Samsung Electro-Mechanics will pull the plug on its high density interconnection (HDI) business by shutting down its HDI substrate plant in Kunshan, China. The company plans to concentrate its business capabilities on new growth areas such as multilayer ceramic capacitors (MLCCs).
Samsung Electro-Mechanics announced on Dec. 12, that it will suspend production and sales activities of Kunshan Samsung Electro-Mechanics and dispose of its assets. The Chinese subsidiary has steadily suffered deficits due to rising labor costs. Samsung Electro-Mechanics also executed a capital increase on the day to repay the subsidiary’s borrowings and secure funds for its liquidation.
Samsung Electro-Mechanics’ Substrate Solution Division, which produces HDI substrates, recorded deficits from 2014 to 2018, and the proportion of its sales in the company's total sales fell below 20 percent for the first time in 2018. Furthermore, Samsung Electronics' share of the Chinese smartphone market fell to less than 1 percent, making it difficult for Samsung Electro-Mechanics to make a profit in the Chinese market.
Samsung Electro-Mechanics is reorganizing its overall HDI substrate business by moving production facilities in Busan to Vietnam.
Other Korean producers of HDI substrates are also under pressure to restructure their HDI businesses. LG Innotek has already put a halt to its HDI substrate production line in Cheongju, Korea and plans to integrate the facilities with its plant in Gumi, Korea.