Helped by expanded investment in artificial intelligence (AI) servers, demand for high-value multilayer ceramic capacitors (MLCC) is rising rapidly. As order indicators for major companies such as Samsung Electro-Mechanics, Murata and Taiyo Yuden have climbed to their highest levels since the COVID-19 pandemic, the possibility of supply shortages is also growing.
On July 6, market research firm TrendForce said, "Upgrades to AI server platforms and expanded production of custom AI Semiconductor (ASIC) by cloud service providers (CSP) are sharply boosting demand for high-value MLCC."
An MLCC is a key component that supplies and controls current stably in electronic product circuits. It is used in smartphones, PCs, automotive electronics and servers. MLCC for AI servers is known to be more technically challenging than for mobile products and at least three times more expensive. The number installed in a single server also exceeds that of general products.
According to TrendForce, as of the end of last month, Samsung Electro-Mechanics' BB (book-to-bill; orders to shipments) ratio stood at 1.31. Japan's Murata was at 1.30 and Taiyo Yuden at 1.25. All three are at their highest levels since the COVID-19 pandemic. The MLCC industry's overall BB ratio also rose to 1.04.
The BB ratio is an indicator obtained by dividing a company's order value by its shipment value. If it exceeds 1, it means new orders outpace shipments. TrendForce interpreted the rise in BB ratios at major companies as "a signal that demand for high-value MLCC has begun to outstrip supply capacity."
Order backlogs are also building quickly. TrendForce said Murata's order backlog ratio in the first quarter of this year was 1.27. That surpasses the 1.25 peak seen during the MLCC supply crunch in 2018. TrendForce noted, "With backlogs accumulating rapidly, the risk of supply shortages is rising."
Demand for consumer products such as smartphones and laptops remains weak due to high interest rates and slowing purchasing power. In contrast, demand for high-capacity, low-voltage and small MLCC for AI servers is increasing rapidly.
TrendForce saw the ramp-up of mass production of custom AI accelerator platforms—such as Google's tensor processing unit (TPU), Amazon Web Services (AWS) Trainium and Meta's MTIA—as driving MLCC demand. It projected that new AI platforms from Nvidia, Google and AMD, which are set to enter mass production starting in the third quarter, will lift utilization of high-value MLCC production capacity.
The expansion of MLCC production for AI is also affecting the automotive and consumer product markets. TrendForce analyzed that as production of AI-related high-value products is prioritized, supply pressure is spreading to other markets. Apple's supply chain began securing inventory one to two months earlier than usual, and original design manufacturers (ODM) for automobiles, concerned about supply shortages in the second half, moved up their procurement from July to May.
Moves to raise prices have also emerged in the Chinese market. TrendForce explained that Chinese distributors began raising prices for mainstream X5R consumer MLCC by an average of 15%–25% starting in June. As Japanese and Korean companies prioritize orders for high-value MLCC for AI, firms in the Greater China region—such as Yageo in Taiwan, Walsin Technology and China's Biyong—could capture substitute demand for mid- to high-capacity consumer X5R MLCC, according to the analysis.
Samsung Electro-Mechanics is cited as a direct beneficiary of the expansion in demand for MLCC for AI servers. Samsung Electro-Mechanics recently signed a supply contract worth about 450 billion won with a North American CSP for MLCC for AI servers. With increased investment in AI data centers, orders for high-value MLCC for servers are translating into actual contracts.
Samsung Electro-Mechanics is also pursuing mid- to long-term investment to strengthen competitiveness in package substrates and MLCC for AI servers. The company disclosed that it will invest about 15 trillion won in package substrates and MLCC for AI servers, centered on its Busan business sites, through 2040. The plan is to foster Busan as a core base for mother lines of high-performance package substrates and high-value MLCC.
TrendForce views the second half of this year as the period that will determine supply conditions in the high-value MLCC market. If customers' preemptive inventory builds coincide with mass production of new AI platforms, lead times could lengthen and prices could rise further.
TrendForce said, "Starting in the third quarter of this year, as mass production of major AI platforms coincides with customers' preemptive inventory builds, lead times could lengthen and prices could rise further," adding, "the fourth quarter will be a watershed that will gauge whether the high-value MLCC market enters a full-fledged supply shortage phase."