Korean and Japanese leaders raise prices and pivot to premium products, opening lower-end market to Chinese suppliers
The AI boom is turning multilayer ceramic capacitors into a major profit engine, with leading suppliers raising prices, locking in long-term orders and racing to expand capacity as data center demand outstrips supply.
But the rush toward premium MLCCs is reshaping the industry beyond artificial intelligence. As Korean and Japanese suppliers shift production to higher-margin components for AI servers and vehicles, Chinese manufacturers are moving quickly to capture the smartphone and consumer electronics business they leave behind.
“Data centers are driving the strongest demand, with customers scrambling to secure a handful of particularly sought-after MLCC models,” an industry official said.
Samsung Electro-Mechanics is raising MLCC prices by 30 percent this month as its production lines run near full capacity. Market leader Murata Manufacturing raised prices in March, while third-ranked Taiyo Yuden plans its second increase of the year for shipments beginning in September.
MLCCs are tiny components that store electricity and filter voltage and signal interference, helping ensure a stable power supply to semiconductors. Found in virtually every electronic device, they are becoming especially critical for AI accelerators, which can require hundreds of thousands of the components. Nvidia’s Vera Rubin platform, for example, is expected to use about 800,000 MLCCs, rising to 1 million in its successor, Feynman.
Murata controls about 40 percent of the global MLCC market. Together with runners-up Samsung Electro-Mechanics and Taiyo Yuden, the three leading suppliers account for roughly 70 percent of the market. Samsung alone holds an estimated 40 percent share of the AI-server MLCC segment.
Strong demand is already feeding into its earnings. Samsung Electro-Mechanics posted second-quarter sales of 3.46 trillion won ($2.42 billion) and operating profit of 440.4 billion won, up 24.2 percent and 106.7 percent from a year earlier, respectively.
The accelerated expansion is also being underpinned by orders from major technology companies. Samsung Electro-Mechanics said during its second-quarter earnings call that it had signed long-term supply agreements with about 10 clients, including top-tier hyperscalers.
The company also signed AI-server MLCC supply contracts worth 454 billion won in June and 295.12 billion won in July.
To meet rising demand, Samsung Electro-Mechanics is accelerating construction of an additional MLCC plant in Calamba, Laguna, the Philippines. It is aiming to begin operations in the first quarter of next year — just 15 months after launching the project, compared with the industry norm of more than two years.
The company is also reorganizing existing MLCC lines around AI-server and automotive products rather than mobile components. Its capital expenditure is also projected to double from 3 trillion won this year to 6 trillion won next year.
China suppliers seize opening
The shift toward premium products, however, is tightening supplies of conventional MLCCs and creating an opening for Chinese manufacturers.
Inventories of mainstream MLCCs have fallen below 30 days, while rush orders from distributors and smaller customers have increased, according to TrendForce. Spot-market prices have risen to as much as two to three times previous levels.
The research firm said the crowding out of conventional production by AI demand had significantly improved orders and pricing for suppliers based in mainland China and Taiwan.
Chaozhou Three-Circle Group raised 7.16 billion Hong Kong dollars ($913 million) through a Hong Kong listing in July and plans to use the proceeds to build factories in Thailand and Germany.
Guangdong Fenghua Advanced Technology Holding Co. has completed a three-stage, 7.5 billion yuan ($1.1 billion) investment program launched in 2020, expanding its monthly MLCC production capacity to 50 billion units, about half of Samsung Electro-Mechanics’ estimated capacity.
Their earnings are also rising sharply. Chaozhou Three-Circle forecast a first-half net profit of as much as 2.04 billion yuan, up 65 percent from a year earlier, while Fenghua projected a profit of up to 300 million yuan, an increase of 79.8 percent.
Chinese manufacturers remain behind in advanced AI-server and automotive MLCCs, which require higher capacitance, greater reliability and precise mass-production capabilities.
Industry officials warn, however, that the barrier is not insurmountable.
“Chinese companies are still at an early stage in advanced products, but MLCC technology is not beyond their reach,” the industry official said.
“For the leading suppliers, the only option is to accelerate the development of next-generation products and maintain their technological lead.”
herim@heraldcorp.com