Murata factory shuts down again! The demand for medium and low regulations in the MLCC market has shrunk seriously.

It is reported that recently, COVID-19 cluster infection broke out in "Fukui Murata Studio," the main production stronghold of Murata Studio, the leading factory of MLCC. Up to now, a total of 116cases have been confirmed, so some production lines have been shut down since January 15th.

It can be said that MLCC has an ill-fated fate in 2021. Due to the continuous production shutdown caused by the epidemic, the superimposed demand and other factors, last year MLCC once ushered in a price rise. However, after entering Q4, the demand for MLCC began to differentiate, and the major leaders "bad" the market one after another. Some people in the industry chain told reporters that the current demand for high-end specification products has returned to exuberant, but the demand for medium-and low-level MLCC products is still seriously shrinking.

The shutdown of Murata affects the demand for small high regulation is still strong.

"the market demand for high-end items continues to be robust, mainly from automobiles, servers, commercial / e-sports laptops, and the fast charging market, and there is a chance to restore the balance between supply and demand by the end of the first quarter," Chen Weisheng, an analyst at Jibang Consulting, told reporters.

At present, domestic high-quality products still rely on overseas MLCC giants, mainly Japanese enterprises represented by Murata, TDK and Sunsei, of which Murata's MLCC market share is up to 40%. The shutdown of the Murata Fukui Wusheng plant mainly produces high-end consumer specifications MLCC, production capacity accounts for 20.7% of the whole company. It is reported that the current production reduction or shutdown of some items will affect the supply of servers, high-end smartphones and other products, but there are still 4-6 weeks of inventory in the factory at this stage, which should not cause a shortage of supply in the market in the short term.

This is not the first time Murata has stopped work and production because of the epidemic. According to public reports, a new crown cluster infection occurred at the Fukui Murata studio in August 2021, when all production lines were suspended.

Although demand has been high for a long time, high-specification MLCC also ushered in a wave of price cuts in Q4 last year due to problems such as supply chain imbalances. In September 2021, Guoju was the first to issue a price reduction letter, and in November, the head of Murata also said publicly that the company's order taking situation has declined, and the September order shipment ratio (Bhand B value) has fallen below the "1" that represents an uptick in the economy. Mainly because the client is restrained by long and short materials, the pulling kinetic energy of passive components slows down.

It is gratifying to note that the demand for high-specification MLCC has been gradually restored. Wang Weisheng told reporters, "this year, high-end MLCC is expected to be robust and prosperous throughout the year due to the mainstream market, such as car use, cloud data center service expansion and meta-universe craze, 5G base station construction, Netcom product WiFi6/6E platform upgrade and so on."

In the domestic market, domestic enterprises have also been frantically moving towards high-end products in the past two years, and they are expected to have more say after the release of production capacity.

Third Ring Group (300408.SZ) raised funds twice last year to carry out the project of "high capacity series multilayer chip ceramic capacitors" and "5G communication high quality multilayer chip ceramic capacitors". After reaching production, the total annual production capacity of MLCC will be increased by 540 billion; Fenghua Hi-Tech (000636.SZ) also started fixed production expansion in 2021, and plans to achieve high-end MLCC monthly production capacity of about 45 billion units when reaching production in 2024.

The mobile phone market is down, the low-specification market is depressed.

High specifications "return to the peak", while low specifications continue to decline. "at present, the medium and low regulation MLCC market has been in the doldrums, and our orders have decreased by about 1/4 from the previous year," a domestic MLCC manufacturer told reporters. "due to the lack of chips, falling demand and other reasons, our orders from downstream mobile phone manufacturers have dropped sharply."

The mobile phone market in 2021 is indeed very negative. Global smartphone shipments fell 6 per cent in the third quarter of 2021, according to a report by Canalys, an international research firm. The main reason is that it is difficult for suppliers to meet the demand for equipment when there is a shortage of components.

In addition to mobile phones, the residential economy has faded, and consumer electronics such as laptops are also declining. Wang Weisheng told reporters that the market trend of high-end and low-end consumption regulation MLCC is different, and the middle and low-end consumption regulation items are limited to mobile phones, tablets, laptops and other products due to slow terminal demand, coupled with the fact that market inventory still needs time to digest, and the short-term oversupply structure is not easy to change.

However, at present, the products of the main MLCC manufacturers in China are mainly in low and medium specifications, and the market share is very low. According to public data, the mainland's MLCC track "players" are mainly Fenghua Hi-Tech, Sanhuan Group, Yuyang, Weirong and so on, with a total global market share of 4%. As a result, the market for low-grade products is in the doldrums, or it may cause more harm to domestic enterprises.

"as the global inflation pressure on ridges continues in 2022, raw material prices continue to rise, sea and air freight rates continue to rise, and the expenditure on daily necessities increases sharply, which will depress the purchasing power of terminal consumption. Under the inflation cap, the downside risk of consumer product demand increases, which is bound to create tremendous pressure on many mainland manufacturers and suppliers who take medium-and low-level consumption rules as the main production force, and the risk of overcapacity increases." Wang Weisheng told reporters.

As for the future trend of medium and low-level MLCC, Wang Weisheng said: low-and medium-level MLCC still have to survive the demise of inventory and the suffering of long-and short-term materials in the first half of the year, and have the opportunity to make the best of it in the second half of the year and usher in the demand momentum of the past.