Recently, a core piece of news has been making waves in the electronic component market - the Japanese passive component giant Murata has initiated internal discussions regarding the price increase of MLCCs. 

In other words: The "big brother" of the global MLCC market might also have to raise its prices. 

From "Spotty Increase" to "Systemic Increase"

MLCC (Surface Mount Multilayer Ceramic Capacitor) is a fundamental component that is indispensable in almost all electronic devices. Mobile phones, automobiles, servers, industrial control - wherever there is a circuit board, it is needed for filtering, coupling, and bypassing. That's why it is called "rice of the electronic industry" in the industry.

This round of passive component price increase actually began to show signs last year in the second half of the year, but at that time, the products that increased in price were relatively scattered: some were aluminum electrolytic capacitors, some were inductors, and some were magnetic beads. The paces were different, and the price increases fluctuated between 5% and 30%. But once Murata officially announced the price increase, the logic completely changed.

Murata is the largest manufacturer of MLCC in the world with the most advanced technology. Its price actions have absolute industry benchmark significance. Once Murata takes action, major manufacturers such as Samsung Electro-Mechanics, Avago, and Huaxinke are likely to quickly follow - the price increase of passive components will evolve from "each doing their own thing" to "systemic resonance". 

Why is this time different from before?

Take a look at the historical price increase cycles of MLCC. There was a price increase in 2017-2018 (a shortage period), and another one in 2020-2021 (due to the pandemic and the surge in home office and automotive applications). But this time, there are three distinct underlying driving forces.

First, AI servers have become the new "money-eating beasts".

This round of MLCC price increase is different from the past cycle dominated by consumer electronics. Here is a set of intuitive data comparison: The MLCC usage of a traditional general-purpose server is approximately 3,000-4,000 pieces, while a high-end AI server with multiple GPUs will have an MLCC usage of over 10,000 to 12,000 pieces. Not only is the usage doubled, but due to the high power consumption and extremely high instantaneous current of AI chips, these new demands are almost all directed towards high-temperature and high-capacity high-end specifications (such as X7R/X7S materials, even automotive-grade). This explosion of demand represents a real and continuous structural increase. The research report of CICC also confirms this: Currently, it is a "structural price increase", and for MLCC, "used in AI servers" and "used in mobile phone peripherals" are facing completely different supply and demand situations.

Second, the rigid transmission of raw material costs.

The cost of MLCC mainly lies in ceramic powders (such as high-end barium titanate) and the inner and outer electrode metal materials (such as precious metals like nickel, palladium, and silver). Recently, the prices of upstream commodities and basic materials have been in a continuous high-oscillation state, coupled with the high preparation cost of high-specification ceramic powders, the material cost of passive components has been directly pushed up. The underlying logic of this round of price increase, the rigid transmission of costs, is a real existence.

Third, structural capacity squeeze, "high-end squeezing low-end".

MURATA and other Japanese leading companies have been undergoing strategic transformation in recent years, shifting their production capacity significantly to high-profit and high-barrier-to-entry fields such as automotive electronics, industry, and AI. This resource shift objectively contracted the supply of mid-to-low-end general-purpose MLCC. When high-end demand is strong, large manufacturers will move more production lines to produce high-end products, and then the middle and low-end will start to experience structural shortages. This is called "high-end squeezing low-end" - a cycle law that repeatedly appears in the component industry. 

What should procurement and supply chain focus on?

For the capital market, this might be a theme party for the passive components sector; but for the frontline end-ware manufacturers and supply chain practitioners, this is a delivery exam that must be prepared for seriously.

What should we do now? The procurement and R&D selection need to pay attention to the following three points:

• First, clearly distinguish which type of MLCC is increasing in price. The distribution of the varieties in this round of price increase is not uniform: general-purpose, medium and low capacitance MLCC are mainly driven by cost, with relatively moderate price increases; while AI server use, automotive-grade, and high-capacity MLCC are driven by demand, with more tight supply and more likely to be out of stock. When getting the supplier quotations, it is necessary to first clarify which product line is adjusting the price.

• Second, the delivery signal is more important than the absolute price. Currently, the lead time (Lead Time) of some high-end MLCC models has begun to lengthen. If you are doing new project hardware selection or just in the preparation window period, ordering now and waiting for two months later may result in completely different outcomes. Even if the price increases can be negotiated, the stretched delivery period can block the entire product launch.

• Third, avoid blindly hoarding in a "one-size-fits-all" manner. This is a structural market cycle, not the panic shortage of all categories in 2018. If all specifications are doubled in anticipation of the most pessimistic expectations, it will not only occupy the company's cash flow but also easily form stagnant inventory. The rational approach is: for categories with high demand certainty and weak substitutability, such as high capacitance and automotive-grade, prioritize securing supply from the original factory or agents; for general specifications for consumer use, maintain normal safety inventory, and respond calmly.

The window period for domestic substitution has reopened.

One noteworthy sub-thread is that during this round of market conditions, domestic MLCC manufacturers (such as Fenghua Hi-Tech and Sanheng Group, etc.) not only face cost challenges but also have an excellent opportunity to break through.

Japanese major manufacturers have continued to raise prices and extend delivery times for high-end MLCCs, objectively opening up importation space for domestic manufacturers. If domestic high-capacity products can pass the reliability verification of major end-users, this round of market conditions actually serves as a catalyst to accelerate the penetration of domestic products.

This also serves as a reminder for hardware enterprises: Beyond the main suppliers, it is time to accelerate the assessment and introduction of one or two high-quality domestic alternative solutions to hedge against the risk of excessive concentration in the supply chain. Conclusion

The price increase of MLCC has evolved from "random fluctuations" to "a collective trend". The underlying factors are the rapid growth of AI computing power, fluctuations in raw materials, and adjustments in production capacity.

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