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Samsung Electro-Mechanics targets EV parts

Signs $436 mn deal to supply top US EV maker with camera modules for new model

By Jul 12, 2021 (Gmt+09:00)

Samsung Electro-Mechanics announced the development of five automotive MLCCs in July 2020.
Samsung Electro-Mechanics announced the development of five automotive MLCCs in July 2020.

Samsung Electro-Mechanics, a South Korean electronic components maker, aims to expand its business in the booming electric vehicle (EV) parts market given stalled growth in the global mobile phone industry.

The sluggish mobile phone industry had raised concerns over the company’s business of camera modules and multi-layer ceramic capacitors (MLCCs), tiny parts that control the flow of electricity in a variety of products including cars, smartphones and laptops. Samsung Electronics Co., its key customer and affiliate, posted weaker-than-expected smartphone sales in the second quarter as a resurgence in the COVID-19 in India and Vietnam mired demand and interrupted production. Other smartphone makers such as Chinese Xiaomi, Oppo and Vivo cut inventories, hurting Samsung Electro-Mechanics’ MLCC business.

Since Jan. 29 when its shares hit a record high of 223,000 won ($194.3) Samsung Electro-Mechanics' shares have slid 16.4% on bearish factors, notably continuous selling by foreign investors in the South Korean stock markets and weak investor sentiment on technology industries overall.

But the shares are attempting a rebound as the company has expanded its EV market business instead of the smartphone industry. Its shares closed up 2.47% to 186,500 won on July 12, outperforming a 0.89% gain in the Kospi.

Samsung Electro-Mechanics was known to have won a $435.7 million deal to supply camera modules to the largest US EV maker. The company plans to launch a new EV, which gives drivers a rear view through a camera equipped on the car, as the model does not have side mirrors. The EV has more than eight cameras for self-driving purposes.

Samsung Electro-Mechanics also plans to increase its MLCC business in the automotive electronics sector with mass production of automotive MLCCs at its plant in Tianjin, China during the second half.

“The rapidly blooming EV markets will drive Samsung Electro-Mechanics' earnings growth,” said KB Securities analyst Whang Go-un. “Once the Tianjin factor starts operations, the revenue proportion of its automotive MLCC will rise to 20.9% in 2024 from 7.6% this year.”

Some predicted second-quarter earnings to be better than forecast, given a recovery in MLCC demand for servers. MLCCs for servers are high value-added products compared to those for smartphones. Growing demand for laptops due to COVID-19 squeezed supply of flip chip-ball grid arrays (FC-BGAs), which are equipped with core semiconductors such as central processing units (CPUs).

“Samsung Electro-Mechanics shares faltered along with Japanese Murata’s stocks due to weak smartphone MLCC markets, but it is worth noting that shares in Ibiden, a Japanese wafer maker, were strong,” said Kiwoom Securities research head Kim Ji-san. Kim set Samsung Electro-Mechanics' target stock price at 270,000 won.

Murata Manufacturing is the world’s biggest provider of MLCCs.

Write to Jae-Yeon Ko at yeon@hankyung.com

Jongwoo Cheon edited this article.

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