Samsung Electro-Mech (009150.KS) Q1 2026: Non-Samsung Surges 24%
94% of Samsung Electro-Mechanics' quarterly revenue growth came from outside the Samsung group, even as a one-off Supreme Court labor ruling absorbed ₩71.4 billion of operating expense.
Source: Quarterly Report — Filed May 2026 with DART | Consolidated Financial Statements | Unit: ₩ billions
Samsung Electro-Mechanics crossed quarterly revenue of ₩3 trillion for the first time in company history, posting ₩3,209.1 billion in Q1 2026 (+17.2% YoY). Of the ₩470.5 billion of incremental revenue, ₩442.1 billion — or 94% — came from non-Samsung customers, dropping Samsung Electronics' share from 33.6% to 29.6% in a single year. Operating profit grew 39.9% to ₩280.6 billion despite a ₩71.4 billion charge tied to a Korean Supreme Court ruling on average wage scope; stripping out that one-time labor charge, adjusted operating profit was roughly ₩352.0 billion and adjusted operating margin was 10.97% — more than 200 basis points above the headline 8.74%. Net income climbed 78.5%, but more than half of the spread versus operating profit growth came from a ₩64.1 billion net swing in FX-related items rather than core operations.
Balance Sheet
Major asset accounts
| Item | Dec-2025 (₩ trillion) | Mar-2026 (₩ trillion) | Change |
|---|---|---|---|
| Cash and cash equivalents | 2.70 | 3.24 | +20.1% |
| Trade and other receivables | 1.86 | 2.07 | +11.6% |
| Inventories | 2.41 | 2.55 | +5.6% |
| Property, plant and equipment | 6.22 | 6.47 | +3.97% |
| Intangible assets | 0.15 | 0.16 | +2.6% |
| Right-of-use assets | 0.12 | 0.13 | +4.7% |
| Net defined benefit asset | 0.28 | 0.17 | -39.3% |
| Total assets | 14.60 | 15.66 | +7.3% |
Total assets grew ₩1,064.5 billion in a single quarter. Decomposed into the five largest contributors, the move came from cash (+₩542.1 billion), receivables (+₩215.8 billion), inventories (+₩135.6 billion), PP&E (+₩247.1 billion), and a sharp ₩110.5 billion decline in the net defined benefit asset. Two of those items deserve closer attention.
The Supreme Court average-wage ruling hit the balance sheet through the pension account. The net defined benefit asset fell from ₩280.7 billion to ₩170.2 billion, and the company explicitly stated in its notes that "the impact of the Korean Supreme Court ruling on the scope of average wages on defined benefit obligations, amounting to ₩71.4 billion, was recognized in the current quarter." The same charge flowed through the income statement as employee benefits, suppressing operating profit by an equivalent amount.
PP&E grew on heavy front-loaded capex. Quarterly capital spending of ₩254.8 billion drove the ₩247.1 billion increase in PP&E, with disclosed segment-level capex split as Components ₩154.6 billion (75.8%), Package Solutions ₩21.1 billion (10.3%), Optics ₩16.8 billion (8.2%), and R&D infrastructure ₩11.4 billion (5.6%). More than three-quarters of new investment went into MLCC capacity expansion. It is notable that Package Solutions — the segment whose operating profit jumped 2.4× this quarter — received only a modest share of new investment; capacity bottlenecks in already-tight Components were prioritized first.
Retained earnings declined from ₩2,782.2 billion to ₩2,622.8 billion, a ₩159.4 billion drop driven by [+ Q1 controlling-interest net income ₩249.2 billion − ₩177.7 billion year-end dividend − ₩230.6 billion transfer to discretionary reserves]. Reserves accordingly rose from ₩4,282.8 billion to ₩4,513.4 billion. Treasury shares were unchanged at 2 million common and 53,430 preferred; no buybacks or cancellations occurred during the quarter.
Debt structure: financial vs operating liabilities
| Category | Dec-2025 (₩ trillion) | Mar-2026 (₩ trillion) | Change |
|---|---|---|---|
| Financial liabilities | |||
| ㄴ Short-term borrowings | 2.00 | 2.45 | +0.44 |
| ㄴ Long-term borrowings | 0.19 | 0.20 | +0.01 |
| ㄴ Current + non-current lease liabilities | 0.085 | 0.089 | +0.003 |
| Subtotal | 2.28 | 2.74 | +0.46 |
| Operating liabilities | |||
| ㄴ Trade and other payables | 1.41 | 1.60 | +0.19 |
| ㄴ Advances from customers (current) | 0.21 | 0.21 | +0.01 |
| ㄴ Long-term advances from customers | 0.53 | 0.61 | +0.09 |
| ㄴ Provisions (warranty etc.) | 0.006 | 0.008 | +0.002 |
| ㄴ Refund liabilities | 0.020 | 0.023 | +0.003 |
| ㄴ Net defined benefit liability | 0.040 | 0.043 | +0.002 |
The maturity profile of short-term borrowings is heavily front-loaded: ₩1,880.9 billion (76.6%) of the ₩2,455.5 billion principal is due within three months, with the remaining ₩574.7 billion (23.4%) maturing between three months and one year. Sensitivity of pre-tax income to a 100bp move in variable-rate borrowings of ₩741.5 billion is roughly ±₩7.4 billion — modest in absolute terms — but the rollover itself is a recurring quarterly exposure. Simple division of Q1 interest expense (₩29.6 billion) by average borrowings (₩2,418.9 billion) implies an average borrowing rate of approximately 4.9%.
Among operating liabilities, long-term advances from customers is the standout: up ₩87.9 billion to ₩613.7 billion. The notes disclose that USD 575 million in advances has been received under long-term supply agreements with major customers, with JPMorgan Chase and others providing performance guarantees totaling ₩860.2 billion. Against a quarterly revenue base of ₩3.2 trillion, advances now equal roughly one month of sales — a quantitative anchor for forward revenue visibility.
Net debt (payables + borrowings + other liabilities − cash, on the company's own definition) rose ₩100.6 billion to ₩1,204.3 billion. With equity expanding in parallel from ₩9.80 trillion to ₩10.09 trillion, the net debt/total capital ratio climbed only 54 basis points from 10.12% to 10.66%.
Capital quality
Paid-in capital (capital stock ₩388.0 billion + paid-in surplus ₩1,053.5 billion = ₩1,441.5 billion) is identical to the prior period. True internal retention is better measured by reserves plus retained earnings: ₩4,513.4 + ₩2,622.8 = ₩7,136.2 billion, up ₩71.2 billion from ₩7,065.0 billion despite the ₩177.7 billion dividend payment.
The composition of accumulated other comprehensive income (₩1,383.4 billion) breaks down into ₩806.4 billion of cumulative FVOCI gains (₩278.5 billion unrealized + ₩527.9 billion realized), ₩577.2 billion of foreign-operation translation gains, and a negligible ₩(0.1) billion equity-method capital adjustment. The dominant quarterly mover was foreign-operation translation, which rose from ₩380.7 billion to ₩577.2 billion — a ₩196.5 billion gain reflecting won weakness applied to ₩3,735.3 billion of USD-denominated foreign net assets. That means roughly 67% of the ₩293.7 billion increase in shareholders' equity during the quarter came from currency translation, exposing book value to FX reversal risk.
Income Statement
Core profit and loss
| Item | Q1 2025 (₩ billions) | Q1 2026 (₩ billions) | YoY |
|---|---|---|---|
| Revenue | 2,738.6 | 3,209.1 | +17.2% |
| Cost of goods sold | 2,229.8 | 2,548.8 | +14.3% |
| Gross profit | 508.8 | 660.3 | +29.8% |
| Gross margin | 18.58% | 20.58% | +2.00pp |
| SG&A | 308.3 | 379.7 | +23.2% |
| Operating profit | 200.5 | 280.6 | +39.9% |
| Operating margin | 7.32% | 8.74% | +1.42pp |
| Pre-tax income | 173.8 | 316.4 | +82.1% |
| Net income | 141.6 | 252.7 | +78.5% |
| Basic EPS — common (₩) | 1,770 | 3,298 | +86.3% |
Revenue +17.2% → gross profit +29.8% → operating profit +39.9% — the staircase pattern of accelerating growth at each margin level is the textbook fingerprint of operating leverage. The ₩3,209.1 billion absolute revenue figure crossed the ₩3 trillion quarterly threshold for the first time in company history, which Korean financial media flagged as the defining headline of the print.
But the operating-profit line conceals a more interesting structure underneath. The Supreme Court ruling on the scope of "average wages" — a Korean labor law concept that affects pension obligations and severance calculations — landed in this quarter. Note 16 to the financial statements explicitly states that "the impact of the Korean Supreme Court ruling on the scope of average wages on defined benefit obligations, amounting to ₩71.4 billion, was recognized in the current quarter." This charge sits in employee benefits within the cost-by-nature schedule: total employee benefits of ₩683.5 billion rose ₩109.5 billion (+19.1%) versus Q1 2025, of which ₩71.4 billion is the one-off ruling impact. Adjusted for the ruling, normalized employee benefits grew only ₩38.1 billion (+6.6%).
Stripping the ruling charge out, adjusted operating profit was approximately ₩352.0 billion and adjusted operating margin was 10.97% — meaning the company absorbed a Supreme Court labor charge equivalent to roughly a quarter of operating profit and still printed a headline margin of 8.74%. Underlying margin recovery is about 200 basis points stronger than the headline number suggests.
Cost structure — raw materials +37.6% behind the gross margin expansion
| Cost line | Q1 2025 (₩ billions) | Q1 2026 (₩ billions) | YoY |
|---|---|---|---|
| Raw materials and merchandise used | 998.1 | 1,373.7 | +37.6% |
| Employee benefits | 574.0 | 683.5 | +19.1% |
| Depreciation and amortization | 221.0 | 241.1 | +9.1% |
| Outsourced processing | 83.2 | 103.8 | +24.8% |
| Service fees | 57.0 | 71.2 | +25.0% |
| Other expenses | 480.6 | 554.8 | +15.4% |
| Change in finished goods and WIP | 127.5 | (99.5) | — |
| COGS + SG&A total | 2,538.1 | 2,928.5 | +15.4% |
Raw materials usage jumped 37.6% — more than double the revenue growth rate. The fact that gross margin still expanded 200bp signals that not all of that incremental raw material flowed directly into COGS; a portion was absorbed into work-in-progress and semi-finished inventory (inventory +₩135.6 billion, "change in finished goods and WIP" of −₩99.5 billion, where a negative figure denotes an inventory build). Closing the quarter with elevated inventory creates two opposing readings: either pre-positioned safety stock against firm forward demand, or a potential cost-of-goods overhang for next quarter. The next print will adjudicate between them.
Within SG&A, ongoing R&D expense was ₩193.7 billion, up 35.6% from ₩142.8 billion a year earlier. R&D intensity (R&D/revenue) has now risen three years in a row: 6.5% in 2024 → 7.0% in 2025 → 7.2% in Q1 2026. The pipeline disclosed in the filing — FCBGA substrates for AI accelerators, FCBGA for server CPUs, ultra-high-voltage MLCCs for xEV applications — explains why R&D is compounding at roughly twice the pace of revenue.
Segment breakdown — Package Solutions doubled profit, Components remains the margin anchor
| Segment | Q1 2025 revenue (₩ trillion) | Q1 2026 revenue (₩ trillion) | Revenue YoY | Q1 2025 OP (₩ billions) | Q1 2026 OP (₩ billions) | OP YoY | Q1 2026 OPM |
|---|---|---|---|---|---|---|---|
| Components | 1.22 | 1.41 | +15.8% | 133.5 | 164.9 | +23.5% | 11.71% |
| Package Solutions | 0.50 | 0.73 | +45.2% | 22.7 | 55.3 | +143.2% | 7.62% |
| Optics Solutions | 1.02 | 1.08 | +5.1% | 44.3 | 60.4 | +36.3% | 5.61% |
| Total | 2.74 | 3.21 | +17.2% | 200.5 | 280.6 | +39.9% | 8.74% |
Package Solutions is the epicenter of the quarter. Revenue grew 45.2% and operating profit jumped 143.2%, lifting segment OPM from 4.55% to 7.62% in a single quarter — a 307bp move. Semiconductor package substrate ASP rose 14.4% while BGA market share held flat at 15%, meaning the price increase was absorbed cleanly into margin without share loss. Management's segment commentary describes "a shift in product portfolio toward high-value, large-area, high-layer-count server substrates," and the R&D registry for both 2025 and 2026 lists "FCBGA for AI accelerators," "high-value FCBGA for server CPUs," and "ultra-high-performance server CPU FCBGA with chiplet technology" as active programs. The volume ramp of AI and server substrate products is now reflected in segment profitability.
Components remains the structural cash cow. Revenue share of 43.9% is the largest of the three segments, and operating profit share — on the company's own segment disclosure — is 58.78%, meaning Components carries more than half of group-level margin on its own. The 11.71% segment OPM is more than double both Package Solutions (7.62%) and Optics (5.61%). MLCC market share held at 23% for the third consecutive year while both price (+8.1%) and volume rose.
Optics Solutions posted the slowest revenue growth at 5.1% but the second-strongest operating profit growth at 36.3%. Camera module market share recovered from 9% in 2025 to 11% in Q1 2026 — a return to the 2024 level — and ASP rose 2.3%. That said, segment OPM of 5.61% is the lowest among the three businesses, reflecting the structural margin pressure that continues to characterize the camera module market.
The net income premium — FX explains more than half of the gap
The 38.6 percentage point gap between operating profit growth (+39.9%) and net income growth (+78.5%) was created almost entirely in the non-operating items, with FX-related lines as the dominant driver. Decomposed from note 21-2 of the financial statements:
| Item | Q1 2025 (₩ billions) | Q1 2026 (₩ billions) | Change (₩ billions) |
|---|---|---|---|
| FX translation gains | 19.2 | 119.5 | +100.3 |
| FX transaction gains | 32.6 | 59.2 | +26.6 |
| FX translation losses | (32.2) | (77.1) | (44.9) |
| FX transaction losses | (36.0) | (53.9) | (17.9) |
| Net FX impact | (16.3) | +47.7 | +64.1 |
| Gain on disposal of PP&E | 0.1 | 0.4 | +0.3 |
| Other (miscellaneous gains/losses, donations) | 0.4 | 0.8 | +0.4 |
Of the ₩111.1 billion increase in net income, ₩64.1 billion — roughly 58% — came from the change in net FX impact. That means nearly half of the quarter's bottom-line move was a one-time function of won weakness against the dollar, and a reversal in the currency pair would push next-quarter earnings in the opposite direction by a similar magnitude. The company's USD-denominated monetary asset base of ₩3,735.3 billion (99% of total foreign monetary assets of ₩3,767.0 billion) sets the size of that recurring exposure.
Cash Flow
| Item | Q1 2025 (₩ billions) | Q1 2026 (₩ billions) | Change (₩ billions) |
|---|---|---|---|
| Cash from operations | 314.6 | 478.9 | +164.3 |
| ㄴ Cash generated from operations | 343.5 | 515.6 | +172.1 |
| ㄴ Interest received | 13.8 | 18.0 | +4.3 |
| ㄴ Income taxes paid | (42.6) | (54.7) | (12.0) |
| Cash used in investing | (176.0) | (263.3) | (87.4) |
| ㄴ Purchases of PP&E (capex) | (177.4) | (254.8) | (77.4) |
| ㄴ Purchases of intangible assets | (11.8) | (10.5) | +1.3 |
| ㄴ Government grants received | 9.6 | 9.5 | (0.1) |
| Cash from financing | 388.8 | 309.7 | (79.1) |
| ㄴ Net short-term borrowings | 457.7 | 347.0 | (110.7) |
| ㄴ Lease payments + interest paid | (32.0) | (37.3) | (5.3) |
| FX effect on cash | 1.4 | 16.8 | +15.4 |
| Ending cash and equivalents | 2,542.3 | 3,243.3 | +701.0 |
Free cash flow = operating cash flow − capex = ₩224.1 billion, up 63.3% from ₩137.2 billion in Q1 2025. Operating cash flow grew faster (+52.2%) than operating profit (+39.9%), indicating that earnings quality improved alongside earnings growth. The operating cash flow to net income ratio of 1.90× sits comfortably above the normalized threshold of 1.0×. The usual caveat applies: Q1 carries strong seasonality in receivables collection and payables timing, so a single-quarter ratio should not be naively annualized.
Capex intensity (capex/revenue) of 7.94% in the quarter is not trivial. Of the ₩254.8 billion Q1 capex, ₩203.9 billion (80%) was facility investment, of which 76% was directed at Components (MLCC) capacity expansion. The company describes capital allocation as "flexibly executed in light of financial position and market conditions," but the fact that Package Solutions delivered the 2.4× profit move while new capacity dollars went disproportionately to Components is a quantitative tell on internal capacity priorities.
Financing cash flow is dominated entirely by net short-term borrowings of ₩347.0 billion — gross new borrowings of ₩2,059.1 billion offset by repayments of ₩1,712.1 billion, a rolling structure characteristic of working-capital and capex bridge financing. Interest paid during the quarter was ₩29.6 billion, up 17.5% from ₩25.2 billion a year earlier.
Key Findings
Customer diversification has appeared in the numbers for the first time. The most structurally important shift this quarter is in the customer base.
| Category | Q1 2025 (₩ billions) | Q1 2026 (₩ billions) | Change (₩ billions) | YoY |
|---|---|---|---|---|
| Samsung Electronics and subsidiaries | 921.2 | 949.6 | +28.4 | +3.1% |
| Non-Samsung | 1,817.4 | 2,259.5 | +442.1 | +24.3% |
| Total revenue | 2,738.6 | 3,209.1 | +470.5 | +17.2% |
| Samsung revenue share | 33.6% | 29.6% | — | -4.0pp |
Samsung group revenue grew only 3.1% during the quarter, while non-Samsung sales jumped 24.3%. The non-Samsung share expanded from 66.4% to 70.4%, dropping Samsung's customer concentration from 33.6% to 29.6% — a four-percentage-point shift in a single year. Of the ₩470.5 billion in total revenue growth, ₩442.1 billion (94.0%) came from non-Samsung customers. The customer roster disclosed in the filing for the relevant geographies — TSMC, Google, Tesla, Bosch, Continental, Intel, Xiaomi — combined with the Package Solutions AI accelerator and server CPU wins, plus expansion of Optics shipments to Chinese OEMs, indicates the quantitative source of the diversification. One quarter is not yet a trend; whether this mix shift sustains into the next print is the critical verification point.
Regional revenue mix — China and Southeast Asia carry 70% of sales.
| Region | Q1 2026 revenue (₩ billions) | Share |
|---|---|---|
| Korea (domestic + exports) | 922.3 | 28.7% |
| China | 1,176.2 | 36.7% |
| Southeast Asia | 864.8 | 26.9% |
| Americas | 125.0 | 3.9% |
| Europe | 100.9 | 3.1% |
| Japan | 20.0 | 0.6% |
Production is distributed across Vietnam, the Philippines, and China (Tianjin and Shenzhen), so the region where revenue is booked does not necessarily correspond to the location of the end customer. Among the consolidated subsidiaries, total revenue of ₩3,617.5 billion includes Vietnam at ₩866.7 billion, Tianjin at ₩753.7 billion, and Shenzhen at ₩883.9 billion as the top three by single-subsidiary revenue. The Vietnam entity, which manufactures camera modules and semiconductor substrates, generated ₩39.2 billion of quarterly net profit — the single largest profit contributor among subsidiaries.
R&D intensity continues to climb. Ongoing R&D within SG&A reached ₩193.7 billion in Q1, up 35.6% year-over-year. R&D-to-revenue has risen three years running: 6.5% in 2024 → 7.0% in 2025 → 7.2% in Q1 2026. The active development programs disclosed in the filing — FCBGA for AI accelerators, FCBGA for server CPUs, ultra-high-voltage MLCCs for electric vehicles (1,000–1,250V), and the world's first 200-megapixel folded OIS module — cluster cleanly around two structural growth axes: AI/server and automotive electronics. Spending at twice the revenue growth rate, with new product ramps already visible in segment margins, signals a working revenue–R&D–margin flywheel rather than open-ended cost accumulation.
FX is structurally embedded in both P&L and book value. The company holds ₩3,767.0 billion of foreign currency monetary assets, of which 99% (₩3,735.3 billion) is USD-denominated. Sensitivity to a 5% move in USD alone is ±₩15.3 billion on pre-tax income; sensitivity across all foreign currencies is ±₩6.3 billion, because USD assets exceed USD liabilities while JPY, PHP, and VND positions are net liabilities and partially offset. Within shareholders' equity, the ₩196.5 billion translation gain that drove 67% of the quarterly equity expansion is a non-cash mechanical adjustment that will reverse if the won strengthens against the dollar.
Contingent commitments and contract guarantees. The company has received USD 575 million in advances under long-term supply agreements with major customers, with JPMorgan Chase and other banks guaranteeing performance obligations of ₩860.2 billion. Separately, the company maintains general credit facilities totaling USD 2,166 million plus RMB 4,212 million (₩2,259.5 billion equivalent) with Bank of America and other financial institutions. No material litigation or tax dispute disclosures appear in the filing. The ₩71.4 billion Supreme Court ruling impact already recognized this quarter can be read as a normalization of a labor law risk common to Korean industrials.
Outlook
The growth story. Three quantitative shifts stand out this quarter. First, crossing ₩3 trillion in quarterly revenue for the first time — ₩3,209.1 billion is the company's first sub-three-trillion-won-free print, and Korean media uniformly led with it as the defining headline. Second, the quantitative emergence of customer diversification — non-Samsung revenue growth of 24.3% delivered 94% of the total ₩470.5 billion revenue increase, dropping Samsung concentration from 33.6% to 29.6%. Third, underlying margin recovery — operating profit grew 39.9% despite absorbing the ₩71.4 billion Supreme Court labor charge, with adjusted OPM of roughly 11% more than 200bp above the headline 8.74%. Package Solutions normalizing at 7.62% OPM while maintaining 15% BGA share and absorbing a 14.4% ASP increase indicates that the AI and server cycle is generating margin-bearing growth, not just top-line.
The risk picture. First, more than half of the 78.5% net income growth (₩64.1 billion) traces back to the swing in net FX, and 67% of the equity increase came from foreign-operation translation — meaning both earnings and book value sit unusually exposed to a single variable, the won/dollar pair. A currency reversal would compress both lines in the opposite direction. Second, 77% of the ₩2,455.5 billion short-term borrowing book matures within three months, embedding a recurring quarterly rollover obligation that is small per cycle but constant. Third, raw materials usage grew 37.6% — more than twice the revenue growth rate — while inventories rose 5.6%, leaving an unresolved question of whether next quarter sees that build flow through as a cost-of-goods headwind or as a planned safety stock against firm orders. Fourth, Optics Solutions OPM of 5.61% remains the lowest of the three segments; the share recovery from 9% to 11% and 2.3% ASP increase have not been enough to lift structural margin against ongoing pressure in the camera module market.
This report is for informational purposes only and does not constitute investment advice. Figures are based on Samsung Electro-Mechanics' Q1 2026 quarterly report filed with DART. Investors should conduct their own due diligence before making investment decisions.
