Key points
- Samsung Electro-Mechanics signs a full-year substrate contract
- Why memory chip substrates are running short
- What Mirae expects from Daeduck's third quarter
On October 19, Samsung Electro-Mechanics (삼성전기, 009150) disclosed a 360.5 billion won ($267.3M) contract to supply package substrates to an unnamed customer for all of 2027. The filing came after the market closed in Seoul.
Korean brokers see the contract as evidence that tight substrate supply is spreading beyond AI processors to memory chips. The filing itself doesn't identify the substrate mix.
"The key point of Samsung Electro-Mechanics' filing is that the supply shortage is spreading from FC-BGA, or ABF substrates, to BGA, or BT substrates," Kwon Min-gyu (권민규), an analyst at Kiwoom Securities (키움증권), wrote in a report on Tuesday, according to Edaily (이데일리). "It's the starting signal that the industry has entered an earnings growth phase, with volumes and prices rising at the same time."
Samsung Electro-Mechanics shares were down 1.6% at 1,151,000 won ($863) as of 9:42 a.m. in Seoul on Tuesday. Smaller substrate maker Korea Circuit (코리아써키트, 007810) was up 13.5% at 73,200 won ($55).
The customer stays secret until the end of 2027
The filing names the buyer only as a "global large company." At the customer's request, Samsung Electro-Mechanics is keeping the name and main terms private through December 31, 2027. The contract equals 3.2% of Samsung Electro-Mechanics' 11.31 trillion won ($8.48B) revenue last year.
Meritz Securities (메리츠증권) understands the customer to be a North American memory company, with most of the order in BGA substrates. Meritz estimates the BGA portion at about 300 billion won ($225M), or about 26% of Samsung Electro-Mechanics' BGA sales last year. Kiwoom called a full-year contract like this unusual and said the customer wanted to lock in supply.
Capacity investment favored AI chip substrates
A package substrate is the small board that connects a chip to the larger circuit board in a device. AI chips and server processors use a high-end kind called FC-BGA, made with ABF film. Memory chips mostly use a less profitable kind made with BT resin.
Big tech customers have paid in advance for new FC-BGA lines, so that's where substrate makers have added capacity, including Samsung Electro-Mechanics' own expansion in Sejong and Vietnam. Kiwoom expects ABF substrate capacity to expand much faster than BT capacity through 2028, though the report doesn't specify a starting year. BT makers are already operating at about 85% of capacity.
Kwon expects a shortage in 2027 and 2028, and he wrote that other BT substrate makers may now sign long-term supply agreements too. Yang Seung-soo (양승수), an analyst at Meritz Securities, called this the first supply contract disclosed for BT-type substrates and said it confirms a shift to a sellers' market. Yang sees room for further BT substrate price increases despite market concerns, and he expects Samsung Electro-Mechanics to sign more contracts and negotiate higher prices with smaller customers next.
BT substrates dominate Daeduck and Simmtech sales
Kiwoom estimates that 84% of Daeduck Electronics (대덕전자, 353200) sales and 72% of Simmtech (심텍, 222800) sales are tied to BT substrates, and the broker named the two as top picks. Meritz said both, along with Korea Circuit, are discussing more price increases for the fourth quarter through the first quarter of next year. Simmtech also makes most of the substrates for SOCAMM, the memory module used in Nvidia AI servers.
Park Jun-seo (박준서), an analyst at Mirae Asset Securities (미래에셋증권), expects Daeduck's third-quarter operating profit to reach 80.4 billion won ($60.3M), up 228.7% from a year earlier, on higher-value products and price increases. He kept a buy rating and a 180,000 won ($135) target, about 35% above Monday's close of 133,800 won ($100), by our calculations.
The contract can still change. The filing notes that the amount and the contract period may shift, and it advises investors to weigh the chance that the contract is revised or canceled.
Quotes are translated from Korean. Won figures are converted at 1,333.5 won to the dollar, the Hana Bank rate shown on Naver Finance on October 19, 2026, except the contract value, which uses the $267.3 million stated in the filing.
