Samsung Electro-Mechanics is making its largest single-product investment to date, committing US$4.9 billion to expand production of chip-packaging substrates in South Korea and Vietnam as the artificial intelligence boom reshapes demand across the semiconductor supply chain.
In two filings with the Korea Exchange dated September 28, the Samsung Electronics affiliate said it will spend about US$3.1 billion in South Korea and around US$1.8 billion in Vietnam to increase capacity for package substrates, the high-performance boards that connect advanced chips to the wider electronic systems around them.
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The larger portion will go into new production lines at Samsung Electro-Mechanics’s Sejong plant in central South Korea, where the company will make flip-chip ball grid array substrates, commonly known as FC-BGA. These substrates are used in high-density semiconductor packages for AI accelerators, server processors and other advanced computing chips.
Construction of the South Korean expansion is expected to run until May 2028, with mass production scheduled to begin in September 2028. Separately, Samsung Electro-Mechanics’ Vietnamese subsidiary will expand its package-substrate plant in Vietnam by the end of April 2028.
The investment is sizeable even for a Samsung group company. Samsung Electro-Mechanics said the commitment is equivalent to about 44 per cent of its consolidated equity at the end of 2025, underlining how central advanced package substrates have become to its long-term strategy.
Why packaging now matters more
For years, the most visible part of the semiconductor race centred on smaller transistor sizes and more advanced chip fabrication. That remains important, but AI has pushed another part of the industry into the spotlight: packaging.
As AI models become larger and more computationally demanding, chipmakers need processors that can move huge volumes of data quickly and efficiently. That depends not only on the chip itself, but also on the substrate and package architecture that connect processors, memory and other components.
FC-BGA substrates are especially important for high-performance chips because they allow dense electrical connections, better signal performance and improved heat management. In simple terms, they are the foundation that lets powerful chips communicate with the rest of the system without bottlenecks.
Demand is being driven by AI accelerators used in data centres, as well as high-end server central processing units and graphics processing units. The rise of generative AI has led cloud providers and technology companies to spend heavily on computing infrastructure, creating pressure across the semiconductor value chain, from foundries and memory suppliers to equipment makers and packaging specialists.
Samsung Electro-Mechanics is trying to position itself in that chain. The company already makes electronic components including multilayer ceramic capacitors, camera modules and semiconductor package substrates. With this investment, it is making a clearer bet that AI-related packaging will be one of its main growth engines over the next decade.
Vietnam’s role in the semiconductor supply chain
The Vietnam portion of the investment is particularly relevant for Southeast Asia. Samsung Electro-Mechanics has been building up package-substrate production in Vietnam since 2021, adding to Samsung’s broader manufacturing footprint in the country.
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Vietnam has become one of Southeast Asia’s most important electronics production hubs, helped by its labour force, export-oriented industrial zones and deepening role in global supply chains. Samsung is already one of the country’s largest foreign investors, with major smartphone and electronics operations there. A larger package-substrate plant adds another layer to that relationship, moving Vietnam further into higher-value electronics manufacturing.
For Southeast Asia, the significance goes beyond one factory. Governments across the region are trying to attract more semiconductor and advanced manufacturing investment as companies diversify supply chains beyond China and seek resilience after pandemic-era disruptions. Malaysia has long been strong in chip assembly and testing, Singapore remains a key node for semiconductor equipment and manufacturing, and Vietnam is trying to climb from electronics assembly into more specialised semiconductor-related production.
Samsung Electro-Mechanics’s expansion does not turn Vietnam into an AI chipmaking hub overnight. Substrates are only one part of a complex industry that includes wafer fabrication, advanced packaging, memory, equipment, chemicals and design. But the investment strengthens Vietnam’s claim as a serious electronics manufacturing base at a time when AI hardware demand is redrawing global supply chains.
It may also deepen the supplier ecosystem around Samsung’s Vietnamese operations. Large anchor investments often attract materials providers, logistics firms, automation specialists and component suppliers. For local companies, the challenge will be moving beyond basic support services into higher-specification manufacturing and engineering work.
Korea keeps the most advanced lines at home
While Vietnam gets a major expansion, the larger investment remains in South Korea. That is not surprising. Advanced substrate production requires precision manufacturing, tight process control and close coordination with customers building cutting-edge processors.
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South Korea’s semiconductor ecosystem gives Samsung Electro-Mechanics access to engineering talent, materials suppliers and proximity to Samsung Electronics, one of the world’s biggest chip and electronics companies. Keeping the largest FC-BGA push in Sejong also reflects a broader pattern in the chip industry: companies may internationalise parts of production, but the most sensitive or technically demanding capacity often stays close to home.
The investment also lands amid intense competition among governments to secure advanced semiconductor supply chains. The US, Japan, South Korea, Taiwan and the EU have all pushed policies to support domestic chip capabilities. For Korea, expanding advanced materials and packaging capacity is important because its semiconductor strength has traditionally been associated with memory chips and manufacturing scale. AI has made the wider supply chain more strategically important.
Rivals are also chasing the AI packaging boom
Samsung Electro-Mechanics is not alone in chasing this market. Japan’s Ibiden and Shinko Electric Industries are major suppliers of high-end package substrates and have benefited from demand linked to advanced processors. Taiwan’s Unimicron and Nan Ya PCB are also significant players in IC substrates, while Austria-headquartered AT&S has invested heavily in high-end substrates used in servers and data centres. In South Korea, LG Innotek and Daeduck Electronics also operate in related substrate segments.
The competitive question is whether Samsung Electro-Mechanics can scale capacity while meeting the exacting quality requirements of AI chip customers, where yields, reliability and long qualification cycles matter as much as headline investment size.
A long-term bet, not a quick AI trade
The timeline shows this is not an immediate revenue boost. Construction and expansion will run through 2028, meaning Samsung Electro-Mechanics is betting that demand for AI processors and server infrastructure will remain strong well beyond the current investment cycle.
That is a reasonable but not risk-free assumption. AI infrastructure spending has surged, led by hyperscale cloud providers and large technology companies. Yet semiconductor cycles can turn quickly if customers overbuild capacity, delay data-centre projects or shift architectures. Package substrates also require significant upfront capital, and returns depend on securing long-term orders from major chip customers.
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Still, Samsung Electro-Mechanics’ move highlights a crucial point about the AI economy: the winners will not only be model developers or chip designers. Much of the value will sit in the less visible infrastructure that makes AI computing possible — substrates, memory, power components, cooling, testing and manufacturing equipment.
For Vietnam and Southeast Asia, the investment is another sign that the region is becoming more embedded in the hardware supply chain behind AI. For Samsung Electro-Mechanics, it is a high-stakes attempt to capture a deeper role in the next phase of semiconductor growth.
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