The global shortage of MLCCs threatening business shows no signs of letting up in Q4 2018.
“As you are likely aware, there is a worldwide shortage of commonly used multi-layer ceramic chip capacitors (MLCC).” Thus began one of many other letters that capacitor distributors would send out this year to customers.
Manufacturers have shifted into more specialized products like small-form and high-reliability commercial commodity parts, which leaves various points of demand left unmet. These pressure points in the MLCC industry won’t let up in the short term, according to industry experts.
Where are the biggest shortages right now?
MLCCs control the flow of electricity in electronic products, and this flow is more nuanced in advanced technologies. With the advent of automated vehicles and more processing power in our pockets than ever before, the crunch on MLCCs has been rough on the industry. Tier 1 and Tier 2 manufacturers take notice of the shortage, feeling the ripple effect of supply chain disruption and migrations.
Companies like Tesla and Apple have, in their advanced technologies, generated lucrative demand for layer-dense MLCCs. The market has been saturated with more basic MLCC product for years, and now MLCC OEMs are re-engineering their production lines to supply more high-value components. With layer density and improved tolerances, innovative manufacturers seek to make new technologies meeting high capacitance standards.
In an end-market analysis of MLCCs, Industry expert TTI, Inc. writes, “…expect shortages in high voltage and high temperature capacitors and resistors that have constructions that expose them to the price of PGM metals (ruthenium and palladium).”
SmithWeb reports that Yageo, a Taiwan-based global leader in electronic component manufacturing, currently faces customer demand at double what the company is shipping out.
Japan-based Murata, which supplies Apple, told Reuters in an interview last week, “Even though MLCC makers have been boosting capacity, it would take time to meet a level of demand that we are seeing now.”
The growth of IoT, smart automobiles, medical and smart device markets have led to the current situation in MLCCs.
Continued Manufacturer MLCC Demand: Sustainable in the mid-long-term?
Rather than let the tail wag the dog, it may be important to look to the real demand for products requiring high-capacitance MLCCs before forecasting a crisis in the long-term.
iPhone X sales disappointed in Q1 2018. This high-capacitance product, which requires twice the MLCC content than the iPhone 6s in ultra-small case size content, has suffered poor customer reception so much so that it now reportedly seeks to “burn off” its excess supply.
Tesla, meanwhile, banks on high Model 3 demand in 2019. Despite the stock’s recent short burn, Tesla’s M3 has not yet seen the demand momentum analysts hoped this year. There is more to come with Tesla’s Q3 report in early November.
IoT remains a burgeoning force behind tech innovations. The smartphone and automobile industries could well be getting ahead of themselves over high-capacity MLCCs, meaning their long-term shortage concerns remain questionable, but IoT demands from industrial entities will require the reliability and function of advanced capacitors.
Finding good guidance in the MLCC market
Power Electronics’ Wilmer Companioni advises that polymer electrolytic capacitors may serve as a viable alternative to MLCCs.
Because polymer electrolytic capacitors generally have a larger form and require higher capacitance (tantalum-based KO-CAPS come in ≥680 nF), they are best used to replace ceramics in limited situations. Future product designs may, therefore, favor polymers over MLCCs to better manage the mid- to long-term unpredictability of MLCC markets, to avoid any future redesign and retooling needs.
Industry specialist Dennis M. Zogbi says of shifting the focus away from MLCCs: “The most cost-effective solution had been and will continue to be for the next ten years the stacking of ceramic, but anywhere that other dielectrics can be employed will now grow as manufacturers have no choice but to distance themselves from such a tremendous reliance on barium titanate based ceramic dielectric.”
In situations where the MLCC is not feasibly replaced on a design, purchasers may be left to their devices with lesser-known OEMs. TTI notes that the process can bring a buyer to sourcing from “smaller vendors in China, Singapore, Thailand, Malaysia, Slovenia, Hungary, Czech Republic, Japan, Australia, etc.” As a race to the bottom, buyers with a keen eye for quality and geographically-based metallurgic differences will have an edge over the rest.
The prevalence of distribution agreements already in existence between MLCC OEMs and resellers leaves less room for large industry players to negotiate long-term obligations out of OEMs. EE News Power reports that Arris CEO Bruce McClelland has seen the structural challenges of the MLCC market firsthand in a visit to his company’s Asian suppliers
“…[OEMs are] pushing more component supply through distribution, which has kind of created an odd environment around MLCCs. So, it’s not just kind of the normal supply-demand price has gone up a bit; it’s really the business distribution model that changed…. most companies like us are in an environment where trying to secure supply is on a week-to-week basis and prices fluctuate pretty significantly.”
McClelland says his best approach has been to proactively seek cost savings and keep his customers informed.
“So what we’ve done is worked pretty closely with customers around their supply needs, try and minimize the amount of premiums you’re paying as much as possible…”
What do you think?
What solutions do you think are effective for the MLCC shortage issue?