Samsung Electro-Mechanics and LG Innotek ramp up production as AI demand surges beyond memory semiconductors
Samsung SDI’s FC-BGA for server. (Photo courtesy of Samsung SDI)
As AI (Artificial Intelligence) demand expands beyond memory to non-memory semiconductors, the earnings forecasts for domestic electronics components companies have been uniformly revised upward. Samsung Electro-Mechanics and LG Innotek are responding to the flood of orders by running their package manufacturing lines at what is effectively ‘full capacity’. With the mid-to-long-term demand for semiconductor substrates becoming more visible, moves to expand CAPA (production capacity) are also expected to accelerate.
According to financial information provider FnGuide on March 31, the operating profit consensus for Samsung Electro-Mechanics in the first quarter of this year is 285.4 billion won (approximately $190.3 million), a 42.3% increase compared to the same period last year. This figure is an upward revision of about 16.3 billion won from the forecast three months ago (269.1 billion won). During the same period, LG Innotek’s operating profit consensus is also expected to increase by 39.9% year-on-year to 175 billion won. This is also about 25.3 billion won higher than the forecast three months ago (149.7 billion won). Although the first quarter is typically considered an off-season for the electronics components industry, it appears that AI demand has offset this.
The increase in semiconductor substrate sales is cited as a major factor for the improved performance. The high-performance semiconductor substrate FC-BGA (Flip Chip-Ball Grid Array) is a prime example. FC-BGA is a key component that connects a semiconductor chip to the mainboard and is used in CPUs (Central Processing Units) that require high-performance, high-density circuit connections, such as in PCs and servers.
To operate AI servers, CPUs are needed alongside GPUs (Graphics Processing Units) to handle data preprocessing and input/output, causing related demand to rise concurrently. In fact, Intel and AMD, which hold the top two spots in the global CPU market share, are reportedly pursuing plans to raise product prices by an average of 10-15% as CPU demand expands due to AI infrastructure investment. A trend where demand is outpacing supply is also emerging among domestic electronics components companies.
This is confirmed by the utilization rates of both companies’ semiconductor substrate production lines. According to Samsung Electro-Mechanics’ 2025 business report, the average utilization rate of its semiconductor substrate production lines last year was 70%, a 5 percentage point (%p) increase from the previous year. LG Innotek’s utilization rate also rose to 80.8% last year, up 5.2%p from the previous year (75.6%).
This year, the lines are in a state of ‘full capacity’. Chang Duck-hyun, President of Samsung Electro-Mechanics, stated at the world’s largest IT and electronics exhibition ‘CES 2026’ held in Las Vegas in January, “The FC-BGA production lines will be at full capacity starting from the second half of this year.” Moon Hyuk-soo, President of LG Innotek, also told reporters after the regular general meeting of shareholders on the 23rd, “FC-BGA is currently at full capacity as our CAPA is insufficient to meet customer demand.”
Samsung Electro-Mechanics and LG Innotek are accelerating the expansion of their production capacity to meet the growing mid-to-long-term demand for semiconductor substrates. Samsung Electro-Mechanics has begun reviewing production line expansion along with supplementary investments in FC-BGA. This is based on the judgment that demand for server and data center FC-BGAs is more than 50% greater than its current CAPA. LG Innotek will move to secure a new site within the first half of this year to expand its CAPA. Through this, the company plans to double its production capacity compared to the current level and begin mass production in 2028. While currently focusing on products for smartphones and PCs, it plans to expand its business area to the server market in 2027.
Kim Eun-jin
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