MLCC Would be Shortage Again?

2025-03-02

Multilayer Ceramic Chip Capacitors (MLCCs) are fundamental passive electronic components, playing a crucial role in a vast array of electronic devices. Their significance lies in their ability to store and release electrical energy, filter out noise, and stabilize voltage levels. Given their widespread use in various industries, any potential shortage of MLCCs can have far - reaching implications for the global electronics supply chain. This article aims to comprehensively analyze whether MLCCs will face another shortage, taking into account factors from both the demand and supply sides.

The MLCC Market in Retrospect

--Past Shortages and Their Causes

In the past, MLCCs have experienced shortages. For instance, around 2018, there was a significant shortfall in the MLCC market. One of the primary causes was the strategic shift of Japanese suppliers such as Murata and Taiyo Yuden. They reallocated their production capacity from general - type MLCCs to high - end MLCCs in response to the burgeoning demand from sectors like automotive, industry, and high - end smartphones. This led to a supply vacuum in the general - type MLCC market.

Another factor was the substantial increase in demand. The booming smartphone market, with major players like Apple, Samsung, Huawei, Vivo, and Oppo, had an insatiable appetite for MLCCs. At the same time, the automotive industry's transformation towards electrification and the development of self - driving cars significantly escalated the demand for passive components, including MLCCs. A traditional car might require around 2000 passive components, while an electric vehicle could need thousands, further straining the supply - demand balance.

Recovery and Market Trends Post - Shortages

After the shortages, the market entered a period of adjustment. In 2019 and 2020, the supply of MLCCs, which had been in high demand, faced a sudden slump. The COVID - 19 pandemic further disrupted the market dynamics. Many Original Equipment Manufacturers (OEMs) and contract manufacturers, having been scarred by the previous shortages, adopted a more conservative inventory approach. They stockpiled components, leading to a distortion in demand patterns. As a result, MLCC producers had to cut production and reduce staff numbers.

However, as the global economy gradually recovered, especially in the second half of 2020, demand for MLCCs started to pick up again, especially in the Asia - Pacific region. But due to the lack of fully trained staff and the disruptions in production cycles, transportation, and logistics caused by the pandemic, MLCC producers struggled to meet the surging demand in a timely manner.

Current Market Landscape

--Demand - Side Analysis

Automotive Electronics

The automotive industry is undergoing a revolutionary transformation, with the increasing electrification and AI of vehicles. The rise of electric vehicles (EVs) and the development of advanced driver - assistance systems (ADAS) have significantly increased the demand for MLCCs. For example, a typical EV now requires a large number of MLCCs, estimated to be in the range of 10,000 - 15,000 per vehicle. This is due to the complex electrical systems in EVs, including battery management systems, electric motor drives, and ADAS.

Moreover, as the industry moves towards higher levels of autonomous driving, the need for more sophisticated sensors and data - processing units will further drive up the demand for MLCCs. The market research firm Grand View Research predicts that the automotive MLCC market will grow at a compound annual growth rate (CAGR) of 6.3% from 2023 to 2030, making it one of the fastest - growing segments in the MLCC market.

5G and Communication Infrastructure

The continuous deployment of 5G networks worldwide is another major driver of MLCC demand. 5G base stations require a large number of MLCCs for signal filtering, power supply stabilization, and other functions. Compared to 4G base stations, 5G base stations operate at higher frequencies and require more advanced and precise electronic components.

In addition to base stations, the expansion of the Internet of Things (IoT) ecosystem also contributes to the growing demand for MLCCs. With the increasing number of connected devices, such as smart home devices, wearable devices, and industrial sensors, the need for small - sized, high - performance MLCCs is on the rise.

Consumer Electronics

Although the consumer electronics market has faced some challenges in recent years, it still remains a significant consumer of MLCCs. In the smartphone segment, the continuous upgrade of features such as high - resolution cameras, 5G connectivity, and high - performance processors has led to an increase in the number of MLCCs used per device. A high - end smartphone can now incorporate more than a thousand MLCCs.

The demand for other consumer electronics products, such as tablets, laptops, and gaming consoles, also has an impact on the MLCC market. As these devices become more powerful and feature - rich, the demand for MLCCs to support their electrical functions continues to grow.

--Supply - Side Analysis

Production Concentration and Risks

The production of MLCCs is highly concentrated in several regions, mainly Japan, South Korea, Taiwan (China), and the Chinese mainland. Japan, in particular, is home to some of the world's leading MLCC manufacturers, such as Murata, Taiyo Yuden, and TDK. These companies have a significant share of the global market and play a crucial role in determining the supply - demand balance.

However, this concentration also brings risks. Natural disasters, such as the earthquake in Japan in 2024, can severely disrupt production. The earthquake affected the production facilities of major MLCC manufacturers, including Murata, leading to concerns about potential supply shortages. Additionally, geopolitical tensions, trade policies, and other factors can also impact the production and supply of MLCCs in these regions.

Capacity Expansion and Challenges

Expanding MLCC production capacity is not an easy task. It requires significant investment in advanced manufacturing equipment, research and development, and skilled labor. The lead time for procuring MLCC production equipment is relatively long, often 8 - 12 months, which limits the ability of manufacturers to quickly respond to sudden increases in demand.

Furthermore, the production process of MLCCs is complex and requires high - precision manufacturing techniques. Training a skilled workforce to operate the production lines and ensure product quality also takes time. In addition, the cost of raw materials, such as palladium and nickel used in MLCC electrodes, can fluctuate, affecting the profitability of manufacturers and their willingness to expand capacity.

Potential for a Shortage

--Factors Indicating a Possible Shortage

Unprecedented Growth in Emerging Applications

The emergence of new technologies and applications, such as artificial intelligence (AI) and augmented reality (AR)/virtual reality (VR), is creating a new wave of demand for MLCCs. AI servers, for example, require a large number of high - performance MLCCs to support their complex computing and data - processing operations. A single AI server can use 3000 - 4000 MLCCs, and the demand for AI - related electronics is expected to grow exponentially in the coming years.

The development of AR/VR devices also requires MLCCs with specific electrical properties to ensure smooth operation and high - quality user experience. As these emerging technologies continue to penetrate the market, the demand for MLCCs may outpace the current supply capacity, increasing the likelihood of a shortage.

Geopolitical and Supply Chain Disruptions

Geopolitical tensions between major economies can disrupt the global supply chain of MLCCs. Trade disputes, sanctions, and changes in import/export policies can restrict the flow of raw materials and finished products. For example, if there are restrictions on the export of key raw materials used in MLCC production, it can lead to production bottlenecks for manufacturers.

--Factors Mitigating the Risk of a Shortage

Existing Inventory and Production Capacity

After the previous shortages and market adjustments, some OEMs and distributors may still have a certain level of inventory. Although the inventory levels are generally not as high as during the peak of stockpiling, they can act as a buffer in the short term when faced with sudden demand surges.

Moreover, MLCC manufacturers have made efforts to optimize their production capacity. Some manufacturers have gradually increased their production capacity in recent years, especially in response to the growing demand in certain segments. Although the capacity expansion may not be sufficient to meet all potential demand, it can help ease the supply - demand imbalance to some extent.

Technological Advancements and Cost - Efficiency Improvements

Technological advancements in MLCC manufacturing are also helping to address potential supply issues. Manufacturers are constantly developing new materials and manufacturing processes to improve the performance and production efficiency of MLCCs. For example, the development of new ceramic materials can increase the capacitance of MLCCs in a smaller size, reducing the overall number of components required in some applications.

In addition, the improvement of production processes can reduce waste and increase yield rates, thereby increasing the effective production capacity. These technological advancements can help manufacturers meet the growing demand more efficiently and reduce the risk of shortages.

Conclusion

The question of whether MLCCs will face another shortage is a complex one, with factors both pointing towards and against such a scenario. On the demand side, the rapid growth in automotive electronics, 5G and communication infrastructure, and emerging applications like AI and AR/VR is creating a strong and increasing demand for MLCCs. On the supply side, production concentration, difficulties in capacity expansion, and potential disruptions pose risks to the supply.

However, existing inventory, ongoing capacity optimization, and technological advancements are mitigating factors. Overall, while the possibility of a shortage cannot be ruled out, the market is also showing signs of resilience and adaptability. Stakeholders in the MLCC value chain, including manufacturers, suppliers, and OEMs, need to closely monitor market trends, collaborate to optimize the supply chain, and invest in research and development to ensure a stable supply of MLCCs in the face of changing market dynamics.

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