Good afternoon. Thank you very much for joining the conference call for Samsung Electro-Mechanics. Today we will start with a presentation by the company followed by a Q&A session with the participants. If you have a question, please press Star one on your phone. Now we will start the presentation by Samsung Electro-Mechanics.
Good afternoon. This is EVP Dongwoo Lee , Head of IR and Planning Team at Samsung Electro-Mechanics. Thank you for joining our 2025 Q3 earnings conference call. On today's call, I am joined by our CFO Sung Jin Kim, EVP Taegon Lee, Head of Strategic Marketing, VP Kyu-Taek Park, Head of Support Team Component Division, Chang Hyung Jod, Head of Support Team Package Solution Division, Hyung Jun Kim, Head of Support Team, Optics Solutions Division, and VP Taiyoung Kim of the Planning Team.
We will start with a presentation on our Q3 company level and divisional business results followed by market trends and outlook by product before taking your questions. First, our 2025 Q3 results. Our Q3 revenue was KRW 2.889 trillion, which is approximately 4% increase QoQ and 10% increase YoY. The details regarding revenue increase and decrease factors by division will be explained later during the divisional results. Q3 operating profit was KRW 260.3 trillion, which is approximately 22% increase QoQ and around 16% increase YoY. Q3 pretax profit was KRW 281.7 billion. Net profit KRW 219.8 billion. Next, in terms of our financials, as of end of Q3 total assets was KRW 13,842.2 trillion, which is roughly 5% QoQ increase. To look at our major financial indicators, liability to equity increased 1 percentage point to 47% from Q2's 46%.
Debt to equity decreased 1 percentage point QoQ from 22% to 21% and equity ratio was around 68%, similar to Q2. Next are the divisional results and future outlook. First, a look at our Component Division. The Component Division's Q3 revenue was KRW 1,381.2 trillion, which is roughly 8% increase QoQ and 15% increase YoY. Q3 saw increased seasonal demand including the launch of new global smartphones combined with continued growth in AI related revenue coming from applications such as AI servers, network equipment, and power modules. Automotive MLCC supply also increased driven by increased electronic content in vehicles. As a result, in Q3 revenue increased across all applications including IT, Industrial, and Automotive. In Q4, some seasonality including year end inventory adjustments may appear, but automotive demand growth is expected to continue.
With growing penetration of ADAS and xEV, SEMCO will focus on new design ins of smaller size, high capacitance MLCC for ADAS and high-voltage MLCC for xEV applications.
We will also pursue new contract wins for high-temperature high-capacitance MLCCs targeting AI servers. Next, Package Solution Division Q3 revenue was KRW 593.2 billion, roughly a 5% QoQ and 6% YoY increase for FCBGA. Revenue increase was driven by increased supply of large-area high-multilayer server substrates t o our major big tech customers.
BGA revenue also increased thanks to increased supply of mobile AP and memory substrate in Q4. Demand for server and AI related substrates is expected to remain solid, and we will continue to increase our supply of server substrates to major big tech customers while also continuing our timely development of next generation AI and server substrate products and new customer accounts. For BGA, o ur focus is increasing supply, especially substrates for overseas customers, mobile AP, and SIP. Lastly, a look at our Optics Solutions Division. Division's Q3 revenue was KRW 914.6 billion, which is roughly a 3% decrease QoQ but a 6% increase on a YoY basis.
Even though IT camera module revenue slightly fell on a QoQ basis due to decrease in overseas customer demand, high performance camera module supply increased with the increased supply of 200 meg pixa slim OIS for the strategic customers, new flagship phone, and mass production of a 200 meg pixel folded zoom camera module for the new overseas customer. Automotive camera module revenue increased with increased supply to key customers and expanded camera module lineup targeting traditional auto OEMs. In Q4, w ith the IT camera module market accelerating adoption of new technologies as a way of differentiating their ultra premium segment, we will focus on timely mass production of new camera modules customized for each key customer, including high performance folded zoom. In the automotive market, advances in autonomous driving technology and new applications including human eye robots are expected to grow.
Accordingly, we will focus on developing next generation automotive solutions and differentiated products to capture the new emerging humanoid market to achieve early design in on new auto platforms and strengthen our technology leadership. That completes the presentation on our 2025 Q3 results. Now our Head of Strategic Marketing, Taegon Lee, will talk about market trends and outlook by key product groups.
Good afternoon. This is Taegon Lee, Head of Strategic Marketing. I will share current market situation and outlook for MLCC, substrates, and camera modules respectively. First, for MLCC, Q3 MLCC demand increased QoQ across all applications including IT, industrial, and automotive. By application, IT MLCC demand continued QoQ growth driven by North American customers, new smartphone launch, and PC replacement demand. Industrial MLCC demand growth was driven by b oth solid AI accelerator demand as well a s server, router, switch, and power module applications. Automotive MLCC demand growth also continued, especially with wider adoption of Level 2+ ADAS.
For Q4, while MLCC demand is expected to slightly decrease on a QoQ basis given the year-end component inventory adjustments by key customers, growth on a YoY basis is likely to continue . In Q4, IT MLCC demand growth momentum is expected to level off versus Q3 due to tariff impact and customer component inventory adjustments, despite the full effect of the North American smartphone customers' new model sales. For industrial MLCC, despite the usual year-end inventory adjustments, AI-related demand is expected to remain solid, including the next-generation AI GPU ramp-up in Q4 as well as the AI-related server and power modules. For automotive, another QoQ demand growth is expected thanks to solid demand for ADAS-related products and xEV growth, especially around Europe and China.
Our focus, therefore, will be on increasing h igh-temperature ultra-high capacitance MLCC qualifications to capture memory demand growth, and also increasing qualifications of high effective capacitance MLCCs for next-generation AI smartphones to further drive high-end new product revenue. F or industrial MLCC, o ur focus is on increasing supply for AI servers, high-speed network equipment, and power modules, and concentrating on design-in of our new MLCCs for big tech customers 2026 new GPU and ASIC models. Regarding the AI GPUs, existing AI-related customers' adoption of new architecture is likely to increase adoption of high-end MLCCs.
Also the North American big tech cloud c ustomers that are keen on strengthening their proprietary AI server development have been intensifying performance competition, leading to greater power consumption and accelerating higher MLCC capacitance demand. We are ready to capture this cutting-edge MLCC need to reinforce our market leadership with first-in-class products and further design ins. Also, this AI server performance competition is driving growth in high-speed network equipment and high-efficiency power modules together, which is another area where we are actively developing business in b y promoting our new high-end MLCCs. For automotive, our strategy is strengthening our portfolio around high-end products, including small size ultra-high capacitance MLCCs for the next-gen ADAS SoCs and low ESL MLCCs. We will also continuously drive market share expansion with active design in of the 630+ V ultra-high voltage products targeting EV powertrains. Next is a look at substrates.
Q3 FCBGA demand increased QoQ, driven by increasing accelerator and server CPU demand riding on the AI and data center market growth. BGA demand also increased on a QoQ basis in Q3, thanks to greater demand for mobile DRAM and communication modules for flagship smartphones in Q4. FCBGA demand growth is expected to continue, especially around AI server accelerators, network equipment, and automotive. For BGA, w hile substrate demand tied to the new ARM CPU is likely to increase, overall demand is expected to decrease QoQ due to seasonality, including year-end inventory adjustments. For the FCBGA,
We will continue to expand our FCBGA portfolio and market share in our existing big tech customer base and also capture the trend of server CPUs and AI accelerator packages getting larger for LLM-related machine learning and high-speed signal processing by offering customer-specific solutions that leverage our precision package control technology, such as embedded components and multi-layer cores, and also pursuing synergies with our Component Division in charge of MLCCs and other embedded parts. With this approach, we will continue to drive revenue growth by increasing share in the high-end market and breaking into new AI server accounts. For BGA o ur focus is on stable first supply o f new substrates for the upcoming new ARM CPU and increasing supply for flagship APs, while continuing to drive new product design inside.
Lastly, camera modules. In Q3, strategic customers s trong foldable phone sales was positive for o ur IT camera demand, but the Chinese m arket mainly grew around mass segment smartphones, leading to a slight QoQ decrease in SEMCO relevant camera demand, but automotive camera demand increased on a QoQ basis driven by increased vehicle sales of major global EV customers. Looking towards Q4, IT camera demand is expected to decrease QOQ due to factors including year-end inventory adjustments, but we will actively drive revenue growth by s upplying cameras for the Chinese OEM's new f lagship smartphones and initial supply of cameras. or the strategic customers.
New smartphones scheduled for launch early next year.
For automotive camera , despite the North American customer's new model launch, some volatility is expected from tariff issues and also U.S. EV subsidy expiration. Accordingly, we will focus on driving revenue growth around high-end camera modules by proposing differentiated technologies specific to each customer.
Such as variable aperture, ultra-light, thin, small
modules and continuous zoom folded modules. F or automotive cameras, w e started mass production and supply of hybrid lenses to a key Korean customer from Q3, which expanded our autonomous driving solution to lenses in addition to the existing modules. We will continue to strengthen our global technology leadership in automotive cameras by expanding our automotive lineup to include hybrid lens technology and heater cameras. For humanoid cameras, w e will focus on claiming an early lead over this new market and building out a strong future business portfolio by working with key customers on 3D integrated module technology for autonomous driving and object recognition using our high reliability actuator and high proficient assembly 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 according to the order you have pressed the number one. For cancellation, please press Star two, that is Star and two, on your phone. The first question will be provided by Woon-ho Kim from IBK Investment and Securities. Please go ahead with your question.
[Foreign language]
I have two questions both related with MLCC. First question is can you provide us some specific data points on your third quarter MLCC shipment inventory and ASP changes o n a QoQ basis and also provide y our outlook for these data points for Q4? Second question, maybe a bit of a sensitive question, and also when these s ort of questions come up. I think everyone starts to ask whether we are at peak or not. My question is about the recent growing anticipation of a possible MLCC shortage coming down the road. It appears that not only SEMCO but also the Japanese company is running at very, very high utilization, almost at max utilization. Of course, last year there could be additional capacity buildouts and other changes. What are your views about s hortage coming down the road f uture, given that in the market there s eems to be anticipation growing for an MLCC shortage.
[Foreign language].
To answer your first question about our Q3 MLCC shipment inventory, ASP, and Q4 outlook, Q3 recorded another QoQ increase in our MLCC shipments across all applications. To take the IT application first, small, small size, high-capacitance MLCC shipment increased thanks to the global mobile customers' new product launch. Also, in industrial MLCC AI-related application, demand such as server, network, and power modules was strong. In particular, automotive MLCC shipment also increased, supported by solid xEV and ADAS-related demand, and therefore inventory days have decreased. Q3 blended ASP was similar to Q2 as all applications grew evenly, and there was limited change in our product mix. Looking towards Q4, while overall shipments may somewhat decrease given seasonality, including the routine customer inventory adjustments, automotive and server MLCC supply is expected to remain solid, likely to deliver a QoQ improvement in our b lended ASP.
[Foreign language].
Your second question was regarding outlook on MLCC supply and demand. According to external sources, including sell side analysts, MLCC companies' utilization appears to be continuously increasing, driven especially by the solid industrial as well as automotive MLCC demand growth around AI servers and ADAS, combined with seasonal IT product demand. Industrial automotive MLCCs, as you know, take u p a relatively larger capacity load on.
The production line, an increase in.
The industrial and automotive large size high.
Capacitance MLCC demand is actually contributing to the tighter MLCC supply situation, and we believe that this situation will continue for some time. Given this outlook, we are preemptively expanding supply around the high growth areas such as AI servers and ADAS, and continuously improving our product mix to actively capture customer demand. For IT MLCCs. We will focus on capturing customer demand for cutting edge MLCC products and aim for top line growth that outpaces the market.
The following question will be presented by Jay Kwon from JP Morgan. Please go ahead with your question.
[Foreign language]
My first question is about the AI server demand increasing. With such strong demand for AI servers, your revenue on both server related MLCC and FCBGA has been rapidly increasing. With that in mind, can you give us some outlook on your top line growth expectations for this year and next year? Second question is a follow up to the previous question about MLCC utilization. With MLCC utilization already close to full but industrial and automotive MLCC demand continuing to grow, I'm wondering what your plans are for your capacity operation.
Can you share some details of what you have in mind in terms of how you will be managing your capacity?
[Foreign language].
To answer your first question about our outlook on revenue growth for MLCCs and substrates related with server AI server demand, first, for AI server MLCC demand from key GPU
customers have been continuously increasing throughout this
Year and we are on track to delivering significant revenue growth versus last year. Given that AI server step growth is expected to continue next year, MLCC demand for AI server accelerators and network and power modules that are mounted onto the server racks is also expected to grow going forward. Cloud customers are also increasing adoption of proprietary chip solutions, which is leading to increased cutting edge MLCC content on AI servers, and we expect growth to be focused around high margin, high value MLCCs. Our plan is to continue our strong top line growth next year by actively capturing customer needs tied to accelerators, network modules, and power modules. For the FCBGAs, o ur product mix has been improving this year with our mass production of the FCBGAs for accelerators and increased sales of server CPU substrates.
Looking towards next year, our cloud customers substrate demand related with their proprietary ASIC is expected to increase significantly, and therefore we will aim to deliver AI accelerator substrate revenue growth next year that is significantly higher than this year by increasing revenue from our existing accounts as well as adding on new accounts.
[Foreign language]
To answer our second
question about our MLCC capacity management plans. In order to meet the increasing industrial and automotive market demand, we have been increasing capacity this year each quarter through both facility expansions and also productivity gains. With stronger sales coming in, our utilization has remained at high levels. Looking towards next year and 2026, industrial MLCC demand is expected to grow especially around AI servers and high-speed high-bandwidth network equipment, and automotive MLCC demand next year is expected to remain solid, supported by xEV and ADAS penetration. Accordingly, we are planning to preemptively increase our capacity especially around the industrial and automotive applications, but also emphasize supply stability, leveraging our diversified production network to effectively meet increasing customer demand.
[Foreign language]
The following question will be presented by Jian Huang from NH Investment & Securities. Please go ahead with your question.
[Foreign language]
I have one question and it's about substrate, specifically the FCBGA outlook. Your FCBGA business unit currently is shifting more towards the high-end substrate business. Also, the application, the end market outlook for next year appears to be very bright. Given that, can you share with us your outlook on your overall server substrate business including the AI accelerators?
[Foreign language]
To answer your question, which was about our outlook for the substrate server substrate business for next year, as you know, with the launch of generative AI services, there's been a rapid increase in demand for data center high-performance chips, which in turn have been driving strong growth of the package market and the need for high multilayer large-size package substrates, which are from a production perspective more difficult and sophisticated.
To capture this market need, we have increased supply of high-end substrates for server CPUs and AI accelerators, and we have been continuously improving our business structure
to be more high-end product focused.
This year we have been supplying not only server CPU substrates, but from the second quarter also AI accelerator substrate, and we are on track to setting a new FCBGA revenue record this year. We are also currently working with several major customers on developing new AI related substrates that leverage our differentiated technologies, such as embedding and multilayer cores. Looking towards next year, we will do our best to deliver another year
of double digit top line growth by
increasing our AI and server related substrate supply, including supplying AI accelerator substrates to new accounts.
The following question will be presented by Min Kyung Kim from Hana Securities. Please go ahead with your question.
[Foreign language]
I have two questions. First question is about camera module business. In addition to the strong demand for the Galaxy Foldable phone, there's growing interest and continuing growth around Robo taxis or humanoid robots . What would be the implications of these new applications for your camera module business? Second question is about your automotive MLCC revenue. Despite the tariffs being imposed on finished vehicles and also the inventory adjustment of EVs in China, your automotive MLCC revenue has been continuing to grow quarter on quarter. With that in mind, can you give us your outlook on your full year results?
[Foreign language]
I think your first question about the camera module business responds to new applications.
Such as Robotaxis and humanoids as well
As mobile OEMs, in order to differentiate their flagship phones, we are noticing that smartphone OEMs are focused not only on better camera performance around telescopic cameras, but also using cameras for innovative form factors and performance by incorporating slim cameras which will provide innovatively thin foldable phones as well as great image quality. In the automotive side, adoption of automotive sensing cameras is increasing for various applications including driverless Robo taxis with advances in ADAS, and demand for high performance sensing cameras is also rapidly growing in humanoid robots which is a newly emerging application.
Currently, we're focusing on providing customized differentiated technology for each key mobile customer such as ultra slim OIS and high power optical zoom, and widening our technology leadership through preemptive technology development. For automotive applications, we have been expanding adoption of specialty products such as all weather heater cameras and leading design ins of next generation products for humanoid opportunities. We're currently collaborating with key customers on proof of concepts that incorporate our key core technologies including the high reliability actuators and high precision assembly technology, and we will be proposing new solutions to these customers to carry these projects into commercialization.
[Foreign language]
I think your question about the automotive MLCC outlook, despite some of the downside factors as you mentioned in the market, the automotive MLCC market continues to grow
this year, supported by the xEV expansion and wider adoption of ADAS, we have successfully strengthened our high capacitance high voltage MLCC lineup by leveraging our high capacitance technology expertise which we have gained from our IT MLCC business as well as developing a high voltage specialized MLCC material which is optimal for powertrain and xEV applications. Our revenue increased Y o Y and maintains a stable upward momentum. We have added new customers and have increased the number of MLCC product types that we offer. On both dimensions, our sales portfolio has been improving. The solid revenue growth is likely to continue on to Q4 and therefore on a full year basis, we are expecting to deliver another year of growth above market growth rates.
Given that the automotive MLCC market is expected to continue growth, we will focus on increasing our production capacity as well as we've explained before, as well as developing new small size high capacitance MLCCs for ADAS and high voltage products for xEVs to further strengthen our position as a major automotive MLCC supplier.
The following question will be presented by SK Kim from Daiwa Securities. Please go ahead with your question.
[Foreign language]
I have two questions. First question is about your Vietnam FCBGA plant. We know that your Vietnam plant started operation last year and is currently increasing its utilization, especially around the high-end substrates. Can you share some current updates on the Vietnam plant operation and also some future plans? My second question is about your future guidance, business guidance for Q4 and going forward. Given that your overall business situation seems to be improving, especially around the MLCC and FCBGA, this is also driving up expectations of future SEMCO results. With that in mind, can you share some guidance for Q4 and onward?
[Foreign language]
To answer your first question about an update of our Vietnam plant, the Vietnam plant started operation in Q2 of last year and currently produces substrates for overseas major customers, server, CPU, AI accelerators, and network modules.
The Vietnam plant had a very smooth start, leveraging the mass production know-how that we have accumulated from our Korean plant. Looking towards its operation going forward, server and AI-related demand is expected to remain solid with a rapid penetration of generative AI models and big tech companies investing in data centers and adopting proprietary chips. Also, there is growing demand for larger and higher layer packaged substrates which actually
aggravates the capacity load on substrate producers.
We will carefully monitor future market supply and demand situations and operate our FCBGA production sites efficiently to capture customer demand at any time.
[Foreign language]
To answer your question about our future guidance, first to look at Q3. In Q3 we delivered results improved on both QoQ and YoY basis, supported by increased sales of AI and automotive high-end products such as MLCC and FCBGA for AI servers and MLCCs and camera
modules for automotive applications.
Looking towards Q4, some inflationary factors tied to commodity prices, volatility, and tariffs as well as seasonal year-end inventory adjustments are expected. The supply of high-end products tied to AI and automotive applications is likely to increase, driving this YoY improvement trend further into Q4.
[Foreign language]
To continue to answer your question about next year 2026 outlook, while it is difficult for me to share detailed outlooks at this time given the external uncertainties that exist including global trade disputes effects and commodity prices. When I look at the MLCC side, supply dynamics are getting tighter as we have been talking about today due to increasing demand for larger size, high-capacitance MLCCs for industrial and automotive applications that take up more capacity versus MLCC, for example, for IT applications.
We think that this trend is expected to continue for some time. For packaged substrates,
FCBGA for servers and AI accelerators, as you know, are getting larger and incorporating more layers. Also, cloud customers' substrate demand related with their proprietary chips is also expected to be strong, continuing to provide multiple growth opportunities for SEMCO going forward. Now, to keep this upward momentum strong for MLCC, we will use the industrial and automotive capacity that we have preemptively secured to actively capture industrial and automotive customer demand such as AI servers and ADAS. For FCBGA, we will focus on increasing our supply to our existing big tech customers while also adding new AI accelerator customers, leveraging our differentiated technology. Also, in 2026, our goal is to achieve solid growth by increasing revenue around the growing applications of AI server and automotive markets and also in humanoid and other new applications.
We aim to gain an early lead and deliver visible results to build out a foundation for our mid to long term growth.
Thank you.
[Foreign language]
On that note, we will end our Q3 earnings call. Thank you very much for joining us. If you have any further questions, please forward them to the IR team.
Thank you.