Behind the "price reduction hype" of MLCC: hidden worries in the high-end market

Since the beginning of this year, the price of electronic components has risen by leaps and bounds, causing commodity prices to continue to rise. In the passive components market "rising sound", the news of Guoju price reduction is particularly eye-catching.

Earlier, foreign investment institutions released a report that the giant will reduce the price of chip resistors among dealers in greater China from September 1, by an average of about 10%. At the same time, Guojun is expected to continue to reduce the price of standard MLCC for dealers in Greater China by about 10 per cent in the next one to two months. However, as of press time, this news has not been confirmed.

The national giant was exposed to price reduction early warning MLCC market cooling ahead of time?

Since the "shortage" became more and more serious last year, this is not the first time that the state giant has announced that it intends to cut prices.

After the seal was unsealed in the Philippines in early June last year, Samsung Motor gradually restored production capacity in the local factory and began to reduce MLCC quotations of various specifications. It was reported in the market that Guoju planned to take the initiative to reduce the price by about 20% to keep the order. However, only in the past two months, the Philippines announced the re-closure of the city, so far, the epidemic in Southeast Asia has shown no signs of abating. Guoju also issued MLCC price increase notices to customers in March and June respectively.

MLCC (chip multilayer ceramic capacitor), known as "electronic industry rice", is one of the most widely used passive components in the world. In addition to the capacitor connectivity characteristics of "separating DC and AC", it also has the advantages of small size, resistance to high voltage and high frequency, wide range of operating temperature, etc., which is more suitable for mass production than electrolytic capacitors. at present, it has been widely used in communications, consumer electronics, automotive, military and other fields.

First of all, it should be clear that Guoju's price reduction is limited to the standard MLCC. Compared with automobile, industrial control and other high-end market demand, this market demand profit is much lower, followed by the adjustment of MLCC shipping prices of dealers in Greater China has little impact on the country giant.

On the premise that it does not affect one's own profitability, a comprehensive analysis of the price reduction may include three reasons: 1. Inventory level is high, eliminate inventory to improve capacity utilization; 2. Due to the continuous shortage of chips, shipments in the downstream application market are blocked, resulting in poor MLCC demand. 3. Under the background of overall price increase, increase the market share.

But in fact, since the Spring Festival production line began to work overtime, the country's giant MLCC production rate has now risen to about 90 per cent, a record high after the price hike of 2018. Industry insiders pointed out that the national giant's average inventory level in MLCC is still lower than the healthy inventory level, that is, between 90 days and 100 days.

In addition, with the comprehensive progress of 5G construction, the surge in the number of high-end smartphones and the acceleration of the "new four modernizations" of cars, the demand for MLCC continues to rise. According to Reportlinker, the global MLCC market is worth $11.89 billion in 2020 and is expected to reach $16.27 billion by 2026, with a compound annual growth rate of 4.5 per cent in the period 2021-2026. Under the huge market prospect, even if the supply of chips falls short of demand at this stage, but the new production capacity continues to open, why does Guoju want to cut prices?

At a time when the industry is worried about the early cooling of the MLCC market from the national giant price reduction news, the production capacity of the main suppliers of the high-end MLCC market, such as Murata production Institute in Japan, Sun luring Power, TDK and other factories have been plagued by the epidemic, and timely delivery is facing challenges.

Among them, the Murata studio closed one of the company's largest MLCC plants in Fukui, Japan, after finding several confirmed cases of novel coronavirus, and resumed operations on September 1 after a week of shutdown. Sun Inductive also said it suspended some operations at its plant in Malaysia until Sept. 10 because its employees were infected with novel coronavirus. Some analysts pointed out that at this time, at a time when Apple is pulling goods for new products, Sunshine is bound to have to deploy production capacity from other plants to make up the supply, and its MLCC supply pace may be disrupted.

Fukui Murata production Institute Wusheng Factory resumes work

Guoju's main factories are located in mainland China and Taiwan, and are less affected by the epidemic. In other words, Guojun's "price reduction" is more like a hype. For now, the MLCC market is unlikely to enter the cooling phase ahead of time. In the case of production facing a variety of uncertain effects, "capacity is king" is still the rule of survival.

High-end high-capacity MLCC capacity limited mobile cars bear the brunt

Market research firm TrendForce pointed out that the decline in the operating rate of the solar induction plant has led to a 5-10-day extension of MLCC delivery from the current 45-55 days. The supply of MLCC for high-end smartphones and Internet-connected devices is likely to be further strained.

According to a report released by ResearchAndMarkets, about 64% of MLCC is used in consumer electronics, of which smartphones account for about 40%. Data show that the amount of MLCC used in an iPhone X is as high as 1100, the functional configuration of the mobile phone is becoming higher, and the use and performance requirements of MLCC are also increasing. With the trend of miniaturization and large capacity, the advantages of Japanese manufacturers who master miniaturized MLCC technology and focus on high capacity are highlighted.

The global passive component industry presents a pattern of "one super and many strong". Japanese manufacturers, including Murata, Sun Inductive Power, TDK and so on, have a market share of more than 50%. Since the beginning of this year, due to the rapid recovery of automobile production, car factories and auto parts factories have actively issued orders in order to increase inventory, leading to a sharp increase in orders from Japanese electronic parts factories. The backlog of orders from many manufacturers, such as Murata production, has reached a record high, and MLCC shipments have also reached a new high in more than a decade.

Compared with the consumer MLCC, automobile industry, the MLCC safety parameters (reliability, service life and failure rate) as well as working temperature, humidity, climate and vibration resistance are required higher, and the entry threshold is higher. At present, Japanese and South Korean manufacturers, including Murata, Sun Induction, TDK, and Samsung Motor, have gradually cut back on low-and middle-end MLCC products and shifted to high-end markets such as automobiles and industrial controls. In addition to Japanese factories, Samsung Motor's MLCC revenue accounted for 92% of total spare parts revenue in the second quarter. In addition, including Guoju and Huaxinke and other Taiwan factories also continue to expand automobile MLCC production capacity.

There is no doubt that the development of new energy vehicles and self-driving technology is pushing MLCC into a new blue ocean. In recent years, many countries around the world have announced that they will phase out internal combustion engine vehicles, and the sales of new energy vehicles with more and more ECU modules are increasing. MLCC provides surge protection for ECU sensors, filters for power supplies, and eliminates EMI noise. A hybrid / plug-in hybrid needs about 12000 MLCC, pure electric vehicles and about 18000, and high-end models may even use as many as 30000 bikes. With the development of cars to L5 self-driving, the demand for advanced driving assistance system (ADAS) will increase, and the demand for MLCC will also increase exponentially.

With the global smartphone market becoming saturated and the replacement cycle generally lengthening, the auto industry is seen as the next growth market. But now the problem is that it is difficult for the downstream market to release more potential due to lack of core, and the tight supply of high-end MLCC has become a new uncertain factor. Experts cannot give an accurate opinion on when the shortage of electronic components will hit bottom, but if the shortage continues, it is bound to slow down the upgrading of the automobile industry.

In addition, MLCC production pre-investment, equipment delivery time is long, capacity construction will take time. However, the world's major MLCC production enterprises are currently expanding production and capacity, the gap between supply and demand may become a new opportunity for these enterprises to seize the market.