MLCC has also entered the "long-term agreement era": Samsung Electro-Mechanics signed a $200 million long-term agreement with a tech giant, securing supply for 2027
- Core Insight: Samsung Electro-Mechanics has consecutively signed large-scale long-term supply contracts for AI server MLCCs, marking the evolution of this electronic component category from short-term orders to long-term agreements in response to the robust demand from AI infrastructure.
- Key Elements:
- In July, Samsung Electro-Mechanics signed an MLCC supply contract worth approximately $204 million, covering the full year of 2027. The total value of publicly announced AI server MLCC contracts for the year has reached $510 million.
- When including the approximately $1.03 billion long-term agreement for silicon capacitors signed in May, the total value of AI server component supply agreements this year has exceeded $1.5 billion.
- The number of MLCCs required for AI servers far exceeds that of ordinary servers, with up to 600,000 units installed per rack. They must also meet stringent technical standards such as ultra-miniaturization and high-temperature resistance.
- Samsung Electro-Mechanics holds a market share of over 40% in the AI server MLCC market, with its technological advantages being the core support for continuously securing major customer orders.
Original Author: Dong Jing
Original Source: Wall Street News
Samsung Electro-Mechanics is moving its AI server MLCC business onto a "long-term contract" track, a trend that is reshaping the supply and demand dynamics for this core electronic component.
According to reports, on July 23, Samsung Electro-Mechanics disclosed that it has signed an MLCC supply contract with a global major tech company valued at KRW 295.12 billion (approximately USD 204 million), with the supply period covering the entire year of 2027. The counterparty was not disclosed due to a mutual confidentiality agreement.
This marks the second consecutive month that Samsung Electro-Mechanics has secured a large-scale order of this kind, following a KRW 450 billion AI server MLCC order in June. The total value of publicly disclosed AI server MLCC contracts this year has now reached KRW 750 billion (approximately USD 510 million). If the approximately KRW 1.5 trillion silicon capacitor long-term contract signed in May is included, the total value of AI server component supply agreements this year has exceeded KRW 2.25 trillion (approximately USD 1.5 billion).
Samsung Electro-Mechanics President Chang Duck-hyun stated:
"This large-scale contract is a result of our MLCC technology gaining full recognition as a core component of AI infrastructure. Based on deep customer trust, we will accelerate the development of next-generation cutting-edge products, build a stable supply chain, and lead the AI component market."
On the day of the announcement, Samsung Electro-Mechanics' share price surged over 8% intraday, reaching KRW 1.475 million, outperforming heavyweights like Samsung Electronics and SK Hynix among the Korea Composite Stock Price Index (KOSPI) constituents.
Consecutive Large Orders: Accelerated Accumulation of AI Server MLCC Orders
The value of this contract accounts for approximately 2.6% of Samsung Electro-Mechanics' total consolidated revenue of KRW 11.3145 trillion last year. The supply includes high-volume, high-performance core MLCCs for the customer's AI servers and data center systems. Looking at the timeline, Samsung Electro-Mechanics' AI server component orders this year have shown a clear acceleration trend:
In May, the company signed a KRW 1.5 trillion long-term silicon capacitor supply contract with a global client; in June, it signed another AI server MLCC supply agreement worth approximately KRW 450 billion with a global major tech company; the contract disclosed in July further pushes the total value of publicly announced AI server MLCC contracts this year to KRW 750 billion.
Reports state that industry observers note such a concentrated series of large-scale, long-term MLCC supply contracts is rare in the industry, signaling that MLCCs – a component category traditionally dominated by short-term orders – are accelerating their transition towards a long-term contract model, driven by AI infrastructure demand.
MLCCs are often called the "rice of the electronics industry," with their core function being to provide stable current and control voltage fluctuations in electronic circuits. In the AI server context, the strategic value of this function is significantly amplified.
Compared to ordinary servers, AI servers require more than ten times the number of MLCCs – each server rack can be equipped with up to 600,000 MLCCs.
Furthermore, AI servers impose extremely stringent specifications on MLCCs, requiring ultra-miniaturization, ultra-high capacitance design, and meeting multiple reliability standards such as high-temperature resistance, high-voltage resistance, and resistance to board flexure. The technical barriers are very high, and the number of companies capable of actual large-scale mass production is extremely limited.
Regarding silicon capacitors, these products are installed inside AI chip packages (including GPUs and High Bandwidth Memory HBM) to assist in stabilizing the power supply. Their resistance is approximately one-hundredth that of traditional MLCCs, offering a significant performance advantage.
Samsung Electro-Mechanics maintains a leading global position in the AI server MLCC market, with a market share exceeding 40%. This market share advantage is considered a core support for the company's continued receipt of major customer orders and was a key driver for the significant stock price increase following the disclosure of the silicon capacitor long-term contract in May.
Samsung Electro-Mechanics stated that it is currently in further discussions with several global customers regarding medium to long-term MLCC supply plans. It also plans to solidify a stable demand base for AI server MLCCs by expanding long-term supply contracts, while simultaneously accelerating the transition towards a high-value-added product portfolio centered on industrial, automotive electronics, and AI server applications.
