Samsung Electro-Mechanics, Daeduck Electronics emerge as coveted AI stocks

Samsung Electro-Mechanics Co. headquarters. [Courtesy of Samsung Electro-Mechanics]

South Korea’s Samsung Electro-Mechanics Co. and Daeduck Electronics Co. are gaining attention in the local stock market for their optimistic outlook for long-term investment amid the ongoing artificial intelligence (AI) frenzy.

According to financial data tracker FnGuide Inc. on Wednesday, Samsung Electro-Mechanics is projected to post an annual sales of 9.64 trillion won ($7.22 billion) in 2024 based on a market consensus, up 9 percent from this year’s projection of 8.84 trillion won. Its operating profit is projected to increase by 34 percent from 864 billion won to 1.16 trillion won during the same period.

Daeduck Electronics is also projected to achieve 998 billion won in sales this year and 1.2 trillion won next year. Operating profit is also projected to go up from 76.2 billion won to 154.6 billion won during the same period.

The similarity shared by Samsung Electro-Mechanics and Daeduck Electronics is that the both are manufacturers of Flip Chip Ball Grid Array (FC-BGA), a critical component of a high-performance chip.

FC-BGA is a type of printed circuit board, the most important component in a physical electronic circuit. With a relatively bigger size of boards, the substrates utilize the metal balls for electrical connections, known as a flip-chip technique. Numerous CPU cores on the substrate are necessary to create a high-performance chip, highlighting the importance of a substantial substrate size.

Driven by the escalating demand for high-performance semiconductors propelled by AI technology, the demand for FC-BGAs is anticipated to see growth.

According to global research firm QY Research, the FC-BGA market was estimated at $4.7 billion as of last year and is forecast to grow at an annual average of 5.6 percent to reach $6.5 billion by 2028.

In the market, the segment of personal computers (PCs) holds the majority share at 57.8 percent. However, the segments of high-performance computers and AI chips are projected to lead the next momentum for growth.

The anticipation for growth led to upswings in the global stocks associated with FC-BGAs.

Ibiden Co., a Japanese electronics company, is known to boast the most advanced technology in the sector. The manufacturer has been one of the suppliers of FC-BGAs for Nvidia Corp.’s graphics processing units (GPUs). Taiwan’s Unimicron Technology Corp. is another player.

The two leading companies suffered from sluggish earnings for the second quarter of this year, when they were heavily hit by a slowdown in the chip industry. However, their share prices enjoyed high profitability on the back of strong expectations for the potential of FC-BGAs.

Ibiden shares have surged by 77 percent, surpassing the Nikkei 225 Index’s gain of 24 percent. Unimicron shares have also risen by 44 percent, outshining the 14 percent increase in the Taiwan Stock Exchange Capitalization Weighted Stock Index.

Samsung Electro-Mechanics and Daeduck Electronics have drawn the attention from investors as leading stocks of FC-BGAs in Korea. The prospects for Samsung Electro-Mechanics are notably favorable, driven by the anticipation of elevated FC-BGA sales attributed to its technological prowess and robust production capacity.

Market sources warn, however, that Daeduck Electronics may take some time to witness tangible benefits from the current AI trend.