MLCC suppliers will focus R&D and capacity expansion efforts
According to TrendForce’s recent analysis of the MLCC market, suppliers’ average book-to-bill (BB) ratio has risen slightly to 0.79 this February. The flow of orders has slowed down as seasonality affects the demand related to consumer electronics, data centers, and 5G network infrastructure.
However, orders for automotive MLCCs may be able to grow in volume due to Tesla initiating a round of price cuts on its vehicles. In view of Tesla’s aggressive pricing, other carmakers have slashed prices as well in order to retain their market shares. As a result, the flow of orders for automotive MLCCs has shown a steady momentum during the first quarter of this year. Hence, MLCC suppliers are expected to focus on automotive offerings with respect to capacity expansion and R&D throughout the entire 2023.
TrendForce points out that after experiencing the impact of the collapse of the demand for consumer electronics in 3Q22, MLCC suppliers have been witnessing a relatively stable flow of orders for automotive MLCCs. Therefore, they will be concentrating their resources on the development of automotive offerings this year. Additionally, they will be ramping up efforts to improve manufacturing process technologies and building up production capacity. Japan’s Murata as the leading supplier maintains the target of increasing its monthly production capacity for automotive offerings by 10% every year. Murata’s production capacity for automotive MLCCs is currently projected to reach 25 billion pieces per month by 2Q23. This growth will reinforce the company’s position as the market leader. The other major Japanese supplier TDK already announced in May 2022 that it plans to expand its existing plant in Kitakami, Iwate. At this plant, TDK will add 5~8 billion pieces per month for automotive offerings, and the newly added capacity is expected to enter operation in September 2024. As for other suppliers such as South Korea’s Samsung, Japan’s Taiyo Yuden, and Taiwan’s Yageo, they will also be substantially raising production capacity for automotive offerings during 2023. Their increases are expected to average around 2~3 billion pieces per month.
Turning to Taiwan’s WALSIN, it was relatively late in building up production capacity for automotive MLCCs and has now attained just around 1.5~2 billion pieces per month for these products. Still, its production capacity for automotive MLCCs is projected to reach 2.5~3 billion pieces per month by the end of this year with the new production lines that it is setting up at its plant in Kaohsiung. As for MLCC suppliers based in Mainland China such as Fenghua Advanced and VIIYONG, they have been recruiting industry talents from all over the world in recent years so as to improve their R&D and manufacturing processes. Since 2H22, these suppliers have been launching low-capacitance automotive MLCCs and expanding production capacity for these products. However, they are still facing some technological bottlenecks. Currently, their production capacity figures for automotive MLCCs average around 300~400 million pieces per month.
As carmakers slash vehicle prices to gain market share, low-capacitance automotive MLCCs have been first to face price competition
As this year moves forward, the global economy is expected to remain in a rather vulnerable state despite the recent easing of inflation in the US and Europe. Carmakers have been lowering their vehicle prices in order to stimulate demand, but this also ratchets up the price competition in the car market. From carmakers’ perspective, gaining cost advantages will be crucial. TrendForce believes the intensifying competition in the car market is going to exert a greater downward pressure on prices across the automotive supply chain. The high gross margins that MLCC suppliers have longed maintained for their automotive offerings could start to gradually shrink. Furthermore, Japanese suppliers have held large market shares for a long time, but this is also about to change as later entrants start to eat into their market shares. TrendForce projects that Murata’s, TDK’s, and Taiyo Yuden’s shares of the global production capacity for automotive MLCCs will shrink in 2023 to 41%, 16%, and 13% respectively.
TrendForce also notes that the demand in the Chinese market for electric vehicles (EVs) has been bolstered by favorable government policies. Moreover, Chinese EV developers such as Xiaomi, Huawei, and BYD started to adopt low-capacitance automotive MLCCs from Fenghua Advanced and VIIYONG in 2022. The competition among MLCC suppliers for orders related to low-capacitance automotive products began around that time as well. This year, Japanese suppliers are expected to gradually withdraw from the market segment for low-capacitance automotive products due to the fierce price competition. Instead, suppliers from Mainland China, Taiwan, and South Korea will be fighting for orders in this segment. Going forward, newly formed EV startups will be searching for ways to reduce the costs of their vehicles further. Therefore, MLCC suppliers will be attempting to undercut each other in order to capture more orders for automotive offerings during 2023.
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