Multilayer ceramic capacitors (MLCC) are used as a primary manufacturing component throughout the modern tech industry. However, over the last year, the MLCC market has changed dramatically. Few were able to predict that the MLCC commodity shortage would suddenly end as product demand declined.
Since then, there’s been a lot of lost revenue and anxiety due to improper planning across MLCC supply chains everywhere. Now, companies from around the world are wondering what’s going to happen next.
We had the opportunity to speak with an electronic components industry expert, Lambert Hilkes, to get his perspective. Hilkes explained the uncertainty surrounding the MLCC market “is a little more sophisticated than whether it will just go up or down.” He also offered key insights into global MLCC pricing changes and areas that will drive demand in the near future.
1. Too Much Supply & Too Little Demand
After projections for the MLCC commodity shortage showed it would likely continue into 2019, companies began to stockpile production materials. After all, just last quarter there were no clear indicators the shortage would let up.
“All the guys who brought new capacity to their supply chains did it mostly in the commodity area, expecting after the shortage that commodities would be at the same low levels they were during the quarters of last year,” noted Hilkes.
But now, the supply of MLCC commodities outweighs demand by roughly 20 percent worldwide. That outcome is prompting companies to sell off their excess stock at incredibly low prices to minimize losses. Chinese companies in particular, which had been big on gathering MLCC commodities, are suffering the most. Now, the country’s firms have enough stockpiled resources to maintain global production rates for 3-5 months. Despite these conditions, some companies are moving forward regardless, like Samsung. The South Korean tech giant hopes to use its MLCC commodities in the construction of the next generation of its popular Galaxy smartphones.
2. Japan to Raise MLCC Prices Worldwide
In April, Japan will release its annual corporate price policy updates. Consequently, it’s expected there will be an across the board MLCC components and products price increase.
Hilkes explained the Pacific superpower will make the increase, “so they can kind of dominate the price policy into the market.” Contemporaneously, leading Japanese technology companies, like Murata and Kyocera, have both announced plans to expand internal MLCC production.
Taken together, these factors suggest Japan will almost certainly raise the margins of MLCC components next month. The rest of the world will just have to adjust to the nation’s market correction.
3. Future MLCC Growth Areas
The automotive industry, with its focus on self-driving cars and dynamic sensors, has been the largest contributor to MLCC demand for years. With companies like Tesla opening mega-factories in this low-demand climate, the automotive industry will easily retain that title.
But aside from that, the rise of modularization and passive integration devices seems to be the most promising growth area for MLCC technology. In particular, smartphone production will be the key driver for the demand increase.
“Modularization is on the way,” said Hilkes. “It is still not very public, I would say, but look at company portfolios and you’ll see MLCC included in a lot of their new products. They are really on the way.”
Lambert Hilkes is a 40 year veteran of the electronic components industry. As such, these insights into the MLCC market are crucial for procurement and supply chain management.