Is there a shortage of MLCC(Multi-Layer Ceramic Capacitor) capacitors?

2024-07-07

The MLCC (Multi-Layer Ceramic Capacitor) shortage has been a significant issue in the electronics industry, affecting various sectors and causing supply chain disruptions. Here’s an overview of the situation and some strategies for managing the impact.

What is the reason to cause of the MLCC Shortage?

Production Capacity Limitations:

Manufacturing Constraints: MLCC production is complex and requires specialized materials and processes. Scaling up production is not always quick or straightforward.

Supply Chain Disruptions: Natural disasters, geopolitical issues, and the COVID-19 pandemic have disrupted the supply chain, affecting raw material availability and manufacturing operations.

The supply of MLCCs suffered an unexpected and major drop in demand during 2019, which extended into the first quarter of 2020, when the market dynamic was further turned upside down by the arrival of the COVID-19 pandemic. The primary reason behind this market volatility seems to be that, after the extreme shortages witnessed back in 2018, many OEMs and contract manufacturers stockpiled components rather than following their usual, more predictable, streamlined inventory practices.

As a consequence of the unforeseen 2019 lull, MLCC producers were forced to reduce staff numbers at their production facilities. The ramifications of this have been felt most strongly in the last two quarters, as demand has returned in the Far East and, to a lesser extent, in North America and Europe. Due to a lack of fully trained staff, MLCC producers have not been able to respond as quickly as they would have liked to the ramp-up in customers’ order requirements. It has taken considerably longer to bring production capacity back online. In addition, the disruption caused by the COVID-19 outbreak to production cycles, transportation and logistics chains has only exacerbated the situation.

The MLCC business is admittedly a very tumultuous one, characterised by acute variations in demand. There are lofty peaks followed by severe troughs of equal magnitude. Consequently, it is critically important to always keep up to date with the dynamics that directly influence it.

Increased Demand:

Consumer Electronics: The rapid growth in consumer electronics, such as smartphones, tablets, and laptops, has significantly increased the demand for MLCCs.

Automotive Industry: The shift towards electric vehicles (EVs) and the integration of more electronics in conventional cars have contributed to higher MLCC usage.

5G Technology: The deployment of 5G networks and devices requires more MLCCs due to the need for enhanced filtering and power management.

The emerging applications that are going to drive shipments in the years ahead. The challenges associated with extracting the necessary raw materials (most importantly the palladium and nickel used in MLCC electrodes)

The number of MLCC going into base stations is estimated to at least double, compared to 2019. The most prominent source of MLCC demand in the telecommunications sector is 5G deployment activity. Here, the utilisation of sub-6GHz and mmWave frequency bands, as well as new functionality such as beamforming, will be contributing factors.

Mobile devices and smartphone manufacturers also need higher volumes of these components. This is most notable in demand for smaller sized units, such as 0201 and 0402, predominantly in Asia. Smartphone designs now constitute over 40% of the overall MLCC market. A typical smartphone handset will incorporate several hundred MLCCs, and the higher-end models can now require more than a thousand.

Demand from automotive brands is likewise increasing, particularly for 0603, 0805 and 1206 size format MLCC components. Conventional combustion engine cars now have greater levels of sophistication. As we move from driver assistance functions towards fully autonomous systems, the quantities of data involved will spiral upwards. Several thousand MLCCs are now required in most vehicles. There are even greater expectations when we look at the electric vehicle (EV) sector. The latest EVs will call for somewhere in the region of 10,000 to 15,000 MLCCs.

Market Dynamics:

Supplier Consolidation: Mergers and acquisitions in the MLCC manufacturing sector have led to fewer suppliers, which can limit production flexibility and responsiveness.

Allocation Policies: With high demand and limited supply, manufacturers often allocate MLCCs to their largest customers first, leaving smaller companies struggling to secure adequate supplies.

Current difficulties relating to production and capacity

Available inventory on the market has been consumed and concerns are now being raised as lead times start to lengthen mainly due to booming demand in Asia. As growth is picking up much more slowly in Europe, buyers here may be caught by surprise and frustrated when suddenly supply will become tight, with Asia consuming most of the available products. This needs to be addressed accordingly. Automotive-grade components, especially with capacitance values >1uF, and smaller case sizes up to 0402, are the first areas with shortening supply.

Whilst small case sizes 0201 and lower are mainly consumed in Asia and represent the lion's share of all MLCC supply, European automotive and industrial customers require mostly case sizes 0402 and bigger, which are less profitable and hence less interesting for investments from manufacturers.

And how to manage the MLCC Shortage ?

Alternative Sourcing:

Identify Alternative Suppliers: Look for secondary suppliers who can provide MLCCs. This may involve working with distributors who have access to various manufacturers.

Diversify Supplier Base: Avoid relying on a single supplier. Establish relationships with multiple suppliers to spread risk.

Substitution:

Alternate Capacitor Types: Consider using different types of capacitors (e.g., tantalum, film) where appropriate, though this may require design adjustments.

Different MLCC Specifications: Explore using MLCCs with slightly different specifications that can still meet your circuit requirements.

Design Adjustments:

Optimize Capacitance Values: Re-evaluate your design to ensure you are not over-specifying capacitance values. Sometimes, reducing the number of capacitors or using larger values can help.

Series and Parallel Configurations: Use combinations of capacitors in series or parallel to achieve the desired capacitance and voltage ratings.

Inventory Management:

Build Inventory: Increase safety stock levels for critical MLCCs to buffer against supply disruptions.

Lead Time Planning: Work closely with suppliers to understand lead times and adjust your procurement schedule accordingly.

Collaborative Forecasting:

Communicate with Suppliers: Share your forecast and production plans with suppliers to help them plan their production schedules.

Collaborate with Industry Peers: Engage in industry forums and associations to stay informed about supply chain trends and collaborate on solutions.

Long-term Strategies:

Invest in R&D: Research alternative materials and technologies that could reduce dependence on MLCCs.

Develop Strategic Partnerships: Form strategic alliances with key suppliers to ensure long-term access to MLCCs.

Industry Outlook

While the MLCC shortage has been challenging, the industry is working towards mitigating the impact. Investments in expanding production capacity, advancements in manufacturing technologies, and the development of alternative materials are expected to alleviate the shortage over time. However, it’s crucial for companies to adopt proactive strategies to navigate the current landscape and ensure continuity in their production processes.

If you have specific questions or need advice on a particular aspect of dealing with the MLCC shortage, feel free to ask at Hongda Capacitors:

Email: judy@hongdacap.com.hk

Skype: +86 136 6989 7281

Whatsapp&WeChat: +86 136 6989 7281