Samsung Electro-Mechanics has significantly reduced its facility investments this year. This decrease comes as large-scale expansion projects in the package substrate sector, both domestic and international, near completion, and as demand for multi-layer ceramic capacitors (MLCC) weakens, prompting the company to adopt a more conservative investment stance. However, as the company focuses on fostering new growth drivers, it has increased its spending on research and development (R&D).

By the third quarter of this year, Samsung Electro-Mechanics had invested 4.272 trillion KRW in facilities, a 41.1% drop compared to 7.258 trillion KRW during the same period last year. The components business unit spent 1.055 trillion KRW, while the optical communications solutions business unit invested 177 billion KRW, down 8.1% and 34.9%, respectively, from last year. Notably, the package solutions unit saw a sharp 60.4% drop in investment compared to the same period last year, contributing to the overall decline. Facility investments for the current quarter are expected to remain below 1.5 trillion KRW, and if this trend continues in Q4, the company's total annual investment could fall below 10 trillion KRW.

The sharp decline in investment is partly attributed to the near completion of expansion projects for package substrates in Vietnam. In late 2021, Samsung Electro-Mechanics began its expansion in Vietnam and committed to investing 1.9 trillion KRW in increasing its domestic and international package substrate production capacity. In 2022, it invested 8.935 trillion KRW, and in 2023, it spent 7.468 trillion KRW. With this investment, the company started full-scale production of next-generation package substrates, such as flip-chip ball grid arrays (FCBGA), in Q2 this year, aiming to secure competitiveness in this sector.

In the MLCC segment, despite expansion investments focused on automotive electronics, demand from key industries like smartphones and personal computers (PCs) continues to weaken, leading to a slight decrease in total investment compared to last year. Samsung Electro-Mechanics has focused on increasing supply and expanding market share for relatively stable, high-value products, such as industrial and automotive-grade MLCCs.

However, R&D-related investments have seen a significant increase. This boost is driven by investments in glass substrate pilot production, core technology development, and business technology innovation. By the third quarter, the company had invested 940 billion KRW in R&D facilities, a 76.7% increase compared to the same period last year. Samsung Electro-Mechanics has set up glass substrate prototype production facilities this year and plans to begin mass production with partners in 2026.

The company is expected to maintain a conservative investment strategy next year. While demand in the IT product market, a key revenue driver for MLCCs, remains sluggish, limited investments may be made in high-value products, such as AI-related servers and automotive electronics. Samsung Electro-Mechanics expects server-related MLCC sales to more than double this year compared to last year and anticipates strong growth in this area next year.

As for package substrates, with the completion of new capacity expansions, the company will likely focus on improving yield rates and operational efficiency at its Vietnam facilities, rather than further expanding production capacity. During its third-quarter earnings call last month, Samsung Electro-Mechanics announced that "sales of FCBGA for servers and AI applications will double this year, driven by central processing units (CPUs)," adding that "next year, AI accelerator products will further boost FCBGA sales for AI and servers, leading to significant growth compared to this year."