CURRENT MARKET ENVIRONMENT: SHORTAGES OF MLCC: December 2017 Quarter
Demand for multilayered ceramic chip capacitors (MLCC) exceeded supply in November 2017 as lead times began to stretch out to the 20-week average mark for all case sizes combined. MLCC demand began to increase in January 2017 as major manufacturers of ceramic chip capacitors in Asia began to suggest that demand from the handset manufacturers and the automotive end markets was stronger than anticipated. In primary interviews with Murata and Samsung EMCO, Paumanok Publications, Inc. also realized that demand was increasing for high capacitance MLCC at an alarming rate as next generation products in multiple segments were viewing MLCC in the 100, 220 and 330 range as standard parts. To address the rising demand, manufacturers of MLCC in Asia were reluctant to add capacity because of data suggesting that the number of Smartphones being sold had reached maximum exposure to global populations. This was further supported by financial data from the major global MLCC manufacturers in Japan, Korea and China, that illustrated a FY 2017 slowdown in sales of MLCC to the handset business. As the data suggests in the following lead time table, by May 2017 at the Electronic Distribution Show in Las Vegas it became apparent that lead times for MLCC were not levelling off and that a certain level of concern was being injected into the supply chain which further resulted in a greater urgency to obtain MLCC before the holiday buying season began in earnest. (See Figure 1)
Ceramic Capacitors: Lead Times By Type and Case Size (In Weeks): January 2013-Nov. 2017
Source: Paumanok Publications, Inc. “MLCC: World Markets, Technologies and Opportunities: 2017-2022”
Forecasted Global Shift in MLCC Revenues for FY 2018:
For the fiscal year ending March 2018 Paumanok predicts that vendor revenues for MLCC will have risen on a global basis by as much as 30% in US dollar value. Due to the fact that the top manufacturers of MLCC are transparent in their financial revenues and forecasts for the 2018 fiscal year, Paumanok notes that revenues for the top vendors of MLCC are expected to rise 30% on average in US dollars year-on-year with manufacturers who have a larger portion of their factories dedicated to high capacitance MLCC production having higher growth rates for the 2018 Fiscal Year. Primary sources in Asia confided in Paumanok- noting that demand was real coming from the handset and module businesses and demand from automotive was coming from channels in Asia that traditionally had not been in the automotive chain as consumer electronics brand companies scramble to get designs in for sub-assemblies to be consumed in hybrid electric and electric vehicles and connectivity products for the automotive passenger compartment.
Forecasted Growth Rate for MLCC in FY 2018 Compared to Other Dielectrics
Paumanok also predicts for the 2018 fiscal year that the global value of ceramic capacitors will increase to 62% of total capacitors sold worldwide in US dollar value, up from 59% in FY 2017, a significant increase as early data suggests that ceramic chip capacitor demand is growing at a rate that exceeds its tantalum, aluminum, plastic and carbon cousins.
MLCC: Shifts in Raw Materials Pricing FY 2017- FY 2018
The following chart illustrates the reaction of specific metals consumed in the production of base metal and precious metal type MLCC. The reader should know that high capacitance MLCC with hundreds of ceramic layers in a tiny chip employ nickel electrodes and copper terminations. These MLCC are traditionally consumed in handsets, computers and consumer electronics and have been an enabling technology for providing immediate capacitance in extremely small case size parts. MLCC also consume palladium electrodes and silver terminations in low layer count MLCC applications. These low layer count MLCC are usually consumed in value-added and application specific electronics, including automotive, medical and defense end – markets, for example. While we note that many types of MLCC are in short supply in the December 2017 quarter, the greatest value proposition and return on investment for ceramic capacitor manufacturers will be most pronounced in FY 2018 coming from the high capacitance MLCC segment for parts in the 100, 220 and 330 microfarad range which command the highest prices and some of the best margins.
In the chart below we note that raw materials pricing for all key metals consumed in the electronics industry are increasing in 2017 with copper and palladium the materials showing the greatest increase in price impacting MLCC.
Source: Paumanok Monthly Raw Material Index for Passive Electronic Components: November 2017- Palladium and Silver Prices Are Per Troy Ounce, while Nickel and Copper prices are Per Ton
Thick Film Chip Resistor Lead Times Almost Double in November 2017
Thick film chip resistor lead times almost doubled in November on a month-to-month basis. Lead times for ultra-small 0201 thick film chips increased by 10 weeks in November to 24 weeks, while the larger case size thick film chip resistors in the 0402 to 1206 case sizes increased from 18 weeks to more than 30 weeks, signifying a serious shortage of thick film chip resistors, a shortage that far exceeds that for MLCC at this writing.
Source:Paumanok Publications, Inc. Monthly Market Research Report
Ruthenium Price Responds to Resistor Demand in November 2017
The price of ruthenium metal has skyrocketed to $150 US dollars per Troy ounce in November 2017 on a month-to-month basis. The overall price of ruthenium, whose primary use is as a thick film paste in thick film chip resistors has increased by 275% in value since February 2017 as a direct result of the demand coming from the resistor industry.
Source: Paumanok Publications, Inc. Monthly Market Research Report
Summary and Conclusions
For 2017 we are noting a significant increase in lead times for MLCC and thick film chip resistors, the two largest volume electronic components in the world. The combined output of MLCC and thick film chip resistors will be more than three trillion units for the year, although we expect that the majority of growth for the year will be in dollar value due to customers paying more for both commodities in order to get parts for the holiday season and beyond. Raw material prices are also giving us an indication of increased materials demand coming from the component manufacturers. This is paramount in materials such as ruthenium and palladium for 2017.