Tesla and Nvidia Plan to Invest About 3.7 Trillion Won in Samsung Electro-Mechanics to Expand FC-BGA Substrate Production

On October 22, according to a report by South Korea's Maeil Business Newspaper citing industry sources, Samsung Electro-Mechanics will receive investment commitments totaling approximately 3.7 trillion won from Tesla and Nvidia to expand production capacity for high-end flip-chip ball grid array (FC-BGA) substrates. These substrates are a key component in high-performance AI chip packaging, and as demand for AI inference grows, leading technology companies are securing critical manufacturing resources in advance through financial support and long-term supply agreements.

The related investment will be included in the 4.27 trillion won Sejong plant investment plan that Samsung Electro-Mechanics disclosed in September this year. The new production line is expected to be completed by the end of 2027, with equipment installation and trial production completed in the first half of 2028, mass production beginning in the second half, and the first shipments for Tesla expected to start in 2029.

At the same time, Nvidia is simultaneously advancing the expansion of the global substrate supply chain, establishing a presence with major suppliers in Japan, South Korea, and China's Taiwan region, with the goal of increasing total IC substrate production capacity to 2.5 times the current level within the next three years.

Tesla and Nvidia lock in capacity in advance, Samsung Electro-Mechanics accelerates expansion

According to reports, Samsung Electro-Mechanics has signed a five-year long-term supply agreement with Tesla for FC-BGA substrates, covering the period from 2029 to 2033. Tesla will contribute approximately 1.1 trillion won to obtain priority supply guarantees from a dedicated production line at the Sejong plant.

The related substrates will be used in AI chips for Tesla's self-driving cars and the Optimus humanoid robot. By investing funds in advance and locking in dedicated capacity, Tesla is trying to reduce the risk of key component supply when its products are mass-produced in the future.

Nvidia's arrangements cover more suppliers. In Japan, according to a report by tech media TechNews, Nvidia has signed a capacity prepayment agreement with Ibiden, committing to invest billions of dollars to support the latter in expanding capacity at its Ono plant to three times the original level, with the new capacity expected to begin coming online in the first quarter of 2028.

In South Korea, according to estimates by Maeil Business Newspaper, Nvidia's investment commitment to Samsung Electro-Mechanics is approximately 2.6 trillion won, but Nvidia's official statement did not disclose the specific amount. As Samsung Electro-Mechanics expands its Sejong and Busan plants, Nvidia is expected to account for a considerable proportion of its annual packaging substrate production capacity in 2028.

In China's Taiwan region, Nvidia is supporting Unimicron in expanding KF substrate capacity through a capacity reservation agreement. TechNews reported that the new output is expected to begin coming online in the second quarter of 2027 and reach full production in mid-2028.

The high-end substrate market is concentrated, and Samsung Electro-Mechanics challenges Ibiden's leading position

The high-end FC-BGA substrate market is currently dominated by a small number of manufacturers, including Samsung Electro-Mechanics, Japan's Ibiden, and China's Taiwan region's Unimicron. According to industry estimates cited by Maeil Business Newspaper, Ibiden holds a leading position with a market share of more than 70%. Samsung Electro-Mechanics' large-scale expansion this time aims to increase its production capacity scale and narrow the gap with the industry leader.

Nvidia's extension of capacity expansion to multiple regions also reflects that competition in the AI chip supply chain is extending from chip design and manufacturing to key links such as packaging substrates. As demand for AI inference chips grows, locking in high-end substrate capacity in advance helps chip manufacturers alleviate supply bottlenecks and also provides substrate suppliers with clearer long-term demand expectations.

Samsung Electro-Mechanics recently also disclosed another packaging substrate order. On October 19, the company announced that it had signed a supply contract worth 360.5 billion won with an unnamed global customer for memory semiconductor packaging substrates, with the supply period covering the whole of 2027.

This order further shows that Samsung Electro-Mechanics is benefiting simultaneously from packaging substrate demand related to AI chips and memory semiconductors. However, whether the new capacity can be smoothly converted into revenue and profit still depends on customer demand materializing, the progress of production line ramp-up, and changes in the competitive landscape of the high-end substrate market. Risk disclosure and disclaimer

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