Research Report Analysis: AI Ignites a Super Cycle for MLCCs—How Long Can Samsung Electro-Mechanics Sustain Its Benefits?

Author: Rita

TideResearch Executive Summary

Morgan Stanley has just raised Samsung Electro-Mechanics’ target price from KRW 920,000 to KRW 2,560,000. Analysts have reclassified MLCCs (multilayer ceramic capacitors) from a cyclical industry into one experiencing structural growth. The core logic is straightforward: AI servers’ demand for MLCCs is 10–15 times higher than that of traditional servers.

AI Ignites “Volume and Price Growth”

A single AI server requires 440,000 MLCCs; a traditional server needs only 30,000—more than ten times less.

This isn’t just about quantity. AI’s requirements for MLCCs are also intensifying: higher capacitance, smaller form factors, and lower ESL (equivalent series inductance) and ESR (equivalent series resistance). The industry has evolved from competing on volume to competing on quality—and ASPs (average selling prices) are rising accordingly. Morgan Stanley estimates that Samsung Electro-Mechanics’ MLCC business will account for 15% of its revenue by 2026, jumping to over 50% by 2030. This reflects enhanced pricing power and genuine profit expansion.

Supply Tightness Is Structural, Not Cyclical

This round resembles the MLCC super-cycle of 2017–2018—but the underlying drivers are fundamentally different. That prior cycle was driven by short-term mismatches: low inventory levels combined with an explosive surge in orders. This time, however, it’s a hard capacity ceiling colliding with sustained new demand.

Production lines for high-end MLCCs are already fully booked; building new lines takes two years before ramping up. Supply-chain inventory levels have now risen not only in the spot market but also in contract pricing—and distributors have begun stockpiling, signaling they no longer view the shortage as temporary.

Morgan Stanley forecasts MLCC prices will rise 30% in H2 2026 and another 30–50% in 2027. These aren’t speculative predictions by futures traders, but conclusions drawn directly from observable contract prices and distributor behavior.

Why Samsung Electro-Mechanics Is the Biggest Beneficiary

Samsung Electro-Mechanics benefits across three dimensions:

First, direct MLCC price increases: IT-focused MLCCs are rising, and AI-specific MLCCs are rising even more—with significantly higher margins. Its Q1 2026 financial results already exceeded expectations—revenue came in at KRW 3.2 trillion versus a forecast of KRW 3.1 trillion. More importantly, Morgan Stanley has upgraded its EPS forecasts for all three coming years; FY2027E EPS is now projected at KRW 55,477—an increase of 71% over the prior estimate. Operating margin is expected to climb from 15.7% today to 24.5% in 2027 and further to 25.9% in 2028. This isn’t number-crunching—it’s real profit expansion driven by strengthened pricing power.

Second, ABF substrates: Orders for ASIC chips from AI customers are already saturated, and Samsung Electro-Mechanics’ shipments and profits in this segment are growing rapidly.

Third, new product lines: Silicon capacitors have secured $1.3 billion in orders, and glass substrates have entered trial production. These won’t contribute meaningfully to revenue this year or next—but they lay critical groundwork for future years.

Will ROE Really Jump from 7.5% to 32.2%?

Morgan Stanley projects Samsung Electro-Mechanics’ ROE (return on equity) will rise from 7.5% in FY2025 to 17.3% in FY2026 and then to 32.2% in FY2028. Simultaneously, the company’s dividend payout ratio is expected to increase from 5% today to 20%.

This implies that a Korean electronic components manufacturer—already boasting a relatively healthy ROE—is entering a higher-profitability phase due to shifts in product mix and pricing power. Its current valuation stands at 1.4x P/B (price-to-book), below its historical average of 1.7x. Raising the target price from KRW 920,000 to KRW 2,560,000—a near 178% increase—is driven not only by earnings growth but also by valuation re-rating potential.

Understanding the Risks

Upside risks: MLCC prices could surge further due to genuine supply shortages; smartphone demand could rebound more strongly than expected; Chinese government consumer stimulus policies could generate additional demand.

Downside risks: A significant slowdown in Samsung Electronics’ flagship smartphone cycle (Samsung Electro-Mechanics has substantial exposure to consumer products); execution failures in expanding its customer base among Chinese smartphone OEMs; global consumer demand weakness.

Catalysts: Further increases in contract pricing; continued upward momentum in Book-to-Bill ratios; capacity utilization nearing full load; and confirmation of increased MLCC content requirements for next-generation AI platforms (e.g., Rubin, VR200).

A New AI Infrastructure Player

From side dish to main course; from cyclical player to structural participant; from traditional capacitor supplier to AI infrastructure provider—that’s the story Morgan Stanley tells about Samsung Electro-Mechanics. How long this narrative holds depends on AI chip demand, capacity expansion progress, and competitive dynamics. For now, however, supply constraints are supporting prices—and rising prices are fueling profitability.

Disclaimer

This article is a summary and interpretation by TideResearch of third-party brokerage research reports. All cited ratings, target prices, earnings forecasts, and related judgments reflect the views of Morgan Stanley analysts and represent solely the positions of their respective institutions—not TideResearch’s views—and do not constitute investment advice.

Please note three key points when reading: First, target prices represent analysts’ 12-month forward expectations—not commitments—and are subject to frequent revisions based on performance and market conditions. Second, sell-side research reports are inherently bullish, and some covered companies may maintain investment banking relationships with the issuing brokerages. Third, the value of research lies in its core logic and underlying assumptions—not any single target price. Focus on the logic—not just the number.

Markets involve risk; decisions must be made independently. This article should not serve as the basis for buying or selling any securities.

Data sources: Samsung Electro-Mechanics Q1 2026 financial report (SEC and other public filings) · Morgan Stanley Research Report (Shawn Kim et al., June 22, 2026)

TideResearch · June 2026