AI server boom fuels record supply crunch for the ‘rice of electronics’

Global inventories of multilayer ceramic capacitors (MLCCs) have dropped to a record low, with distributor volumes declining 8% by August 9 compared with four weeks earlier, according to a UBS Evidence Lab report. The squeeze, driven by surging demand from AI infrastructure, has pushed unit prices up 13% year-on-year, and UBS analysts led by Shingo Hirata expect tightness to spread from AI-related channels to the overall market.

AI server boom fuels record supply crunch for the ‘rice of electronics’ UBS data shows a major squeeze on MLCCs, setting the stage for what some believe could be the longest demand cycle in the sector’s history Iris Deng /author/iris-deng in Shenzhen Global inventories of multilayer ceramic capacitors MLCCs – tiny components dubbed “the rice of the electronics industry” – have dropped to a record low as the industry grapples with surging demand from artificial intelligence infrastructure. Worldwide distributor inventory volume for the components – which act as electrical buffers in circuit boards and are increasingly used in massive volumes in high-performance servers – declined 8 per cent by August 9 compared with four weeks earlier, extending a downward trend, according to a Wednesday report by UBS Evidence Lab. MLCCs have emerged as the latest AI-driven investor darling following memory chips and optical modules. With average unit prices continuing to climb, the total value of distributor inventory jumped 10 per cent over the same period, the UBS report showed. Year-on-year data to the end of July showed a 13 per cent rise in the unit price index, distributor volumes plunging 22 per cent and inventory value up 6 per cent. “We believe supply-demand tightness could start with AI-related and distributor channels and then spread to the overall market,” wrote UBS analysts led by Shingo Hirata in the report. Inventory levels at major manufacturers followed a similar trend to distributors. By August 9, Japan’s Murata Manufacturing and South Korea’s Samsung Electro-Mechanics SEMCO saw volume declines of 8 per cent and 20 per cent, respectively, compared with four weeks earlier.