Supply shortages spread to memory substrates, bolstering domestic suppliers in price negotiations
Samsung Electro-Mechanics commits W6.78T in capex alongside Broadcom's direct investments amid fierce race to secure supply
Samsung Electro-Mechanics has secured long-term supply agreements (LTAs) totaling approximately 4.3 trillion won this year, thrusting the semiconductor package substrate market supply shortage into the spotlight. Following high-performance substrates for artificial intelligence (AI) servers, a fierce battle to secure volume is now unfolding in memory substrates. Global semiconductor giants are rushing to secure long-term supply chains by directly investing in production facilities or providing financial backing to suppliers.
Samsung Electro-Mechanics Secures W4.3T in Long-Term Deals as Global Firms Lock Down Production
On the 19th, Samsung Electro-Mechanics announced it signed a long-term supply contract for memory semiconductor package substrates worth 360.5 billion won with a major global client. The supply period runs from January to December 2027.
Since May, Samsung Electro-Mechanics has steadily expanded its supply agreements—spanning silicon capacitors, multi-layer ceramic capacitors (MLCCs) for AI servers, and inductors—to include package substrates. Including this latest deal, the company has announced a total of seven long-term supply contracts this year, with a cumulative value of approximately 4.3 trillion won.
Advanced Substrate Technologies (AST), a joint venture between U.S.-based Broadcom and Japan’s Toppan Holdings, also opened an advanced FC-BGA substrate plant in Singapore on September 29. The move underscores how critical securing a stable supply chain has become, prompting fabless chip designers to directly participate in substrate manufacturing.
Major substrate makers, including Taiwan’s Unimicron and Nanya PCB, are likewise pushing to expand production capacity to cope with surging demand for AI server substrates.
In September, Samsung Electro-Mechanics unveiled massive investments totaling 6.78 trillion won in FC-BGA production facilities, comprising 4.27 trillion won for its Sejong campus and 2.51 trillion won for its Vietnam production subsidiary. The Sejong plant targets mass production by September 2028, with the Vietnam facility aiming for operations in June 2030.
These investments are being structured around global clients providing financial support in exchange for mid- to long-term supply volumes. To ensure a stable influx of required substrates down the road, clients are actively sharing the capital expenditure burden for production facilities.
Memory Substrate Prices Rise, Benefiting Daeduck Electronics and Simmtech
Historically, supply constraints were concentrated in ABF-family substrates utilized in high-performance AI server semiconductors. Recently, however, the race to secure volume has intensified in BT-family substrates predominantly used in memory chips.
In a report released on the 20th, Kiwoom Securities interpreted Samsung Electro-Mechanics’ latest contract as a signal that substrate shortages are spilling over from FC-BGA to BGA products.
Meritz Securities similarly estimated that a substantial portion of the recent contract involves BGA substrates. Assuming BGA supply value stands at roughly 300 billion won, it accounts for approximately 26% of Samsung Electro-Mechanics’ related revenue from last year.
According to Meritz Securities, major domestic memory substrate manufacturers such as Daeduck Electronics, Simmtech, and Korea Circuit are currently discussing additional selling price hikes slated between the fourth quarter of this year and the first quarter of next year.
The backdrop behind these substrate price increases has also shifted. While earlier price adjustments primarily reflected rising raw material costs, recent hikes are driven by customer orders outpacing production capacity, handing suppliers significantly stronger pricing power. Major Taiwanese ABF substrate makers are also pursuing price increases.
Even when new manufacturing plants are built, advanced substrates require considerable lead times before actual mass production can begin. Because Samsung Electro-Mechanics’ new capacity at the Sejong campus is not scheduled to come online until the second half of 2028, easing the supply crunch in the near term will prove difficult.
As substrate supply shortages persist, domestic substrate makers—led by Samsung Electro-Mechanics—are presented with prime opportunities to boost profitability through secured volumes under long-term contracts and rising selling prices.
