro-Mechanics' third-quarter operating profit stands at 605.1 billion won ($433 million), about 2.3 times the 206.3 billion won posted a year earlier, according to data provider FnGuide on the 28th. That is roughly 30% higher than the 470 billion won brokerages projected three months ago. KB Securities and iM Securities forecast operating profit of more than 650 billion won.
The upgraded outlook carries added weight because it comes despite the won's recent strength. Samsung Electro-Mechanics counts major U.S. technology companies among its main customers, giving it a relatively high share of dollar-denominated revenue. Won-converted earnings inevitably shrink when the exchange rate falls, but brokerages say rising sales volumes and higher prices, driven by big tech demand for AI components, will more than cover the currency effect.
The company is a leading supplier of multilayer ceramic capacitors (MLCCs) and flip-chip ball grid array (FC-BGA) substrates, both essential components for AI chips and servers. For MLCCs, it signed its largest-ever supply contract worth 1.0722 trillion won earlier this month and is expanding production lines in Busan and the Philippines. For FC-BGA, the substrate used in AI chips, demand for larger-area products for the latest AI processors is growing, and the share of long-term agreements (LTAs) with big tech firms is rising.
KB Securities said severe shortages of MLCCs and substrates are expected to persist, raising the prospect of LTAs on favorable terms that include advance payments and profitability protection clauses. It added that core AI-related components are enjoying an unprecedented boom and that further improvement in industry conditions is expected.
