What Does 2020 Hold for the MLCC Market?

Article By : Michael Welch, Smith & Associates

After 2018’s shortage, what dynamics can we expect from MLCCs now? Is more scarcity on the horizon – or is it just caution and speculation?

During my 16 years with Smith, the world’s largest open-market distributor of electronic components, I have had the opportunity to learn the IC market inside and out in my role as commodity manager. In this blog post, I offer my insights and outlook on MLCC market dynamics and how Smith can help you navigate them.

2018’s MLCC shortage left a definite impact on the global electronic component supply chain – enough so that players across strata and industries are keyed in for any dynamics that may hint at renewed scarcity. We saw normalization of MLCC supplies, pricing, and lead times across 2019.

Can we expect this to continue? Or will we see new disruptions as we continue into 2020?

We’ve heard a fair number of questions from our global partners on the topic. Here are Smith’s thoughts on the current MLCC situation.

At a glance, what is going on overall with supplies of MLCCs?

We are seeing an increase in requirements for MLCCs. Some customers appear to be testing the waters, as there have been some pockets of increased activity on selected devices. In recent weeks, we’ve received some noticeably large requirements in the open market, with quantities being requested that we have not seen since the shortage. We’re not ready to raise a red flag yet, but it is something we’ll be monitoring closely.

Yageo recently reported an increase in their demand, and – in response – they have decreased their excess inventory and accelerated their hiring labor to boost production utilization. They also reported rising lead times – extending from 45 to 90 days – and a 10% price increase on commercial products.

Samsung Electronics, meanwhile, attributes their growth in MLCC demand to 5G product introductions. In December, the company reported price increases that are expected to be maintained through at least 1H20.

What are current MLCC lead times?

MLCC lead times appear to be stable for the time being. Some distributors are continuing to work through increased inventory levels brought on by the previous allocation.

Have prices changed?

We have seen some manufacturers – like Yageo and Samsung – increase pricing over the past 12 months. While we currently haven’t yet seen significant price increases through franchised distribution channels, we are staying vigilant for any pricing shifts.

Are smaller case-size MLCCs undergoing shortages?

Not currently. We’ve seen lead times of these smaller case-size MLCCs normalize.

Have manufacturers of MLCCs added capacity to respond to or anticipate demand?

While some MLCC manufacturers have added capacity, others have stopped producing certain case sizes due to low profits. Murata recently started construction on a new production building to respond to the growing demand for MLCC products.

What is the MLCC outlook for 2H2020?

We should have a better understanding of the landscape after Lunar New Year. There have been some signs that there will be increased activity in this space, but it is still too early to make a final call. We encourage vigilance, though, as dynamics can change quickly. Smith can aid you in making sure you’re prepared to avoid any disruptions.

Are we likely to see shortages in the second half of the year?

The current shortage fears are still all speculation, and some customers are concerned and have been taking steps to be proactive. Customers continue to seek Smith’s help to understand their supply chain, and many customers have added manufacturers to their AVLs to open their options up in the event of sourcing challenges. Again – preparedness is the name of the game, especially after the industry-wide challenges we experienced in 2018.

What are some overall MLCC market takeaways?

While we haven’t noted any large-scale disturbances across MLCCs in general, it’s still best to be aware and note changing dynamics as we move further into 2020. Additionally, we have seen continued challenges around automotive and larger case sizes. We’ll continue supporting our global partners as they work to source these products and others that present challenges.

–By Michael Welch, Global IC Commodity Manager at Smith & Associates