"Double Boost from Volume and Price Increases"... This Company's Operating Profit Expected to Soar 2,076% This Year [Weekend Money]

"SIMMTECH Supplies Both MCP and Module PCBs
Expected to Benefit More Than Other Substrate Makers"

With expectations that both demand and supply for memory package substrates will remain favorable amid growing demand for agentic AI, it is projected that Simtek, a substrate manufacturer, is likely to benefit the most.

Kim Minkyoung, analyst at Hana Securities, stated, "The increased adoption of memory semiconductors in AI data centers is expanding the downstream market for memory package substrates and driving an increase in ASP (average selling prices). On the supply side, since there has been no expansion of BT substrate capacity since 2022, and major substrate manufacturers have been concentrating on their ABF businesses, substrate manufacturers' pricing power has been rising," she explained.

Simtek Cheongju Plant. Simtek website.

In particular, Simtek is expected to benefit more significantly than its peers. Kim noted, "Simtek supplies both MCP substrates and module PCBs for SoCAMM, so the extent of its gains is expected to be greater than other substrate manufacturers." She added, "Based on its high market share, Simtek is expected to reap the benefits of both increased product volume and price hikes."

The company reported strong results in the second quarter of this year. Revenue reached KRW 514.6 billion, up 51% year-on-year, while operating profit surged 1,035% to KRW 62.9 billion. The main reasons cited were higher product prices and utilization rates. Profitability also improved due to falling prices of raw materials such as gold and copper.

This growth trend is expected to continue in the second half of the year, as the supply-demand balance for memory package substrates is forecast to become tighter starting from the latter half of this year. The spread of agentic AI is leading to increased demand for DRAM and NAND, resulting in greater demand for memory package substrates. Kim explained, "Especially for AI server memory, not only is there demand for higher capacity, but also for high-speed interfaces, power efficiency, and signal integrity, which is driving substrates to become more multilayered and larger in size."

The supply side environment is also turning favorable. Kim stated, "Following a period of large-scale capacity expansion by substrate manufacturers during 2021-2022, when DDR4 and LPDDR4 were mainstream, BT substrate production capacity has stagnated." She added, "Given the cannibalization of production capacity due to the memory generation shift and increased shipments of high-spec products, actual supply capability has effectively decreased. As a result, the pricing power of substrate suppliers is rising from both the demand and supply perspectives, creating a favorable business environment for Simtek."

Kim projected that Simtek's annual sales this year will reach KRW 2.1234 trillion and operating profit will hit KRW 258.5 billion, representing year-on-year growth of 2,076%.

This content was produced with the assistance of AI translation services.