Samsung Electro-Mechanics Stock

Good afternoon. This is EVP Dong Woo Lee, Head of IR and Planning team at Samsung Electro-Mechanics. Thank you for joining our 2026 Q2 earnings conference call.

On today's call, I am joined by our CFO, Sung Jin Kim; EVP, Tae Gon Lee, who is the Head of Strategic Marketing; VP Kyu-Taeck Park, Head of Support Team of the Component division; EVP [indiscernible] Kim, Head of Support Team, Packaged Solutions Division; and [indiscernible] Kim, Head of Support Team of the Optic Solution division.

We will start with a presentation on our Q2 company level and divisional business results, followed by market trends and outlook by product before taking your questions. Then first, our second quarter results.

Q2 revenue was KRW 3,457.2 billion, which is an approximately 8% increase Q-o-Q and 24% increase on a Y-o-Y basis. The details regarding revenue increase or decrease factors by division will be explained later during the divisional results. Our Q2 operating profit was KRW 440.4 billion, which is approximately 57% increase Q-o-Q and around 107% increase on a Y-o-Y basis. Pretax profit in Q2 was KRW 433.3 billion, and net profit was KRW 315.7 billion.

Next, in terms of our financials. As of end of Q2, total assets was KRW 16,566 billion, which is roughly a 6% Q-o-Q increase. For major financial indicators, liability to equity increased 2 percentage points to 57% and debt to equity was 28%, which is an increase of 2% versus Q1. Equity ratio was around 64%, similar to Q1.

Next are the divisional results and future outlook. First is a look at our Components division. The Component division's Q2 revenue was KRW 1,649.4 billion, which is a roughly 17% increase Q-o-Q and 29% increase Y-o-Y. Data centers related revenue tied to applications such as AI servers, networks and power equipment recorded strong growth, and automotive revenue also increased advances in ADAS and ex EV demand. So revenue grew across all applications, but particularly in the industrial and automotive MLCCs. Q3 MLCC market is expected to see continued growth, demand for high-capacitance, high-reliability MLCC demand driven by ongoing AI infrastructure investments and AI chip performance gains. So we'll focus on timely development and effective supply of cutting-edge MLCCs for AI applications, and we've entered into long-term agreements with 10 or so customers, including the top tier hyperscaler and major semiconductor companies. And we are currently actively responding to additional long-term supply request from big key accounts. The growing penetration of ADAS and growing xEV market is expected to support solid automotive MLCC demand. And so we're we will expand market penetration of our high-capacitance products for ADAS applications and high-voltage products for xEVs.

Next is the Packaged Solutions division. Q2 revenue was KRW 771.6 billion, roughly 6% increase Q-o-Q and 37% increase Y-o-Y. For FCBGAs, supply of high-end substrates for major big AI accelerators and server CPUs continue to increase. And we started the full-scale supply of new AI data center network application products for a new customer. Also, supply of automotive substrates for ADAS and autonomous driving increased leading to revenue growth led by AI, server and automotive applications. BGA revenue also increased with increased supply of mobile AP and memory substrates. In Q3, FCBGA market is expected to see continued strong demand for high-end FCBGA for AI data centers. So we will focus on increasing revenue with mass production of new substrates for AI accelerator and server CPUs for a global big tech customers to capture and expand production capacity overseas to capture demand from almost all of the top class semiconductor customers related with AI and data centers to increase supply of our high-end substrates.

Lastly, the Optic Solutions division Q2 revenue was KRW 1,362 billion, a roughly 4% decrease fuel, but a 10% increase Y-o-Y. Even though IT camera revenues slightly fell Q-o-Q due to seasonality, our supply of differentiating products for new flagship smartphones of Korean and overseas OEMs increased, including new mass production of the 200 meg pixel folded zoom cameras and high-resolution large angle OIS and slim OIS. Automotive camera revenue increased, driven by increased supply of high pixel sensing and all weather cameras for the global EV OEM and adoption of in-cabin caverns in more vehicle models of the Korean OEM.

Looking at Q3, IT camera module market is expected to enjoy increased supply of high-performance cameras for the new foldable phone unveiled by the strategic customer and continued demand from mobile OEMs for differentiating camera modules. And we will focus on strengthening our high-spec camera module lineup, including high image quality slim OIS and power person folded zoom. Also further advances in ADAS and new camera applications such as humanoid are expected to grow in the future, so we will focus on timely supply of specialty cameras for global EV OEMs next generation platforms preparing pilot mass production of our high pixel sensing modules for humanoids and focus on development of differentiating products such as AF and long distance 3D sensing.

That completes the presentation on Q2 results and now Head of Strategic Marketing, Tae Gon Lee, will take you through the trends and outlook by key products.

Good afternoon, this Tae Gon, the Head of Strategic Marketing, and I will share the market update and outlook for MLCC substrates and camera modules, respectively. First, MLCC. Q2 MLCC demand increased across all applications, including IT, industrial and automotive. In particular, with AI infrastructure investments continuing and the accelerated increase in electric content in vehicles, demand for high-end MLCCs grew significantly. By application, industrial MLCC demand was particularly strong for high-end MLCC such as the high temperature, high voltage, high capacitants MLCCs that are paired with high-performance AI accelerators and next-generation CPUs because AI servers have highest technology requirements. Only a few companies are able to supply, making MLCC supply even tighter. Such growing supply uncertainties have led to long-term supply contracts already signed with 10 or so accounts, including top-tier hyperscalers and key companies. And we're also actively engaged with additional long-term supply requests from key customers. Automotive MLCC market also continues to grow, driven by penetration of eco-friendly vehicles and higher autonomous driving levels. In addition, in the MLCC content per vehicle is increasing and high-end MLCC for powertrain and ADAS is also continuing to drive solid demand growth. MLCC for IT applications also saw Q-o-Q demand growth.

Regarding 4Q outlook for Q3, MLCC demand is expected to see another quarter of growth across applications. For industrial MLCC, supply is expected to become even tighter due to AI technology advances driving significant increase in MLCC content per box and greater demand for higher reliability MLCCs with high temperature, high voltage, high capacitance characteristic needed for the harsh AI server environment. In particular, in the case of the 1005-millimeter 45 micropharic product, demand is expected to grow by more than 7x in 2027 versus this year, given the large quantities of the product being adopted in the big company's new platform. So considering the limited physical space in AI servers, demand for high capacities, MLCC is likely to increase, and so we are focused on launching next-generation new products, including 68-microfarad and 150-microfarad to preempt this demand.

In response to data center adoption of 800-volt systems and higher heat levels, we have been increasing the 1-kilowatt high-voltage lineup and design and activities of the 125-degree, 150 degrees ultra-high-temperature MLCCs. Meanwhile, the increasing power consumption and AI chips has been driving rapid increase in demand for silicon capacitors, and we have announced last May that SEMCO has successfully joined the key supply chain of global big tech companies and is in a great position to expand supply to wide varieties of semiconductor customers.

For automotive, we continue to capture the increasing demand for small-sized ultra-high-capacity MLCCs needed for advanced ADAS. We're also expecting demand for 100-fold high-capacity components used for 48 voltage power systems to increase in the future. And so we are ready to respond quickly to this market shift. Growing competition over EV range and charging time is driving wider deployment of ultrafast charging infrastructure. And so we will actively seize opportunities to increase our market share.

For IT applications, we expect to see another quarter of growing demand for high-end MLCCs, including the high, ultra-small and ultra-high capacitants low ESL products, driven by strong demand for semiconductor packages and memory such as [indiscernible]. So we're working with key semiconductor companies, a new qualification of our ultra small-size ultra-high-capacitance capacitors and we'll focus on timely capture of growing demand for next-generation low ESL MLCC products. We're also focusing on timely capture of high-temperature, low-profile MLCC products for next-generation memories such as DDR6, LP6 [indiscernible], to benefit from memory demand growth.

Regarding long-term supply agreements, MLCC demand is continuing to grow from a variety of applications, including AI, automotive and industrial. And so we're engaging in strategic talks with major big tech customers.

Regarding MLCC pricing, with even tighter supply expected due to increasing AI demand, we will take a strategic approach to pricing while carefully monitoring supply and demand situations.

Next is substrates. Flip to BGA market demand recorded solid growth in Q2 as the shift from generative AI to genic AI drove server CPU demand. Demand for AI accelerators also recorded solid growth as big tech investments continued. This has led to a significant Q-o-Q increase in our data center-related revenue and we started full-scale supply of our new AI data center network products to the new North American big tech account. The Q2 BGA market demand grew Q-o-Q despite soft smartphone and PC set demand, thanks to the pricing adjustments in the industry to reflect higher raw material prices for BGA. Our revenue also increased driven by increased supply of BGA for data center SSD controllers.

FCBGA is expected to remain a sellers market in Q3 with demand for server CPUs and AI accelerators continuing to remain strong and driving market growth. With supply remaining tight, we will continue to have pricing discussions with key customers. Supply of high-end products for data centers is expected to grow significantly on a Q-o-Q basis in Q3, therefore, driving further profitability gains. In data centers, larger area semiconductors require larger, high multilayer substrates, leading to even greater shortage of FCBGA supply. We will leverage our strength in multicore and embedded technology to continue talks with almost all of the top class semiconductor customers related with AI data center projects about capacity expansion and long-term supply arrangements to maintain our edge in advanced substrate markets by adding new capacity at the right time.

Q3 BGA demand is expected to increase Q-o-Q with mobile customers planning new product launches in the second half. So we will focus on capturing demand from increasing supply of new ARM CPUs for PC and tablets and the demand from data center SSD controller customers. At the same time, we will develop new applications tied to satellite antennas and data centers with heightened design-in activities.

Lastly is a look at camera modules. Q2 IT camera demand decreased Q-o-Q due to seasonality of major customers' flagship smartphones launched in Q1. However, automotive camera demand in our addressable market increased slightly Q-o-Q with growing xEV demand.

Q3 camera demand may be affected by the adjustment in Chinese OEM handset launch schedules to cope with memory supply issues. But we look forward to strategic customers foldable phone launch and also the U.S. OEMs new flagship launch. We will differentiate ourselves with performance Ultraslim new feature actuator technology and the lens integrated PRISM and miniature lens technology to break into new customers and applications.

Q3 automotive camera demand is expected to be similar to Q2, and we will continue to expand high pixel camera lineup, targeting next-generation autonomous driving platforms and actively capture the growing automotive camera markets by winning new design-ins of major North American customers to reinforce our technology leadership in the autonomous driving market. We will also scale up mass production of camera modules for a global humanoid customer and pursue design in on high-resolution recognition modules to gain an early lead in the newly emerging physical AI market. Thank you.

[Interpreted] [Operator Instructions] The first question will be provided by [indiscernible] from Hana Securities.

[Interpreted] I have 2 questions regarding MLCC. The first question is related with the recent announcement of your additional MLCC supply contracts for AI applications. I'm wondering if you have additional supply contracts that's currently being discussed. Also, what would be your MLCC capacity operation plans for this year?

Second question regarding MLCC is your actual MLCC shipments inventory ASP data points in Q2 and your guidance on these data points for Q3.

[Interpreted] To answer your first question regarding our supply of MLCCs for AI servers. As you've mentioned, with the continuing investments by hyperscalers in AI data centers and also advances in GPU performance and also the higher-speed networks that are being adopted on servers, there is continuing demand for adoption of cutting-edge high-end MLCCs in AI data center servers. And we expect this steep growth curve to continue for some time in the future. When we talk about cutting-edge MLCC products, those would be the high capacitance products with 100 mega farens or above or those that have high temperature characteristics of 125 degrees and above. These are products that require the highest level of technology in terms of performance and reliability. And only a few companies, including SEMCO, is able to supply at that level. This is resulting in growing tension on the supply side of the market, and therefore, customers, especially those that have AI server needs are showing stronger needs and wishes to secure long-term supply agreements in order to secure stable MLCC supply volume going forward. Based on this, we have already signed long-term supply agreements with 10 or so customers, including the tier hyperscalers and key semiconductor companies. And in addition to the already signed LTAs, we are currently actively responding to additional long-term supply agreement requests from other major customers. You've also asked about our plans of running our MLCC capacity this year. We are focusing on improving the yield of our cutting-edge MLCC products and improving the productivity in order to further strengthen our lead in the MLCC market for AI servers. We've also budgeted a larger CapEx size versus previous years so that we'll be building a production that could maximize supply. Also, we're noticing that the technology demand for MLCCs for AI servers is rapidly becoming more and more sophisticated. And so we will be leveraging the already wide high capacity and product lineup that we have. to launch a diverse combination of different cutting-edge products, MLCCs in different size, voltage or temperature conditions so that we'll be able to capture the variety of needs coming from our customer base. Overall, this year, we'll remain focused on continuing our technology leadership in the MLCC market for AI servers to deliver revenue growth that once again outpaces the market.

Your second question was about MLCC Q2 shipment inventory ASP and our third quarter outlook. In terms of second quarter MLCC shipment, shipment increased across all applications, but particularly around industrial and automotive applications. We saw a double-digit level of growth in industrial and automotive MLCC shipments supported by strong demand from data center applications, including AI servers, network and power equipment as well as increasing demand for xEV applications with growth in shipments, our overall inventory decreased. In terms of second quarter blended ASP with growing share of the high-end industrial and automotive MLCC and overall makeup or ASP, blended ASP once again increased on a quarter-on-quarter basis.

Regarding outlook for Q3, we do expect once again, there to be continued increase in demand for MLCCs for AI servers, especially coming from hyperscalers Also, on the automotive side, according to third-party sources, the shipment of EVs are expected to grow by double digit in Q3 versus Q2. And therefore, we think that there will be solid demand being maintained for automotive MLCCs as well in Q3. So overall, Supported by such strong market demand, we expect our MLCC revenue to increase on a quarter-on-quarter basis. And with the higher share of high-end MLCCs, we expect our blended ASP also to increase.

[Interpreted] The following question will be presented by Jay Kwon from JPMorgan.

[Interpreted] My first question is about the flip chip BGA. We've been told that you are considering increasing your capacity of FCBGAs. If possible, can you share with us some details about that capacity expansion and how you plan to operate this additional capacity in the future?

Second question is about the silicon capacitor. You've announced that back in May that you signed KRW 1.5 trillion silicon capacitor supply contract. Can you give us some market outlook on silicon capacitors? And is there a possibility of winning additional contracts?

[Interpreted] To answer your first question about our FCBGA capacity expansion and our operational plans, with the AI paradigm shifting from training models to inference and reasoning, the global big tech companies are now focused more on developing their own proprietary chips that specialize for reasoning and inference. And more and more companies are participating in this development. Also, with higher performance of AI chips, chips are getting larger in sizes and adopting more and more HBM together, which means that the package substrate itself has to become ultra large size and high multilayer. This is actually aggravating the capacity consumption of the substrate suppliers. On top of that, recently, we're seeing that key customers are having stronger demand for high-end substrates that have multicore or have embedded components. But at this level, there's only a few companies that are able to supply this with the right technology level and the mass production capacity. And this limited supply is further aggravating the shortage in supply of high-end substrates. Given this market situation, we are talking with almost all of the top tier, top class AI and data center-related semiconductor companies about long-term supply contracts, including investment support and we will plan our capacity expansions based on these talks. Also, we are strengthening our collaboration with customers about developing next-generation substrate products and focusing on securing differentiated technology. So our key priority would be to respond timely to customer demand by preparing our capacity expansion smoothly and to focus on expanding our business in the mid- to long term.

To answer your question about our silicon capacitor and whether there's possibility of additional orders versus MLCCs, silicon capacitors have better electric characteristics such as low ESL also versus MLCC silicon capacitors are thinner. Therefore, they are key components that is mounted nearest to the semiconductor chip on an AI servers semiconductor package and play a critical role in guaranteeing overall system performance and reliability. There's been a shift of our early expansion of silicon capacitor applications from the traditional mobile to AI data centers, and we are expecting there to be an increase in silicon capacitor adoption in AI data centers and market size, therefore, to continue to grow. Based on the mutual complementary characteristics between MLCC and silicon capacitors, we are currently in additional talks about supply contracts with key semiconductor companies related with AI. Also, SEMCO is the only company in the world that can provide on a turnkey basis not only the silicon capacitor, but MLCC and package substrates. Therefore, we're using that unique strength and leverage, we will focus on gaining a lead in the market, early market and to deliver significant revenue growth going forward.

[Interpreted] The following question will be presented by Jongbae Kim from Hyundai Motor Securities.

[Interpreted] My first question is about the Flip chip BGA. There are I think, is growing expectations for stronger Flip chip BGA performance in your second half, given that you've announced that you've entered the supply chain with a new big tech accounts and also there's been pricing adjustments in fit. Can you give us a bit more detail about your outlook for Flip chip BGA in the second half?

Second question is about camera modules. There's also increasing market attention on camera modules, given that there's new applications emerging in addition to ADAS, there's also humanoids and physical AI, you've always emphasized these new applications. Can you give us some updates and details about your camera module business?

[Interpreted] I'll answer your first question about Flip chip BGA outlook in the second half. With big tech companies continuing to invest in data centers and also developing their own proprietary chips to meet the AI demand. We're seeing rapid increase in demand for FCBGAs and we're getting various requests to participate in the supply chain from a large number of global big tech customers. We already have a track record of producing flip chip BGAs for server CPUs and AI accelerators. And leveraging this, we already started supply of a new flip chip BGA product for the AI data center network of a new big tech account in Q2. We also have mass production scheduled throughout second half for new products to be supplied to key customers. In addition to the strong demand for package substrates and the higher specifications, there has been an increase in raw material prices. All of this is leading to a steady increase in substrate prices overall.

So to summarize, we have plans of supplying new high-end substrates in the second half, and we will also be responding strategically to pricing. Overall, therefore, we expect there to be a significant growth in revenue in the second half, and we will continue to focus on continuing this growth trend of our package substrate business.

To answer your second question about our camera module business. First, look at somewhat smartphone cameras, even though there is overall growth stagnation expected for the smartphone camera market overall due to a decrease in set supply tied to the memory supply issues. Our key focus in the smartphone camera market has been the flagship camera modules. And in that segment, we actually continue to see demand from our key customers for cameras that have differentiating performance including high image quality slim camera modules and new folded zoom technology. The strength of SEMCO's camera module business is that we have a wide diversified global customer base and leveraging this strength, we will be focusing on providing customized solutions for each of our customers and also strengthening our technology leadership by developing next-generation camera module technology ahead of time. On the automotive camera module side, we are seeing an expansion of automotive cameras to a wider variety of applications. So in addition to the development of autonomous driving technology, we're seeing an increase in demand for high-precision sensing and high-reliability cameras for new applications such as driverless autonomous driving robotaxis. Therefore, our focus on the automotive side is to further our competitiveness in the automotive driving market by timely responding for the new platform that will be announced by the global customer, the OEM and also by expanding the new automotive product lineup for the taxi applications. There's also the humanoid application side, and we are planning to start pilot mass production of our humanoid-related camera module based on the global -- based on next-generation differentiating technology, quality, reliability and also the fact that we have a global supply base. We are also going to continue to work with top-tier customers to develop next-generation camera module products so that we will be in a good position to actively respond to the newly growing physical AI market.

[Interpreted] The following question will be presented by Kangho Park from Daishin Securities.

[Interpreted] I have 2 questions. First question is related with substrates. If I understand correctly, you signed the main contract related with the establishment of a joint venture for the glass substrate business, early July, earlier this month. Can you give us an update on the business development of the substrate glass of state business and future plans?

Second question is about your third quarter outlook. As you mentioned during the presentation, this huge AI demand is driving growth of your MLCC and flip chip BGA business. Also with the data centers and automotive growth increase, there's an increase in the high-end product share across your business lines. This is driving up market expectations for your Q3 earnings. So at this point, can you share what you expect to see in Q3?

[Interpreted] To answer your first question about the glass substrates. Glass substrates have been 1 of the new businesses that we've been developing as a next-generation package substrate solution, we have been developing the glass substrate business stage by stage. The joint venture agreement that you mentioned is the joint venture agreement that we've signed with Tomo Fine Chemical, which is a subsidiary of Japanese company Sumitomo Chemicals. We had the joint venture, MOU signed last year and early July, early this month, we announced that we signed this main agreement for the joint venture establishment. This joint venture is to produce glass course, which is a key substance that's necessary for production of glass substrates. We are planning to own 66.2% stick of this joint venture and we're aiming to complete the establishment of this legal entity within this year.

In terms of the development of the technology, we have continuously been working with big tech customers that have data center needs in the development of large area, high multilayer glass substrates with some of these customers, we're already in sampling phase for engineering qualification. We have plans to develop this step-by-step, including deploying the production facilities, stabilizing the production process and doing quality control and verification. Our current time line is to have full-scale operation from 2028, and we will be aiming to secure early lead in the glass substrate market by timely responding to customer needs.

To answer your question about third quarter outlook, to look back on we had increase in our high-end MLCC and flip chip BGA revenue from AI server network as well as automotive applications. And with this increased share of high-end products, product mix improved, and we were able to therefore deliver better performance, both on Q-o-Q and Y-o-Y basis.

Looking towards Q3, we do expect the demand for related components to continue to remain very strong as the AI data center investments continue to expand and autonomous driving technology advancements continue. With stronger demand expected on these key components, we expect the supply to become even tighter for MLCC and flip chip BGA in Q3. Therefore, we will focus on actively increasing supply of high-end MLCCs. So the high capacitants high temperature, high voltage MLCCs that have a higher selling prices that will be supplying towards applications related with AI severe network and ADAS, we will also be continuing to have a strategic long-term supply agreement talks with key hyperscalers and semiconductor companies and also actively respond on pricing, taking into account the supply and demand situation. For flip chip BGA, we will focus on actively increasing the supply of high-end substrates for data centers, including the mass production of new substrates for AI accelerators and server CPUs for global big tech customers. Also, we will continue to have price talks with customers to reflect the market situation. Also, we will focus on carrying out the capacity expansions in Korea and overseas in line with these long-term supply contracts and talks that we're having with the top class semiconductor customers. Also, on the camera model side, we will focus on increasing supply of high-end camera modules for automotive applications and also to increase and scale up the mass production of new camera modules for humanoid applications.

Therefore, to summarize, in Q3, we expect the supply situation to become even tighter around our key high-end products at MLCC and flip chip BGA, we expect to increase the number of long-term supply contracts, and we expect there to be continued increased upward movement in our ASP. And so overall, we do expect there to be an even significant -- more significant earnings growth on a Q-o-Q and Y-o-Y basis versus Q2. And at this rate, we are on track to setting a new earnings record in Q3. Actually, we expect this upward momentum to even become stronger as we move into Q4 and even 2027. So we're expecting there to be continuous improvement in our overall business performance. As we have always done so, we will continue to focus on the high-growth areas in markets such as AI data center and automotive, and we will also back this up with preemptive capacity expansions so that we're able to quickly respond to changes in market situation and supply chain. At the same time, we will also develop our new businesses such as silicon capacitors and glass substrates by closely working with our key customers, including global big tech companies. so that we're able to, at the same time, prepare for mid- to long-term business development.

[Interpreted] This completes our second quarter earnings conference call. If you have any further questions, please forward them to our IR team. Thank you very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good afternoon. This is EVP, Dong Woo Lee, Head of IR and Planning Team at Samsung Electro-Mechanics. Thank you for joining our 2026 Q1 earnings conference call. On today's call, I am joined by our CFO, Sung Jin Kim; EVP, Taegon Lee, Head of Strategic Marketing; VP, Kyu-Taeck Park, Head of Support Team Component Division; EVP, [ Tanbee Kim ], Head of Support Team Package Solutions Division; and Hun-Jun Kim, Head of Support Team Optics Solutions Division.

We will start with a presentation on our Q1 company level and divisional business results, followed by market trends and outlook by product before we take your questions.

First, a look at our 2026 Q1 results. Q1 revenue was KRW 3,209.1 billion, which is an approximately 11% increase on a Q-o-Q basis and a 17% increase on a Y-o-Y basis. The details regarding revenue increase or decrease factors by division will be explained later on during the briefing on divisional results.

Q1 operating profit was KRW 280.6 billion, an approximately 17% increase Q-o-Q and 40% increase Y-o-Y, beating market expectations even after the one-off retirement pay provisioning expense recognized in Q1. Q1 pretax profit was KRW 316.4 billion, and net profit was KRW 249.2 billion.

Next, in terms of our financials, as of end of Q1, total assets was KRW 15,660.5 billion, a roughly 7% Q-o-Q increase. To look at our major financial indicators, liability to equity increased 6 percentage points to 55% from Q4's 49% and debt to equity increased 4 percentage points Q-o-Q from 22% to 26%. Equity ratio was around 64%, decreasing 3 percentage points from Q3's 67%.

Next are the divisional results and future outlook. First is a look at our Component division. Component division's Q1 revenue was KRW 1,408.5 billion, a roughly 7% increase Q-o-Q and 16% increase Y-o-Y. AI-related revenue, including server, power, network applications; recorded high growth and automotive MLCC supply also increased with increasing electronic content in vehicles. So revenue increased across all applications, but especially around industrial and automotive applications.

Q2 MLCC market is expected to see continued strong demand for industrial high-end MLCCs for AI servers and data centers. So we will focus on developing and supplying cutting-edge products targeting AI server and data center applications such as small-sized, ultra-high capacitance MLCCs.

And given the continued growing demand for automotive MLCCs driven by greater xEV demand and ADAS adoption, we will also focus on accelerating design-in of high-capacitance, high-voltage automotive MLCCs and diversification of our automotive customer base.

Next is Package Solutions division. Q1 revenue was KRW 725 billion or roughly 12% Q-o-Q and 45% Y-o-Y increase. For flip chip BGA supply of high-end substrates for global big tech AI accelerators, server CPUs and network equipment increase and automotive substrate supply also increased tied to ADAS and automotive driving, autonomous driving, saw revenue increase across all applications, but particularly tied to AI server and automotive.

BGA revenue also increased with increased supply of substrates for ARM processors and memory chip. Q2 flip chip BGA market is expected to see continued strong demand for high-end flip chip BGA substrates. So we will focus on timely supply of next-generation high multilayer large area embedded products for AI accelerators and server CPUs and scale up supply of our new products targeting big tech AI data center network. applications.

Lastly is the Optics Solutions division. Q1 revenue was KRW 1,075.6 billion, a roughly 15% increase Q-o-Q and 5% increase Y-o-Y. For IT camera modules, revenue increased with full-scale mass production of high-performance camera modules such as the 200 megapixel modules for the strategic customer and slim folded zoom.

For automotive camera modules, revenue increased with increased supply of camera modules to our global EV OEMs and adoption of our in-camera -- in-cabin cameras in a wider lineup of the Korean OEMs vehicle models.

Q2 IT camera module market is expected to see some seasonality, but demand for differentiating camera modules for flagships will continue both for Korean and global OEMs. So we will focus on timely mass production of high-performance camera modules such as next-gen high-image quality folded zoom and 200 megapixel OIS.

For automotive, we will focus on mass production of next-generation modules targeting the switch of the global EV platform and continue to increase supply to the Korean OEMs.

That completes the presentation on our Q1 results. And now our EVP, Taegon Lee, Head of Strategic Marketing, will talk about market trends and outlook by key product.

Good afternoon. This is Taegon Lee, Head of Strategic Marketing. I will go over the current market situation and outlook for MLCC, our substrates and camera modules, respectively.

For MLCC, in Q1 with overall MLCC demand maintained an increasing trend with MLCC demand relevant to SEMCO becoming even stronger, especially for premium MLCCs tied to AI servers driven by wider adoption of Agentic AI and automotive MLCC demand remaining solid around ADAS.

By application, industrial MLCC grew significantly both Q-o-Q and Y-o-Y, thanks to increased demand tied to AI server GPU and CPUs combined with increased demand for routers, switches and power modules for data centers with particularly drove up supply for the X6S high-capacitance MLCC.

For automotive MLCC, despite the impact of decreased finished car demand in Q1, our addressable demand increased especially around the global Tier 1 and ADAS applications. In the case of IT applications, despite the seasonal market demand decrease, we recorded revenue similar to the previous quarter, thanks to increased volume of high-capacitance MLCCs for the strategic customers' new flagship model.

To look at Q2 MLCC outlook, in Q2, our MLCC demand is expected to grow Q-o-Q across all applications. First, for industrial, supply is expected to get even tighter with data centers, power infrastructure becoming more advanced and MLCC content in AI servers increasing with greater AI server power consumption as well as continued growth in demand for high-end, high-reliability MLCCs.

Given that the next-generation AI server platform has higher power consumption, we launched a new 47-microfarad product, doubling the capacitance from our existing 22-microfarad product targeting GPUs and power modules. This has received great responses from our customers, who are eager to sign long-term supply contracts to secure stable supply.

Also, more AI servers are adopting the 800-voltage system typically used in EVs for better power efficiency, which is driving demand for the more expensive 1 kilovolt plus high-voltage MLCCs, and we are keen on capturing this demand.

Data centers are also adopting high-speed network equipment, the 800 gigabit and 1.6 terabit optic modules to handle greater traffic, and this is continuously driving demand for the 100 microfarad plus ultra-high capacitance 125-degree Celsius high-temperature MLCC demand, which we will also target to continue to increase our market share within the AI-related high-end MLCC market.

For automotive, global OEMs are launching new EV models and the sudden surge in international oil prices is driving higher electrification demand, including EVs. So Q2 automotive MLCC demand is expected to increase Q-o-Q. We are increasing supply of high-end MLCCs such as high-capacitance low ESL to meet latest ADAS requirements to major Tier 1 and SoC customers.

We are also strengthening our position in the automotive market with our 100-volt class, ultra-high capacitance MLCC needed for the 48-voltage electronic platforms and ultra-high-voltage MLCCs for the 800-voltage charging platforms, which are becoming adopted by more global OEMs.

Based on our solid partnership with key strategic customers, we will continue to sign more preemptive mid- to long-term binding volume contracts in Q2, as we have done in Q1, to lock in early volume visibility and build a sustainable growth engine.

For IT applications, despite the risk of [ set ] demand decreasing due to the so-called chipflation, we expect IT MLCC demand to increase in Q2 versus Q1 around high-end products. We will actively capture demand for high -- ultra-high capacitance MLCCs for flagship smartphones and focus on design-in of mid-voltage new MLCCs for the ultra-quick charging units to increase sales of high-end products.

We will also capture increasing demand for the low-ESL, low-profile MLCCs driven by new semiconductor packaging technology and drive revenue growth by increasing supply of small-sized high-capacitance MLCCs.

Regarding MLCC pricing, continued strong demand tied to AI servers has increased overall supply tensions. Also, raw material price increases is another factor to consider, and we will strategically respond to pricing while monitoring market situations.

Next is a look at the substrate markets. Q1 flip chip BGA market demand saw strong growth again, mainly around server CPUs and AI accelerators as customers' AI investment continued. And so our related revenue also increased significantly in Q1. However, the Q1 BGA market demand was weaker than Q4 due to seasonality and the memory supply issues for smartphone and PCs. However, our addressable demand grew in Q1 with increase of products such as SSD controllers.

Q2 FCBGA demand is expected to continue strong growth around AI applications and supply is expected to remain tight, leading to significant Q-o-Q and Y-o-Y growth.

We are expecting increase in revenue and profits as we continue pricing discussions with customers, considering the tight supply situation for FCBGA substrates and raw materials, increased supply of server and AI application substrates to existing customers and start mass production of new products for our big tech customers, which will further improve our product mix.

In addition to the large area high-multilayer substrates for server and AI applications, we're seeking growing demand for -- we are seeing growing demand for substrates with multi-core embedded technology, which is our strength and are needed to implement better performance. So we will focus on leveraging this strength to successfully start supply to big tech customers starting from Q2 and increase our synergies with our Component division.

For BGA, Q2 demand is expected to decrease Q-o-Q due to smartphone seasonality, coupled with memory supply issues. However, substrate demand for SSD controllers is expected to grow Y-o-Y, driven again by AI data center demand growth.

We will conduct pricing talks to reflect the raw material price increases and focus on increasing supply of substrates for high-end AP applications in Q2 and also focus on capturing demand of the growing SSD controller customers for data centers. We will also continue to expand into new applications and design-in activities, including preparing supply of MLCC embedded substrates for [ VPD ] to a new AI-related customer in the second half.

Lastly is a look at camera modules. Q1 IT camera module demand was affected by soft global smartphone demand due to increased memory prices, but our addressable demand increased Q-o-Q with the launch of our strategic customers' new flagship smartphone.

For automotive cameras, despite the decrease in finished vehicle demand, our addressable automotive camera demand increased with increased supply and mass production of new vehicle models by our key automotive customers.

Q2 IT camera demand is expected to slow down versus Q1 due to seasonality. And so we will focus on capturing opportunities created by wider adoption of folded modules across more handsets and on preparing the initial supply of camera modules for the new mobile phone scheduled for launch in Q3 by the strategic customer and other global customers.

We will also aim to improve [ AIS ], ASP and deliver high profit-driven growth by increasing share of high-end products such as continuous zoom, slim modules, large angle OIS and aperture.

Automotive camera demand is expected to increase Q-o-Q as we enter new model launch season of global OEMs. We will preemptively prepare for the future autonomous driving market with high-pixel heating cameras for next-generation autonomous driving platforms and by developing in module small-sized active cleaning technology to further strengthen our technology leadership.

For humanoid cameras, we continue to work with major global humanoid customers in developing high-resolution recognition modules, and we will focus on becoming an early leader in humanoid markets by securing small-sized thin camera technology for precision gripping motion.

[Operator Instructions] The first question will be provided by Giuni Lee from Goldman Sachs Securities.

I have two questions. The first question is about substrates. And the second question is MLCC.

During the shareholders' meeting, the AGM, the company had mentioned that the flip chip BGA demand for servers and data centers have gone above 50% or more of your production capabilities or expected that to happen. And also during April, there was media reports about possible price increases. Also, during the last call in January, therefore, you've shared your 2026 full year guidance. But at this point of the year, do you see any changes versus the guidance that you had provided earlier this year?

Second question is about the MLCC demand. We are seeing continued growth of MLCC demand tied to AI-related applications. And I think there is in the market expectations of long-term supply contracts or price increases that you mentioned during your presentation. So can you give us any comments or your insights regarding the overall current situation and outlook about MLCCs for AI applications?

To answer your first question about the substrates, regarding demand, demand for high-performance AI chips is rapidly increasing due to adoption of Agentic AI. And so we are also receiving requests from existing customers for more supply and the demand from the new customers starting supply from Q2 has already been upward adjusted from the original volumes. So at this point, the flip chip BGA total demand is indeed exceeding our production ability.

Regarding price increases, as you know, we are talking with our major customers about pricing to reflect the increased raw material prices such as gold and copper as well as the T-glass shortage as well as the overall tight supply situation.

Regarding the 2026 full-year guidance, while we are still cautious given potential impact from external factors, we still expect our gradual utilization to gradually increase, reaching full utilization in the second half. And especially with a strong increase in big tech and other key customers, we look forward to a significant revenue jump for our FCBGAs this year.

We will, at the same time, actively respond to demand by closely talking with customers and vigilantly manage risks by carefully monitoring market demand.

To answer your question about the MLCCs related with AI applications, as mentioned during the market outlook, the AI application-related MLCC demand continues to grow and supply-demand tensions are increasing in the market. AI big tech and other customers are engaging with us in talks about long-term supply contracts and such long-term supply contracts will give us a source of continuous revenue growth and a foundation for us to expand our business with a mid- to long-term perspective.

With greater GPU computing power and faster server network equipment, cutting-edge high-end MLCCs such as the 100-microfarad plus ultra-high capacitance and maximum 125-degree Celsius high-temperature MLCCs are where demand is growing strong tied to AI servers. These cutting-edge MLCCs require leading technology and also stable quality control capabilities. And therefore, only a few companies, key players, including SEMCO, can be the sources of these cutting-edge MLCCs.

In addition, major metallic and petrochemical raw material prices have been going up, increasing cost burdens. And we will, therefore, strategically respond to pricing by carefully monitoring market supply/demand situation as well as raw material price movements.

Given the expected increase in cutting-edge high-end MLCC demand for AI and servers, we will use our ultra-high capacitance lineup to capture customer demand, while at the same time, focus our development resources to quickly follow up with launches of next-generation high-end products. We are building a stable supply platform by preemptively securing capacity and we'll use this to further strengthen our lead in the AI server market.

The following question will be presented by Jong Wook Lee from Samsung Securities.

I have two questions regarding MLCC. First question is, can you follow up on your presentation and give more detailed data points about your Q1 MLCC shipment inventory and ASP results and also second quarter guidance?

The second question is we've recently heard through media reports that SEMCO has now entered in supplying MLCCs for aerospace applications. As you know, currently in the market, there is growing interest in the sector itself, aerospace. And so can you give us a bit more detail of the growth potential you're seeing of that MLCC market and what kind of benefits you are looking forward to?

To answer your first question about our first quarter MLCC data points and second quarter outlook, Q1 MLCC shipment increased Q-o-Q, thanks to increased industrial MLCC demand for AI server and data center power modules, also coupled with solid growth continuing from our automotive MLCCs. Blended ASP continues to increase with improved product mix around high-end industrial and automotive MLCCs. So revenue increased on a Q-o-Q basis and overall inventory slightly decreased in first quarter on a Q-o-Q basis.

In second quarter, strong demand for high-end MLCCs is expected to continue tied to AI servers and automotive MLCC demand is also expected to stay solid with wider ADAS adoption and EV demand supported by the recent higher oil prices. So overall, second quarter MLCC demand is expected to increase across all of our applications. And also shipment and blended ASP in second quarter are both expected to increase on a Q-o-Q basis.

To answer your question about our aerospace-related MLCC supply, aerospace-related MLCC market can be classified into two large parts. One is MLCCs that are used on terminals that are used on earth, and then there are MLCCs that go into the low orbit satellites themselves.

The MLCCs for the terminals are similar in specification to the -- those used in AI servers such as small size, high temperature and high capacitance. And so SEMCO is naturally participating as a major supplier in that space.

The low-orbit satellite uses more than 100,000 MLCCs, which is more than an EV, and requires high reliability. And so we are using our high reliability, high-specification MLCCs from our automotive lineup to supply to leading global customers. So we will focus on gaining a first-mover lead in the growing aerospace MLCC market and develop it into a mid- to long-term growth engine.

The following question will be presented by Bo Young Choi from Kyobo Securities.

I have two questions. First question is that during mid-April, there was media reports about SEMCO making large-scale investments in FCBGA capacity in Vietnam. We've already been told that you're expecting to be at full utilization in second half and that your capacity up to 2027 is already fully booked. So there are expectations for further capacity expansions. Can you give us your current thoughts and plans about capacity expansion?

Second question is going back to the March AGM, the company had mentioned projects such as the acceleration of robotaxi, humanoid market growing and also mass producing parts for humanoid starting from the second half. Relating with these new areas, can you give us your current progress update on the camera module business?

To answer your first question about our flip chip BGA capacity expansion plans with a strong surge in FCBGA demand from existing and new big tech data center customers and the capacity erosion that naturally happens with higher spec substrates, we are currently not able to sufficiently meet all of the customer requested volume with our current capacity.

In anticipation of this, we had already formed and launched the task force last year, and this task force has been carefully analyzing market situation as well as customer specification and volume requirements and also closely communicating with customers. And based on that, we have been carrying out supplementary and new capacity expansion investments.

On top of that, we are actively considering additional investments to increase next-generation production supply after 2027. And so we are prepared to actively respond to the demand for high-end package substrates tied to the rapidly increasing AI and data center applications, and we plan to continuously increase our FCBGA business scale.

To answer your question about the camera module business tied to these new areas, there is definitely accelerating change in the autonomous driving and humanoid markets. We're seeing commercial robotaxi services being launched in many places, thanks to advances in autonomous driving technology. And many companies are looking into different ways of adopting humanoid robots in the actual shop floor.

As a company with camera module know-how from our IT applications as well as internal core part technology, we will expand our lineup of high pixel sensing camera modules and further develop our specialized technology such as all-weather camera products. We are also focusing on leading next-generation humanoid camera module development and differentiating our core technologies.

Based on our automotive quality and global supply network, we are deepening our strategic cooperation with the global top-tier customers and in Q2, plan to supply camera modules for the new robotaxis and camera modules for humanoids in the second half. We will also prepare a new solution for the next-generation physical AI in time to preemptively respond to customers' new product needs and future markets.

The following question will be presented by S. K. Kim from Daiwa Securities.

I have two questions. The first question is about your CapEx plans this year. You've just mentioned you're considering additional CapEx and package substrate capacity expansions to meet the strong AI-driven demand growth. That probably implies a large change in your existing CapEx plan for 2026. Can you give us any updates on your CapEx plans this year?

Second question is about your future business results guidance. Despite the one-off expense that you recognized in Q1, still the company delivered better Q-o-Q and Y-o-Y business results in Q1, even though, yes, there is uncertainty related with the Middle East situation. Can you give us at this point, what you expect in terms of business results in Q2 and in the remainder of the year?

To answer your first question about our CapEx, because demand for MLCC and package substrates related with AI and server applications are rapidly growing above existing expectations, a prompt response to this growing demand is necessary at this point. And that's why we are making already active supplementary and new capacity investments for the AI server-related high-capacitance, high-spec MLCCs as well as the high-end FCBGAs for AI accelerators and network equipment.

We are also planning preemptive investments in new business areas such as silicon capacitors and glass substrate to continue this momentum of building core technology and business foundation.

And considering all of this, our investment CapEx this year is expected to more than double versus last year. And we are currently talking with customers about mid- to long-term supply volumes to actively respond to the AI data center-related demand. So our investments for the next 3-year period is also expected to increase greatly versus previous years.

To answer your question about our guidance, in Q1, despite the one-off, all of our divisions delivered Q-o-Q and Y-o-Y based improved better results, thanks to the strong demand tied to AI servers and ADAS and the strategic customers' flagship phone launch.

In second quarter, in Q2, MLCC and FCBGA supply is expected to become even tighter with AI server, network and automotive demand increasing continuously. We will increase supply of higher-margin, high-capacitance, high-temperature, high-voltage MLCCs for AI server, network and automotive applications and strategically respond on the pricing front to account for tighter supply and the raw material price increases and pursue also long-term supply contracts with key customers.

Specifically for flip chip BGA, we will increase supply of high-end products for AI accelerators and server CPUs and also continue talking with our customers about pricing to refresh the market situation. So overall, we expect second quarter to deliver again improved business performance on both Q-o-Q and Y-o-Y basis.

Regarding the second half of this year, while uncertainties remain high with the higher oil price and supply chain instabilities tied with the Middle East geopolitical risk and also fluctuations in exchange rates and raw material prices, the strong demand tied to AI, server, network and automotive is expected to continue regardless of these geopolitical factors, driven by increased AI data center investments and advances in the autonomous driving technology.

And so both MLCC and flip chip BGA markets are likely to see even tighter supply in the second half around the high-end products needed for AI and data centers. And also the effect of long-term supply contracts and ASP increases are expected to continue in the second half, driving further significant upside in our business results in the second half.

We will focus on further upgrading our business structure around AI server, automotive by strengthening high-end MLCC lineup for the AI and server as well as automotive applications, increasing flip chip BGA revenue tied to new big tech AI accelerators and data centers and increasing high-end high-reliability camera module supply for the automotive applications.

At the same time, we will thoroughly prepare for the mid- to long-term growth by securing core technology in new business areas such as silicon capacitors, glass substrates and robotic components and collaborate closely with global top-tier customers on developing commercial projects.

Lastly, I would like to comment that we will continuously monitor the external business environment and preemptively increase capacity to promptly respond to market and supply chain changes to do our best to deliver maximum business results.

Thank you. That completes our earnings conference call for '26 first quarter. If you have any further questions, please forward them to our IR team, and thank you very much for joining us.

Good afternoon. This is EVP, Dong Woo Lee, Head of IR and Planning team at Samsung Electro-Mechanics. Thank you for joining our 2025 Q4 Earnings Conference Call.

On today's call, I am joined by our CFO, Sung Jin Kim; EVP, Taegon Lee, who is the Head of Strategic Marketing; VP, Kyu-Taeck Park, Head of Support Team Component Division; Hong Jin Kim, Head of Support Team Package Solutions Division; and Hun-Jun Kim, Head of Support Team Optics Solutions Division.

We will start with a presentation of our 2025 Q4 company level and divisional business results, followed by market trends and outlook by product before taking your questions. First, a look at our 2025 Q4 results. Q4 revenue was KRW 2,902.1 trillion, which is approximately 0.5% increase Q-o-Q and 16% increase Y-o-Y.

The details regarding revenue increase, decrease factors by division will be explained later during the briefing on divisional results. Q4 operating profit was KRW 239.5 billion, approximately 8% decrease Q-o-Q and around 108% increase on a Y-o-Y basis. Q4 pretax profit was KRW 268.9 billion. Net profit was KRW 222.8 billion.

Next, in terms of our financials, as of end of Q4, total assets was KRW 14,595.9 trillion, which is a roughly 5% increase from end of Q3. To look at major financial indicators, liability to equity increased 2 percentage points to 49% from Q3's 47%. Debt to equity increased 1 percentage point Q-o-Q from 21% to 22%. Equity ratio was around 67%, which is a 1 percentage point fall from Q3.

Next are the divisional results and future outlook. First, the Component division. The Component division's Q4 revenue was KRW 1,320.3 trillion, which is roughly 4% decrease Q-o-Q, but a 22% increase Y-o-Y. Q4 revenue decreased due to seasonality, including year-end customer inventory adjustments, but AI-related revenue continued growth, driven by solid demand for AI, server and power applications.

The 2026 MLCC market is expected to enjoy solid demand for industrial and automotive MLCCs with continued AI infrastructure investments and wider adoption of ADAS and xEV. Accordingly, we will expand our AI-related high-end cutting-edge products targeting server and network equipment and strengthen our lineup of high-capacitant MLCCs for ADAS and high-voltage MLCC for xEV to increase industrial and automotive revenue.

Next is a look at our Package Solutions division. Q4 revenue was KRW 644.4 billion or roughly 9% Q-o-Q and 17% Y-o-Y increase. For Flip Chip BGA, revenue increase was driven by increased supply of large area, high multilayer server CPUs and AI accelerator substrates to our major big tech customers and increased supply of substrates for high-performance autonomous driving systems.

BGA revenue also increased with greater supply of mobile AP and SiP substrates for overseas customers. In 2026, the Flip Chip BGA market is expected to see solid demand for high-end FCBGA for AI, server and network applications driven by continued strong growth of the data center market. Accordingly, we will focus on increasing new server CPU substrates with differentiated embedding architecture and on-time supply of new products for AI accelerators and networks to new big tech customers.

Also, given that our production sites are expected to run at full utilization in the second half, we will look into capacity expansion plans for timely execution of investments. Last is the Optics Solutions division. The division's Q4 revenue was KRW 937.2 billion, roughly a 2% increase Q-o-Q and 9% increase Y-o-Y.

In IT camera modules, we started mass production of differentiating new camera modules for new flagship smartphones such as Slim folded Zoom for strategic customer and continuous Zoom and Super Macro for Chinese OEMs. For automotive camera modules, revenue increased, thanks to increased supply of global EV OEMs and our in-cabin camera modules being adopted in increased number of vehicle models by the Korean OEM.

Now in 2026, the IT camera module market is expected to see continued demand for higher-performance cameras as a way of differentiating high-end flagship smartphones, and we will secure customer-specific differentiated technologies such as slim optical Zoom and Iris in time to capture this demand.

In the automotive market, new applications such as advanced ADAS and humanoid are expected to increase, and we will focus on increasing supply of automotive specialty camera modules such as heating, water repellent coating, cleaning and also focus on securing next-generation technology for physical AI, such as high pixel for sensing and high reliability actuators.

That completes the presentation on our 2025, Q4 results. And now Taegon Lee, our Head of Strategic Marketing, will talk about market trends and outlook by key product.

[Interpreted] Yes. Good afternoon. This is Taegon Lee, Head of Strategic Marketing. I will share the current market situation and outlook for MLCC, substrate and camera modules, respectively. First, the MLCC. Q4 MLCC demand decreased slightly Q-o-Q due to year-end inventory adjustments in certain applications, including IT, despite the momentum of AI-related demand remaining solid.

However, demand increased on a Y-o-Y basis across all applications with particularly strong growth coming from MLCCs for AI and server applications. To look at MLCC demand by application, IT MLCC demand slightly decreased Q-o-Q due to inventory adjustments in certain applications such as PC and consumer electronics, despite the tailwind from the North American smartphone OEMs new model.

For industrial MLCC, despite the seasonality of certain applications such as base stations, server-related MLCC demand continued rapid growth driven by major big tech companies continued AI-related investments. Automotive MLCC demand also continued Y-o-Y growth supported by increased xEV sales in China and Europe.

Next is a look at the 2026 Q1 MLCC outlook. While global economic uncertainties continue due to supply chain shifts and geopolitical risks, the MLCC market is expected to maintain a structural growth trend. Despite some softness in IT set demand, IT MLCC demand is expected to remain similar to Q4 as high-end MLCC demand increases with strategic customers' flagship smartphone launch.

Industrial MLCC demand growth trends are expected to continue as AI-related customers adopt new architectures and the share of rack scale architecture servers increased in the cloud market, accelerating MLCC content growth even further. In particular, with a surge in usage of high-temperature, high-capacitance MLCC specialized for AI servers, supply is expected to be even tighter than last year, especially around the AI and server applications.

Lastly, for automotive MLCC, the Chinese government's extension of its vehicle trade-in subsidy and European environment-friendly automobile policies are expected to drive solid xEV and in turn, automotive MLCC demand. Furthermore, the self-driving vehicle market is expected to record significant growth, keeping momentum strong for high-end MLCCs.

Accordingly, for IT MLCC, we will actively expand sales of high effective capacitance MLCC where significant content per box increase is expected, driven by higher performance APs necessary for AI smartphones and strengthen customer proposal activity, including design-in activity for new medium voltage and low ESR products used for ultra-high-speed charging and power systems for flagship smartphones.

We will further also drive up share of high-end new product revenue by increasing supply of high-temperature, ultra-high capacitance products for memory chips, including silicon, which is in high demand. For industrial MLCC, we will be actively driving revenue by revenue increase of the high-end new products, which are positioned to benefit from the GPU customers' new architecture-based new product launch.

In particular, when it comes to new programs, we will develop rack-level design-in opportunities covering integrated GPU server network in addition to AI servers. We will also provide timely supply for the cloud customers' new proprietary solution program to lock in our volume. We also see demand for our cutting-edge products spreading to network and power applications. So we will preempt this opportunity to increase our supply, especially around the small-sized ultra-high capacitance high-temperature MLCCs.

For automotive, high-end MLCC demand continues to grow, supported by penetration of 800-volt charging platforms with continued development of EV technology and ADAS spreading to even the lower segments. So we will continue to strengthen our high-end MLCC lineup, continuing the C0G high-voltage, ultra-sallsize, ultra-high capacitance characteristics to fully meet the customer requirements.

Next is look at substrates. Q4 Flip Chip BGA market demand increased Q-o-Q with solid demand from high-spec FCBGA for AI accelerators and server CPU tied to Gen AI infrastructure as well as solid automotive demand around EVs, which more than offset its seasonal softness. Q4 BGA market demand slightly decreased Q-o-Q due to seasonality, but ARM CPU-related new product demand increased.

In 2026 Q1, FCBGA demand will be affected by seasonal softness and slowdown in PC replacement demand, but AI server and data center-related demand is expected to remain strong with growth momentum continuing, especially around AI accelerators and data centers. Now Q1 BGA demand is expected to decrease Q-o-Q due to soft demand for certain products, including SiP, but grow on a Y-o-Y basis, driven by increased ARM CPU and SSD controller-related demand.

Accordingly, for FCBGA, we will continue to drive market share gain in our existing big tech accounts by significantly increasing supply of FCBGA for growing AI accelerator and server CPU demand based on our track record of stable on-time delivery and high quality. We will also focus on breaking into new big tech accounts, leveraging synergies with our component division, which produces the silicon cap and other embedded parts and are embedding multilayer core package precision control technology to drive our business growth in 2026.

For BGA, we have been focusing on increasing market share of the North American key customers' upcoming new ARM CPU and capturing demand from the SSD controller customer in Korea and North America. We will also continue to drive new design-in activity, including preparing supply of the MLCC embedded substrates to new customers in Q2 and expanding the new lineup of AP participating products.

Lastly is the camera modules. In Q4, IT camera demand decreased due to overall year-end inventory adjustments despite the launch of new flagships by Chinese OEMs. On the other hand, automotive camera demand relevant to SEMCO increased, thanks to key customer supply volume increase and mass production of new models.

Looking towards Q1, IT camera demand is expected to remain soft, especially around the mass tier smartphones, but our addressable IT camera demand is expected to increase, thanks to strategic customers' new flagship smartphone launch effect. On the other hand, automotive camera demand is expected to decrease Q-o-Q due to the major North American customers' production volume adjustments in anticipation of new model launches, but we expect that to grow on a Y-o-Y basis.

Accordingly, we will focus on proposing customer-specific technologies such as folded zoom, aperture modules and wide-angle OIS ultra light and thin modules that enhance customers' brand value with differentiated user experience and drive high-end revenue. We will also focus on successful launch of the new North American customers business to add a new engine for future growth.

For automotive cameras, we will focus on expanding heating solutions for advanced self-driving performance, internalizing small-sized active lens cleaning technology and supplying modules for the in-cabin cameras with our high-pixel lenses to further strengthen our technology leadership.

For humanoid cameras, we are currently in development with major humanoid global companies using our differentiated core technologies, including low light performance enhancing lens and high-reliability shock-resistant actuator technology and long-distance high-precision infrared 3D sensing technology and aim to become a first mover in next-generation physical AI robot market. Thank you.

[Interpreted] [Operator Instructions] The first question will be provided by Hyun Ji Cho from DB Securities.

[Interpreted] I have 2 questions regarding your MLCC business. First of all, can you share with us your Q4 MLCC shipment inventory ASP as well as your outlook on these data points for Q1?

Second question is about MLCC utilization. It appears your Q4 MLCC utilization increased on a Y-o-Y basis. Can you give us a bit more color and detail about your utilization for MLCC? Also, can you share your outlook for MLCC utilization this year and how you plan to manage your capacity?

[Interpreted] To answer your first question, which was about our Q4 MLCC shipment inventory ASP and Q1 outlook. First of all, overall, Q4 MLCC shipment decreased on a Q-o-Q basis due to seasonality including some year-end inventory adjustments happening at our customers' side. But AI-related shipments, including for servers remained solid throughout Q4.

And so overall -- and also overall inventory increased slightly in Q4. Blended ASP in Q4 increased on a Q-o-Q basis with a higher mix of high-end industrial and automotive MLCCs. Looking towards Q1, shipment is expected to remain similar to Q4 with softness in certain IT set demand such as smartphones and PCs. But blended ASP is expected to increase in Q1 on a Q-o-Q basis with the strategic customers' new model launch and the increased demand for AI server or automotive-related high-end MLCC.

[Interpreted] To answer your question about our MLCC utilization and capacity operation plans during Q4, shipment increased on a Y-o-Y basis at a double-digit rate with strong server and automotive demand supporting the shipments. And our utilization in Q4 also improved at a meaningful level.

Looking towards 2026, global big tech companies' AI-related investments is likely to continue. And with ADAS and xEV penetrating -- penetration increasing within the auto market, MLCC demand this year is expected to remain solid based on both pillars, one being AI, the other automotive. And so our utilization this year is also expected to remain at high levels.

As you know, we have been increasing CapEx from last year to meet this growing demand, and we have also been preemptively preparing our supply capabilities, including further enhancing our productivities. We will continue to carefully watch customer trends and overall market demand and maintain our stable supply capabilities.

The following question will be presented by Junseo Park from Mirae Asset Securities.

[Interpreted] My first question is about the Flip Chip BGA. Looking at your Flip Chip BGA business, we are expecting that new big tech accounts will be secured, that your capacity will be fully sold out until 2027. And you've just shared that you're expecting your second half capacity to be running at full utilization.

These are all very good news. And in that context, can you give us a bit more detail of your Flip Chip BGA business outlook for 2026? And if the demand for Flip Chip BGA remains so strong for some time, there may be a need for additional capacity expansions. Can you share with us any plans or what you're looking into in terms of additional CapEx into capacity?

My second question is about your MLCC. MLCC demand continues to remain quite strong, especially around your high-end AI and automotive applications. And not only SEMCO, but other companies' utilizations are appearing to stay at high levels, and this is driving up market expectations for the MLCC business results this year.

With that expectation growing, can you share your company business outlook for 2026 MLCC.

[Interpreted] To answer your first question about our Flip Chip BGA business. First to look at our 2025 last year business, Flip Chip BGA revenue increased significantly versus previous year, thanks to, first, the strong demand for high-performance chips driven by hyperscaler investments in data centers and also global big tech companies proprietary chip adoption increasing.

Looking at this year, we expect Flip Chip BGA capacity consumption will continue to increase with a trend of large area, high multilayer substrates to support the larger number of semiconductors as well as the growing technical difficulty levels of the Flip Chip BGA itself. And so we continue to receive supply increase requests from our existing customers and also supply requests from new big tech accounts.

Our Flip Chip BGA is expected to approach full utilization later this year, and we will go through capacity expansion, if necessary based on customer request and supply-demand situation to meet customer demand on time and continue the Flip Chip BGA revenue growth trend.

[Interpreted] To answer your second question, which was about our MLCC business outlook for this year, in 2026, the MLCC market is expected to grow in all areas, including industrial and automotive due to the factors that we have explained before.

In order to strengthen our leadership in growth markets of AI-related servers, network and power applications, we have been launching high-temperature, high-capacitance, high-end MLCCs at the right time, and we continue to expand, for example, in the 1 kilovolt plus high-voltage lineup to meet the higher power input voltage requirements of the higher-performing AI servers.

For automotive, we plan to increase revenue by using, first of all, our existing lineup of high-capacitance MLCC for ADAS and high-voltage MLCC for xEV, while also actively driving customer diversification. For IT MLCC, we will focus on solidifying our leadership also in the volume market by enhancing our manufacturing competitiveness with better production yield and productivity, while continuing to win in the high-end market using our cutting-edge products. So overall, our aim for 2026 for MLCC is to continue and deliver another year of revenue growth that outpaces market.

[Interpreted] The following question will be presented by Shawn Kim from Kiwoom Securities.

[Interpreted] My first question is about camera modules. I think there are some concerns about the possible negative effect of the increasing memory prices may have on IP camera modules. But on the other hand, I think there's growing interest into the autonomous driving or robot and other physical AI applications for your camera business. With that in mind, can you share your business outlook for camera modules in 2026?

Second question is about your new business, especially the glass substrates. We are hearing that you have been, for example, making investments and going into partnerships with and pursuing a joint venture related with glass substrate business, for example, with companies that have expertise in plating or surface treatment. So it seems that your preparations of the glass substrate business is picking up speed faster than what the market is expecting.

Can you give us a bit more detail of what your business development efforts currently are at and your outlook for the glass substrate business?

[Interpreted] To answer your first question, yes, higher memory prices may pose market uncertainty such as smartphone set demand volatility. But when it comes for the camera modules, our camera modules, which are targeting flagship smartphones, we expect positive impact will continue with growing demand of differentiating camera modules such as continuous zoom, slim folded camera modules and large angle OIS.

We will focus on, therefore, strengthening our technology leadership by developing customer-specific differentiating technologies and preemptively developing these leading technologies. For automotive cameras, we will focus on increasing supply of automotive specialized products such as high pixel sensing or heating to capture the increasing autonomous driving-related demand and also drive business expansion using our stable quality competitiveness and global supply network.

For humanoid and other new applications, we are strengthening strategic collaboration and designing together with top-tier customers, and we will focus on securing next-generation technology for robotic applications on time, such as high reliability, shock-resistant AF actuators and long-range 3D sensing to gain first-mover advantage and deliver specific revenue in this growing physical AI market.

[Interpreted] Now to answer your question about our glass substrate business, as you know, we launched our pilot line in 2025 to build glass substrate as a new generation, new business for us -- next-generation new business for us. And we have been promoting our glass substrates to various big tech customers through core technology development and sampling.

Currently, we are engaging several projects. We are engaging customers in several projects that are currently underway. We are also currently developing core material, including glass etching and plating solutions together with Korean and overseas partners. And as you mentioned, we have signed an MOU to study the possibility of establishing a joint venture last quarter to secure technology competitiveness and prepare for mass production on time.

We hope to complete the joint venture establishment within the year. Our aim regarding our glass substrate business is to complete a glass substrate supply chain early on and to gain early market lead in glass substrates by satisfying the needs of key customers that are already working with us.

[Interpreted] The following question will be presented by Kango Park from Daishin Securities.

[Interpreted] I have 2 questions. First question is about your CapEx outlook for 2026, given that your MLCC utilization is quite high, and you're expecting Flip Chip BGA to reach full utilization later this year. Also, you're continuing to have strong demand from the automotive and humanoid-related cameras. This all indicates a possible CapEx increase. How much of a CapEx increase are you expecting this year on a Y-o-Y basis?

Second question is about your business outlook for first quarter and full year 2026. When we look at Q4 results, it's explained mainly by improved mix and utilization for the MLCC and also increasing demand for the Flip Chip BGA from the big tech accounts. This probably will continue until the first and second half of this year. With that in mind, what is your outlook for your business Q1 and full year 2026?

[Interpreted] To answer your question about our CapEx, as you know, we have been continuously making investments around the high-growth, high-end areas such as AI, server and automotive. In 2026, we are planning to make investments in line with customer demand. And this year, CapEx is expected to increase versus last year on a Y-o-Y basis, especially given the plan to construct new overseas plant to gain high-end MLCC capacity, including automotive MLCC.

The expansion of the high-end package substrates for AI and server and also possible investments in North America for EV and humanoid-related camera demand. Regarding new business, investments will also be made to secure key technologies and business foundations, including in glass substrates and other new business areas.

And so going forward, we will make investments for capacity expansion around high-growth areas such as AI server and automotive as well as new future growth areas in order to drive our continuous momentum of growth.

[Interpreted] To answer your question about our full year outlook and Q1 outlook for this year. First, to start with our Q1 outlook. While some seasonal softness is expected in certain IT set demand, the strategic customers' upcoming flagship smartphone launch and continued growth of AI server and automotive applications is expected to drive high-end MLCC, package substrate and camera module supply and to -- and we are expected to deliver both Q-o-Q and Y-o-Y base growth in Q1.

Looking for the full year 2026, while external uncertainties such as global trade disputes and exchange rates, commodity price fluctuations will likely to continue, strong AI server demand from AI infrastructure investments is likely to continue again this year, and automotive market growth is also expected to continue due to the accelerated increase of electronic content driven by ADAS and autonomous driving.

So for MLCC, supply is expected to remain tight, and we will use our preemptively secured industrial and automotive MLCC capacity to actively respond to large-sized high-capacitance product demand such as from AI servers and ADAS to drive business performance this year. For package Flip Chip BGA, we aim to deliver significant revenue growth around AI and server applications by expanding AI server and network-related supply to existing big tech accounts, while also breaking into new AI accelerator-related big tech customers this year.

For camera modules, we will focus on improving business results by expanding supply of IT, automotive, high-end differentiating camera modules and also building strategic partnerships with global customers for new applications, including humanoids and robotics. And so overall, this year, our goal is to raise our business results to the next level, while building our existing business and also focusing on developing new business opportunities such as glass substrates and robotics.

[Interpreted] This completes our earnings conference call. If you have any further questions, please forward them to our IR team. Thank you very much.