Good afternoon. Thank you for joining our earnings conference call. We will now start the 2022 first quarter earnings conference call of Samsung Electro-Mechanics. The conference call will start with a presentation by the company, followed by a Q&A session. If you have a question, please press star one on your phone. Now we will hear the company presentation.
Good afternoon. This is Taiyoung Kim, Head of IR and Planning Team at Samsung Electro-Mechanics. Thank you for joining our 2022 first quarter earnings conference call. On today's call, I'm joined by our EVP and CFO, Sungjin Kim, EVP Kook-hwan Cho, Head of Strategic Marketing Center, Kyu-Taeck Park, Head of Support Team, Component Division, Changwan Lee, Head of Support Team, Optics and Communication Solution Division, and VP Jungwon Ahn, Head of Support Team, Package Solution Division.
We will start with a presentation on our first quarter company level and divisional business results, followed by market trends and outlook by product before taking your questions. First, our first quarter results. In Q1, our revenue was KRW 2.6168 trillion, which is an approximately 8% increase QoQ and approximately 14% increase YoY, thanks to strong sales across Component, Optics and Communication Solution, and Package Solution divisions. The details regarding revenue decrease and increase factors will be explained later on during the divisional results. Q1 operating profit was KRW 410.5 billion, which is a 30% increase QoQ and 15% increase YoY. Pre-tax profit in Q1 was KRW 427 billion. Net profit was KRW 315.4 billion after deduction of corporate income tax.
Next, in terms of financials, as of end of March 2022, total asset was KRW 10.0657 trillion, which is about a 1% increase from the end of the previous quarter. For major financial indicators, liability to equity was 42%, a slight QoQ decrease. Debt to equity was 17%, and net debt to equity was -1%, both increasing from the end of the previous quarter. Next are the divisional results and future outlook. First, the Component Division. The Component Division's Q1 revenue was KRW 1.2293 trillion, which is a roughly 5% increase QoQ and a 13% increase YoY.
Revenue growth was driven mainly by improvement of a product mix around high-end MLCCs, with increased supply of high-end industrial and automotive MLCCs, and also increased sales of small size and ultra-high capacitance MLCC for IT applications. Q2 MLCC market is expected to show soft demand around commodity products, but demand for high-end MLCCs for 5G server and EV applications is expected to be solid. Accordingly, we will focus on responding timely to high-end IT application demand, such as small size and ultra-high capacitance MLCCs. Also, we will focus on increasing the supply of industrial and automotive applications by expanding our high reliability product lineup with recently developed high temperature MLCCs for powertrains that guarantees 150 degrees Celsius and 200 volts high voltage. Next is the Optics and Communication Solution Division.
The division's Q1 revenue was KRW 867.9 billion, which is a roughly 12% increase QoQ and a 3% increase YoY. The main driver of the QoQ increase was the increased supply of camera modules for the strategic customer. The new flagship smartphone launch drove increase of our supply of 100MP 10X zoom high-spec camera modules and a wider penetration of OIS camera modules for the upper mass-tier smartphones also helped increase our sales. At the same time, we also saw an increase in automotive camera module revenue QoQ, thanks to increased supply of camera modules for ADAS and autonomous driving related applications to key customers.
In Q2, demand for smartphone camera modules is expected to be soft due to seasonality, but we will focus on securing the foundation for expanding sales by responding timely to new flagship projects of Korean and global key OEMs, and also focus on driving up supply of new high pixel automotive camera modules to global automotive customers in U.S., Europe, and China, where the market size has been increasing in line with adoption of a large number of camera modules and higher pixel modules, with advancement in ADAS and autonomous driving technology. Lastly, for the Package Solution Division, Q1 revenue was KRW 519.6 billion, an 8% increase QoQ and 44% increase YoY.
First, for BGA, revenue increased QoQ, mainly due to increase in supply of high-spec products supported by strong demand, including increased supply of mobile AP substrates for strategic customers' flagship and increase in supply of substrates for high-end AP and high-end SSD memory. Flip chip BGA revenue also increased QoQ with increased supply of flip chip BGA for laptop, ultra thin CPUs and automotive applications amidst continuing supply tightness. In Q2, supply in the package substrate market is likely to remain tight, and we will focus on increasing supply of high-spec substrates for high-end AP and ultra thin CPUs, and also prepare for mass production of high-end server substrates scheduled for the second half to drive our strong growth momentum.
In the case of server substrates, because higher layers and larger sizes are needed compared to existing substrates, technical barriers are higher, and only a limited number of suppliers are available. Semco aims to become the first in Korea to mass-produce server substrates during the second half of this year. That ends my presentation on first quarter results, and now
EVP Kook-hwan Cho of Strategic Marketing Center will go over the market trends and outlook for each product group.
Good afternoon. This is Kook-hwan Cho of the Strategic Marketing Center at Semco. I would like to share the update and outlook for MLCC, camera module, and substrate markets respectively. First, MLCC. During Q1, overall MLCC market demand was slow due to seasonality of downstream markets and also adjustment of MLCC buffer inventory built up until fourth quarter of last year.
The slow downstream demand appears to be the result of many factors, including the Russo-Ukrainian war, China's zero-COVID policy, raw material prices increasing, the rising interest rate, which has hurt consumer sentiment. Also, during Q1, our customers went through MLCC inventory adjustments, which has led to a decrease of MLCC purchasing demand during Q1. Under such circumstances, we focused on actively meeting changes in customer and market demand by increasing the production of high-capacitance MLCC for IT applications and automotive industrial MLCCs. In terms of Q2 and second half outlook, MLCC demand is expected to remain soft in Q2 due to increased external uncertainties, delay in smartphone demand recovery in certain markets, and MLCC inventory adjustments continuing. However, starting from the latter part of Q2, MLCC purchasing demand may return in anticipation of better economic outlook for the second half.
During the second half of the year, MLCC demand from IT applications is expected to increase versus the first half, with partial improvement in IC supply shortages, launch of new smartphone models. The demand for industrial automotive MLCC is expected to maintain a growing trend. MLCC market inventory levels are expected to gradually come down after peaking during Q2. That said, within MLCC, the excess of industrial and automotive inventory is less of an issue, and we expect to see restocking demand to return in anticipation of the chip shortage improving in the second half.
We will continue to monitor the key factors impacting the MLCC market, including macroeconomic indicators, the Russia-Ukraine war, and key component supply situations, and actively respond to changes in MLCC market demand by focusing on the high-quality products where growth will continue, such as high temperature, high voltage, and high capacitance MLCCs for industrial and automotive applications, and by gaining greater foresight into changes in customer demand. Next, our camera modules. During Q1, camera module demand was stagnant in certain geographies, but the strategic customer's new flagship smartphone launch helped increase demand for smartphone camera modules that are relevant to Semco. In Q2, camera module demand is expected to decrease QoQ as the effect of flagship launches decreases and seasonality kicks in.
In the second half, growth is expected in slim camera modules tied to the expansion of foldable smartphones planned by key OEMs, including the strategic customer, and the trend of high picture quality, high pixel, and high-power zoom camera modules for flagship smartphones is likely to continue. With greater adoption of high-performance cameras on mass-tier smartphones, the demand for flagship-level specifications such as high pixel and OIS modules is continuing to increase. Accordingly, we will actively respond to the demand of slim camera modules by strategic customer and also Chinese OEMs for their flagships and foldable smartphones, and focus on increasing our revenue by winning the new project, projects of strategic customer and global OEMs, including the Chinese customers.
We will highlight our technical differentiation in flagship models with internalized key components such as large aperture lenses for big sensors and ball guide actuators, and focus on winning more opportunities in mass-tier, in particular, the higher-end mass-tier, where high-pixel and OIS adoption is increasing. Also, given the continued growth of camera demand from automotive applications tied to autonomous driving technology, we have been increasing supply of high-pixel camera modules to key automotive customers, and will continue to focus our development and supply capabilities in this area. While risk remains, particularly in terms of raw material supply and consumer sentiment due to the lockdown in key Chinese cities against the resurgence of COVID-19, we will focus on minimizing disruptions to our camera module business by closely cooperating with customers and proactively meeting customer demand. Lastly, for substrates.
In Q1, despite slower smartphone demand, BGA demand for mobile applications such as high-end AP, 5G antenna and memory remained strong with greater penetration of 5G smartphones. Flip chip BGA supply remained tight due to increased demand tied to the high-end PCs and greater demand for high multilayer large site substrates for servers and network equipment. Also, Arm processors with high performance and low power advantages have been quickly winning market share, supported by positive market responses. As more downstream products and more developers adopt Arm processors, the Arm processor market is expected to rapidly grow and lead to rapid increase in demand for new substrates.
In terms of Q2 and second half substrate, market outlook, despite concerns of smartphone demand slowdown and delayed recovery, 5G related BGA demand such as 5G antenna, communication module SIP substrates and high-end AP substrates, is expected to continue growth with further 5G penetration and increase in the number of 5G smartphones. For flip chip BGA, while PC demand is expected to become stagnant, the growth of server and network equipment, which requires high multilayer and large size substrates and has a significant impact on overall flip chip BGA demand and capacity, is expected to continue driving further growth in overall flip chip BGA demand. Recently, many flip chip BGA suppliers have announced capacity expansion plans, causing some worries about mid to long term implications to supply.
However, we continue to see growing demand driven by increase in server and network equipment, and the increase in substrate layers and size to support the higher performance. When considering such demand growth and technical factors, despite the increasing capacity on the supply side, mid- to long-term supply is expected to remain tight and customers are continuing to look for sources where they can secure long-term stable supply. We will focus on generating growth from packaged substrates such as 5G antenna substrates, high-end AP BGA and ultra-thin Flip chip BGA for laptops and further enhance our product mix around the high-end products. At the same time, we will also focus on winning new opportunities in the growing Arm processor substrate market and on diversifying the Flip chip BGA applications and customers to include servers and data centers.
Also, to further strengthen the competitiveness of our substrate business and to proactively respond to market growth and customer demand, we will carry out mid to long term capacity expansions and also development of differentiating technology. Thank you.
Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken accordingly to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. The first question will be provided by Kim Jisan from Kiwoom Securities. Please go ahead with your questions.
I have two questions related with MLCC. First of all, can you share with us your first quarter MLCC shipment inventory and ASP, and also your guidance for the three data points for the second quarter? Second question is, I think there are some that are looking towards possible ASP decline of MLCC during second quarter. In that context, can you share with us your outlook for MLCC ASP first half as well as second half of the year, and your guidance on profitability?
22년 1분기는 지난 분기에 이어 IT commodity용 MLCC 위주의 재고 조정이 지속되며, 재고 및 출하량은 전분기와 유사한 수준을 보였습니다. 단 고용량 비중 증가 등 product mix 개선을 통해 blended ASP는 상승하였습니다. 2분기는 COVID-19로 인한 지역 봉쇄가 지속되며, 국제 정세 불안 리스크 등으로 수요 확대가 지연될 수 있으나 서버 및 전장용 등 고부가품에 대한 수요는 견조할 것으로 예상되어 출하량은 전분기 대비 증가할 것으로 전망됩니다.
To answer your first question about first quarter MLCC shipment inventory, ASP and second quarter outlook. During first quarter, both MLCC inventory and shipments remained flat quarter on quarter, with inventory adjustments continuing mainly around the IT commodity grade MLCCs. Also, however, our blended ASP actually increased as the product mix improved, including the gain in the share of high capacitance MLCC. Looking towards second quarter, demand increase expansion may be delayed somewhat, as there is continuing international political uncertainties and also some regions going into COVID-19 related lockdown. Actually demand for high-end MLCC, such as server and automotive applications, is expected to remain solid in the second quarters, and we're expecting our shipments to increase quarter on quarter.
질문 주신 MLCC 상하반기 가격 흐름 및 수익성 전망에 대하여 답변드리도록 하겠습니다. 2분기까지는 IT용 위주의 재고 조정 지속 가능성이 있으나, 업계 전반적으로 통상적인 수준의 판가 인하가 예상됩니다. 당사는 산업, 전장용 등 고부가 제품에 사업 역량을 더욱 집중하여 현재의 수익성을 유지할 수 있도록 하겠습니다. 하반기는 시황 개선에 따라 전 분야에서 물량 증가가 예상되어 매출 확대 및 고부가 중심의 product mix 개선을 통해 상반기 대비 수익성을 개선해 나갈 계획입니다.
Your second question was about our expected MLCC ASP trend for first and second half and also profitability outlook. I think until around second quarter, inventory adjustments may continue mainly around the IT MLCCs. ASP adjustments may continue, but we expect them to remain within routine levels. We will focus our business capabilities on further increasing the high-end industrial and automotive MLCC share to maintain our current level of profitability in the second quarter. Looking towards the second half, volume growth is expected during the second half of this year as all segments, all MLCC segments overall, market situation improves. In the second half, we plan to further improve our profitability versus first half by increasing both our revenue and further improving our product mix.
네, 다음 질문 받아주시기 바랍니다. 다음으로 질문해 주실 분은 미래에셋증권의 차유미 님입니다.
The following question will be presented by Cha Yumi from Mirae Asset Securities. Please go ahead with your questions.
안녕하세요. 저는 미래에셋증권 차유미 연구원입니다. 오늘 좋은 실적 너무 축하드립니다. 저는 오늘 패키지 사업부와 광학통신 사업부에 각각 한 가지씩 질문드리려고 합니다. 첫 번째 질문은 지난 12월 이후에 FC-BGA 관련해서 지금까지 1.6조 원 규모의 투자 계획을 발표하셨는데요. 이런 증설 발표가 패키지 사업부에 유의미한 영향을 미치는 시점은 언제쯤으로 예상하고 계시는지, 또 관련한 사업부 전망 그리고 시장 전망 어떻게 예상하시는지 궁금합니다. 두 번째 질문은 최근 중국 쪽 스마트폰 수요가 굉장히 좋지 않은 것 같습니다. 또한 전략 거래선 관련해서도 부정적인 뉴스가 조금 나오고 있는 것 같은데, 저희 쪽에 미치는 영향이 어떤 게 있었는지, 그리고 향후 시장 수요는 어떻게 전망하고 계시는지 의견 부탁드립니다.
My first question is about the package side. I think since December last year, the company has announced total investment plans around KRW 1.6 trillion, and it's FC-BGA capacity. In terms of timing, when do you think this investment will have some meaningful impact on your package business performance? In that context, can you share with us your overall outlook for the package business of the company as well as the market? Second question is about the smartphones. Recently, Chinese smartphone demand has been rather sluggish, and there's been some series of negative news around the smartphone business of your strategic customer. Has there been any impact on the camera module business of Semco? I wonder what your outlook is.
예, 우선 질문 주신 FC-BGA 증설에 대한 향후 사업 전망에 대해 말씀드리겠습니다. 당사는 중장기적으로 반도체 고성능화 및 시장 성장에 따른 FC-BGA 수요 증가에 적기 대응하기 위해 단계별 투자를 결정하였고, 이를 통해 생산능력을 확대시켜 나갈 예정입니다. 또한 기존 주력 제품인 PC용 제품군 중심에서 향후 고성장이 전망되는 서버, 네트워크용 등 고다층 대면적의 하이엔드 제품군 중심으로 product mix 개선을 추진할 계획입니다. 고부가 서버용 기판의 경우에는 하반기 양산을 준비 중에 있으며, 앞서 말씀드린 증설을 통해 사업 확대를 적극 추진해 나가도록 하겠습니다. 이와 같은 Capa 확대와 고부가 사업 구조로의 전환을 바탕으로 당사 중장기 FC-BGA 사업은 큰 폭의 매출 성장이 전망됩니다.
To answer your first question regarding our Flip chip BGA capacity expansion, in order to respond timely to the expected growth in Flip chip BGA demand, driven by chip performance enhancements as well as market growth, we have decided a multi-stage investment plan to increase our production capacity. We will also be driving a product mix shift from the existing PC-focused substrates to higher-end multi high-layer and large area substrates for server and network equipment where strong growth is expected. The high-end server substrate mass production is scheduled for the second half of this year, and we will actively drive our business growth with this new capacity. Supported by both the capacity expansion and also the product mix transition, we expect to deliver significant top-line growth in the mid to long term for our Flip chip BGA business.
두 번째로 질문 주신 최근 스마트폰 이슈 관련 당사 카메라 모듈 사업 영향에 대해서 말씀드리겠습니다. 일부 지역의 수요 부진 영향으로 스마트폰 시장 성장 정체가 전망되는 등 올해 카메라 모듈 시황은 좋지 않은 상황입니다. 그러나 1분기에는 이러한 우려에도 불구하고 전략 거래선 플래그십 모델향 카메라 모듈 공급 확대에 따라 전년 동기 대비 카메라 모듈 매출은 소폭 증가하였습니다. 2분기는 스마트폰의 계절적 수요 둔화로 인해 카메라 모듈 매출은 1분기 대비 감소가 예상되나, 3분기 출시 예정인 국내외 주요 거래선에 신규 모델용 차별화 제품을 차질 없이 준비하여 매출 확대 기반을 확보하겠습니다.
To answer your question about the smartphone market situation, the camera module market situation faces some challenges, including the likely stagnation in overall smartphone growth due to weak demand in certain regions. However, in Q1, despite such concerns, Semco was able to increase our supply of camera modules to the strategic customer flagship and also our camera module revenue increased slightly year-over-year. Looking towards the second quarter, our camera module revenue is expected to decrease quarter-on-quarter with seasonality, but we will focus on offering differentiated camera modules for the new smartphone projects of Korean and overseas OEMs scheduled for the launch in third quarter to gain the foundation for revenue growth. 네, 다음 질문 받아주시기 바랍니다.
다음으로 질문해 주실 분은 UBS의 이태우 님입니다.
The following question will be presented by 이태우 from UBS. Please go ahead with your questions.
Hi. Thanks for taking my question. The first one is on MLCCs. When we look at the MLCC cycle this time, despite market concerns, the company's been delivering much more stable results and with better profitability compared to prior cycles. If we were to take a step back, wondering what has changed versus before to enable this, and should we expect future cycles to be similar, i.e. much more stable going forward? Secondly, on substrates, seems like the supply demand remains tight and favorable. For each of BGA and Flip chip BGA, wondering if the company has any plans to further raise pricing this year. Subsequently, what should we expect for, in terms of margins for each going forward? Thank you.
두 가지 질문이 있습니다. 첫 번째 질문은 MLCC에 대한 질문인데, 금번 MLCC 사이클의 경우에는 시장의 우려와는 달리 삼성전기는 과거 사이클보다 훨씬 더 안정적인 모습과 높은 수익성을 유지하고 있습니다. 이렇게 된 이유는 과거와 달리 무엇이 달라졌기 때문이라고 회사는 분석하고 계시는지 궁금하고요. 또 그렇다면 앞으로 사이클이 오더라도 지금과 같이 좀 더 안정적인 실적을 낼 것으로 저희가 예상을 해도 될지 궁금합니다. 두 번째 질문은 패키지 기판에 대한 질문입니다. 기판에 대한 수급 상황이 여전히 타이트한데, 이러한 맥락에서 BGA, 또 Flip Chip BGA 각각 올해 판가 인상 계획이 있는지 궁금하고요. 그리고 또 올해 수익성에 대한 마진에 대해서는 어떻게 예상을 하시는지 궁금합니다.
질문 주신 MLCC 사이클에 대한 당사 수익성 관련 답변드리도록 하겠습니다. 과거 18년, 19년의 수요 사이클은 수급 불균형 심화에 따른 고객사 과수요와 판가 상승 영향으로 MLCC 업계 실적 변동이 컸으나, 최근의 MLCC 사이클은 세트 수요 증가뿐만 아니라 5G의 보편화, ADAS 보급 등의 고성능화에 따른 세트당 소요 원수 증가로 인해 다운사이클에도 불구하고 과거 대비 높은 시장 수요를 보이고 있습니다. 이러한 MLCC 사이클 특성 변화와 함께 당사의 수율 개선 등 생산성 향상 효과, IT용 소형 고용량 제품과 산업 전...
Your first question was about the MLCC cycle and the implications on our profitability. If you look back on the demand cycle that we saw for MLCC in 2018 and 2019, the demand and supply mismatch actually drove up customer over-demand and also the ASP, which ended up amplifying the peak and the bottom of the business performance of MLCC companies that went through that cycle. The recent MLCC cycle that we have been seeing is being driven by two factors. One is, yes, there is an increase in downstream set demand, but also there is an increase in the MLCC content per box as downstream products adopt higher performance applications such as 5G and ADAS. This appears to help keep the market demand stronger versus the previous down cycles.
In addition to that, Semco at the company level has been managing to maintain the stable growth in both top and bottom line in its MLCC business by increasing our productivity, for example, with a better yield, and also increasing the share of high-end MLCCs, such as small size and high capacitance for IT applications, as well as industrial and automotive high reliability MLCC. Now, going forward, we will continue to focus on improving the profitability through revenue growth, supported, with productivity improvements and further enhancement of our product mix. Your second question about the BGA and flip chip BGA, ASP and margins. With demand for package substrates continuing to increase in the market, supply remains tight, as you mentioned, for both BGA and flip chip BGA.
We are currently running at full capacity level, and we adjusted the prices for some BGA and Flip chip BGA products last year in 2021. Overall, we think that the trend will remain similar this year, and so we will be appropriately responding in terms of ASP, considering customer relationships and also the market situation. Overall, our strategy for driving further revenue and margin growth is to, number one, further improve our product mix towards the higher end substrates, and also to concentrate our capabilities to Flip chip BGA for server and network applications, which is a major source for future growth. The following question will be presented by Kwon Sung Yoo from DB Financial Investment. Please go ahead with your questions. I have two questions regarding MLCC. First is, about the, your automotive MLCC product lineup.
If you had to compare your automotive MLCC lineup to your competitors who have had a head start in the automotive segment, where does your automotive MLCC currently stand in terms of lineup? Also, the Tianjin plant, if I recall correctly, was supposed to produce automotive MLCC. Is it currently producing automotive MLCCs? If not, what is the current purpose? What type of MLCC is the Tianjin new plant currently producing? Second question is about raw material prices increasing and the impact that would have on your MLCC. Especially with the Russia-Ukraine war, raw material prices globally have been going up. There is concern overall in the industry. I understand that nickel is one of the key raw materials for your MLCC. Nickel prices have been going up. What would be the impact on your margins?
질문 주신 전장용 MLCC 라인업 확보 현황 및 천진 신공장 현황에 대하여 답변 드리도록 하겠습니다. 당사는 수요 비중이 큰 고용량 MLCC에 대해서 지속적으로 라인업을 확대하고 있으며, 이에 따라 2021년 당사 전장용 MLCC 사업은 시장 대비 높은 매출 성장률을 기록했습니다. 향후 전장용 MLCC 시장은 ADAS, 전기차, 자율주행 등의 성장에 따라 차량 한 대당 2만 개까지 탑재가 예상되는 등 큰 폭의 성장이 전망됩니다. 당사는 ADAS용 고용량은 지속적으로 선점해 나가는 동시에 파워트레인용 고압 및 고온 라인업도 적극 확대하고 있습니다. 이와 함께 고객사 확보 및 고객 승인도 지속 확대하여 시장 성장을 상회하는 성장을 지속하도록 하겠습니다.
To answer your question about our automotive MLCC lineup, as you know, we have continued to expand our lineup towards the high capacitance MLCC, which does account for a large part of demand. Our automotive MLCC business actually outgrew the market in terms of revenue last year. A strong growth is expected in overall automotive MLCC, with some expecting up to 20,000 MLCC pieces expected to be used per car as ADAS and also EV autonomous driving, these new technologies are adopted onto the vehicle. We have been consistently gaining position in the high capacitance MLCC for ADAS, and also we have been actively adding our product lineup, the high voltage and high temperature MLCCs for powertrains.
We will focus on winning new accounts and also new design-ins to maintain above market growth for our automotive business going forward.
천진 신공장은 작년 이 분기부터 IT용 고부가 제품 위주로 양산을 진행해 왔으며, 현재는 제조라인이 안정화된 상태입니다. 전장용에 대해서는 양산대응 체제를 구축하여 올해 초도 양산을 시작하였으며, 본격적인 성장에 대비하여 안정적인 공급 능력 확보에 초점을 맞출 계획입니다. 내년부터는 전장용 수요 증가에 맞추어 본격적으로 물량을 확대하여 매출 성장을 이어나가도록 하겠습니다.
You've also asked about our Tianjin new plant. Tianjin has been in mass production since second quarter of last year, mainly around high-end MLCC for IT applications. Currently, the Tianjin manufacturing line is in stable operation. At the same time, Tianjin has been preparing for automotive MLCC mass production and started pilot mass production earlier this year, and we'll be focusing on ensuring stable supply capabilities. We plan to further drive revenue growth by introducing meaningful automotive MLCC volume from Tianjin starting from next year in line with the automotive MLCC demand growth.
이어서 원자재 가격 급등에 따른 MLCC 수익성 영향에 대하여 답변 드리도록 하겠습니다. 근래 유가 및 니켈을 포함한 원자재 가격 변동으로 수익성에 일부 영향은 있으나, 재료비 중 개별 원자재가 차지하는 비중은 높지 않습니다. 현재 예상되는 가격 인상분은 내부 효율 개선을 포함한 대책을 통해 흡수 가능한 수준으로 보고 있으며, 당사는 앞으로도 추가적인 리스크에 대한 모니터링을 지속하며 대응하도록 하겠습니다.
You also asked about the recent raw material increase and the impact on our MLCC margins. Yes, recently, raw material price movements such as oil and nickel has had some impact on our profitability, but actually no single raw material accounts for a large portion of our overall MLCC material cost makeup. We think that the magnitude of material cost increases would remain within levels that are absorbable, internally by our efforts, such as internal efficiency gains. We'll continue to carefully monitor against additional risk.
다음 질문 받아주시기 바랍니다. 다음으로 질문해 주실 분은 JP Morgan의 Jay Kwon 님입니다.
The following question will be presented by Jay Kwon from JP Morgan. Please go ahead with your questions.
Thank you for taking my questions. I have one each for substrate and camera module. First on the substrate, we've been hearing substrate package equipment tightness recently. May I ask what is the typical time required to build a new substrate plant line? And do you foresee any impact to your FC-BGA capacity expansion because of this? And my second question is, can you share the auto camera components growth trend for the electric vehicle applications? Great if you could also share Semco's automotive camera revenue, the prospect. Thank you.
두 가지 질문 드리도록 하겠습니다. 첫 번째는 기판과 관련이 된 질문입니다. 기판 자체에 대한 수급도 타이트하지만 기판 장비에 대한 쇼티지도 이야기가 되고 있고요. 그래서 현재 저희가 궁금한 거는 반도체 기판 라인 증설에 소요가 되는 리드 타임이 어느 정도-
Regarding your first question about substrate equipment, similar to the package substrate supply situation, the substrate equipment supply lead time has also become longer, with more orders being placed. We are hearing that in some key equipment, the lead time from order placement to delivery is as long as two years or more. Fortunately, we were able to coordinate the schedules, with our customers and equipment suppliers early on, and so we have secured the necessary equipment ourselves, and we do not expect any schedule disruptions in terms of our capacity expansion. To answer your question about the automotive camera modules, especially for EVs, as you mentioned, the number of camera modules per vehicle has been increasing with the adoption of ADAS and other autonomous driving technology. In the case of electric vehicles, EVs, especially camera module requirements per vehicle is growing faster.
We're seeing around two times the growth versus IT applications, and EVs mainly use the high pixel camera modules. In order to capture this market and technology trend, we are leveraging our IT camera module technology to increase the design in of camera modules aligned with customer needs. We're using this to diversify our customer base on automotive camera modules. For this year, 2022, our automotive camera module revenue is expected to report significant growth year-over-year as we win a greater share of our key customers' wallets, and also expect this revenue growth momentum to continue going forward.
The following question will be presented by Kim Un-ho from IBK Securities. Please go ahead with your questions.
I have two questions. The first question is about the Flip chip BGA business. Recently, with strong data center demand, the demand for semiconductor related components is also very strong. If my information is correct, Semco is also producing Flip chip BGAs for network equipment. Can you share with us your current status of network equipment, Flip chip BGA, and also your outlook for that segment? Second question is about your performance guidance. Recently there's the Russia/Ukraine situation, also market uncertainties, interest rates rising, raw material prices rising. Overall, it's a very challenging business environment. With that in mind, can you share with us your guidance outlook for your business for second half and also after that period going forward?
To answer your question about the network equipment Flip chip BGA substrates, our current status and future outlook.
Growth in AI as well as cloud services is driving data center demand, as you mentioned, and this is accelerating the performance increase of semiconductors used in the data center for large scale and high speed connectivity and data processing. This is also driving an evolution of the Flip chip BGA technology, such as larger size and high multilayer finer pitch circuits, which is needed in order to open up and unleash the higher performance of differentiating processors semiconductors. We continue to receive customer inquiries about high end network substrates using our differentiated substrate technology. As you mentioned, we are already supplying substrates for network equipment IC for overseas customers, and we'll be able to increase our supply of high-end Flip chip BGA using our expanded capacity for both server as well as network equipment. To answer your question about our performance outlook.
Looking back on first quarter, demand overall, market demand for key IT components was somewhat slow, as the demand consumption for electronic products related with the untact economy was rather sluggish during first quarter. Despite this overall slow demand, we were able to actually deliver quarter-over-quarter performance improvement, thanks to increase of supply of high-end MLCC for industrial and automotive applications. Also increase of our camera modules tied to the launch of a new flagship smartphone by our strategic customer, and also continued strong performance of our package substrates.
Looking towards the second quarter, once again, the IT-related market situation does not look quite easy given the expected delay in the recovery of a smartphone demand in certain regions and also as the effects of a smartphone flagship launches weakens during the second quarter. However, the outlook for future growth markets such as 5G, server, network, automotive will remain relatively solid. We will focus on creating growth opportunities by concentrating our resources on these areas such as industrial, automotive, MLCC, automotive camera modules, and also high-end package substrates.
Looking towards the second half of this year, first, MLCC demand, including MLCC for IT applications, is expected to recover in the second half, as the chip shortage is likely to ease from now in the second half and also new smartphones are launched during the second half. Also, we're expecting to see an increase in demand for slim camera modules as many of the OEMs have scheduled launch of new foldable smartphones. Also, overall high-end package substrate is expected to maintain a solid demand in the second half. Considering all of these factors, we do expect our overall business results to improve in the second half. That said, there are many factors that we need to watch out for, including the higher interest rates, the Russia/Ukraine situation and other external factors.
We will do our best to minimize the fluctuation in our results from these external uncertainties by carefully watching the business environment changes and also analyzing customer demand to manage our risk effectively. That completes our earnings conference call for 2022 first quarter. If you have any further questions, please forward them to our IR team. Thank you very much.