Last October we mentioned the problems South Korean MLCC supplier Amotech (052710.KS) was facing as COVID-19 slowed the development of their MLCC line, but the pandemic also slowed the rate at which 5G was being deployed in China, the company’s target market. Among those MLCC customers was Huawei (pvt), whose problems with US trade sanctions reduced demand for its 5G smartphones and base stations, which are large consumers of MLCCs, and the company faced a loss in 1H ’20. Other Chinese customers have been testing the product, as a way to avoid using US MLCC manufacturers, which should help the company in the long run, but MLCC sales were pushed from 1H to 4Q or 1Q ’21.
As it turns out, Amotech’s MLCCs have now received approval from Samsung Electronics’ (005930.KS) network business, which opens a path for the company to become a supplier in the future. Samsung affiliate Samsung Electro-Mechanics (009150.KS) is also a producer of MLCCs, among the largest in the segment, which makes it unusual for Samsung to be potentially adding a supplier, especially when it has Japan’s Murata (6981.JP) as a 2nd source, but there is a reason. Most MLCC’s are constructed using base metal electrodes, usually nickel or copper, but Amotech specializes in MLCCs that use precious metal electrodes, usually silver or palladium, which tend to be more effective at higher frequencies and are considered the most reliable of the two types (used in many aerospace applications).
PME MLCCs are also more expensive and somewhat limited in the number of layers (“Multi-Layer Ceramic Capacitors”), but have very low resistance and low power dissipation, so they are ideal for 5G and other RF applications such as medical devices. , but most important is that Samsung Electro-Mechanics does not produce PME MLCCs, leaving an opening for Amotech. They will still have to compete with Murata, Yageo (2327.TT), and AVX (6971.JP), but getting through qualification at Samsung is a plus for the company which has faced losses again in 3Q as its other component sales to Samsung saw weaker than expected smartphone sales from the COVID-19 pandemic and some price cuts for its other products. All in, it’s a positive for a new MLCC player, after Huawei’s issues, but they will have to now strike a real deal with Samsung sometime this year before they can consider themselves in the Samsung supply chain.
As it turns out, Amotech’s MLCCs have now received approval from Samsung Electronics’ (005930.KS) network business, which opens a path for the company to become a supplier in the future. Samsung affiliate Samsung Electro-Mechanics (009150.KS) is also a producer of MLCCs, among the largest in the segment, which makes it unusual for Samsung to be potentially adding a supplier, especially when it has Japan’s Murata (6981.JP) as a 2nd source, but there is a reason. Most MLCC’s are constructed using base metal electrodes, usually nickel or copper, but Amotech specializes in MLCCs that use precious metal electrodes, usually silver or palladium, which tend to be more effective at higher frequencies and are considered the most reliable of the two types (used in many aerospace applications).
PME MLCCs are also more expensive and somewhat limited in the number of layers (“Multi-Layer Ceramic Capacitors”), but have very low resistance and low power dissipation, so they are ideal for 5G and other RF applications such as medical devices. , but most important is that Samsung Electro-Mechanics does not produce PME MLCCs, leaving an opening for Amotech. They will still have to compete with Murata, Yageo (2327.TT), and AVX (6971.JP), but getting through qualification at Samsung is a plus for the company which has faced losses again in 3Q as its other component sales to Samsung saw weaker than expected smartphone sales from the COVID-19 pandemic and some price cuts for its other products. All in, it’s a positive for a new MLCC player, after Huawei’s issues, but they will have to now strike a real deal with Samsung sometime this year before they can consider themselves in the Samsung supply chain.
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