The allocation of Murata’s primary production hubs and production capacity is as follows: 56% in Japan, 36% in China, 3% in Singapore, and 5% in the Philippines, according to TrendForce’s investigations. Recently, a cluster of employees at Murata’s Fukui Takefu Plant tested positive for the COVID-19 virus. Since production diversion management had been strengthened and anti-pandemic measures implemented in advance, only some categories of production capacity have been reduced or suspended and this incident has not halted production for the entire factory. According to TrendForce, the Fukui Takefu Plant accounts for 20.7% of the company’s production capacity, mainly producing high-end consumer MLCCs. The current production reduction or suspension of some items will affect the supply of products such as servers and high-end smartphones. Fortunately, Fukui Takefu still retains 4~ 6 weeks of inventory and this incident should not tighten market supply in the short term.

Decentralized production hubs and off-site backups are major issues for MLCC suppliers after the pandemic

In addition, according to data released by the National Health Commission of the People’s Republic of China on January 17, the cumulative number of COVID-19 cases as of January 16 reached 163, including 80 in Tianjin and 9 in Guangdong, distributed among the production center of suppliers such as SEMCO, TAIYO, WALSIN, FENGHUA, and VIIYONG. The current situation will once again test the operation and risk management of MLCC suppliers as they disperse production hubs and back each other in terms of production capacity.  These plans have become an important 2-3 year strategy for MLCC suppliers.

It is worth noting that the recent pandemic outbreak in Tianjin, China is intensifying. Samsung, which is located in the Tianjin Economic-Technological Development Area, is currently operating normally. However, as the Winter Olympics opening ceremony draws near, China has stepped up its zero-COVID policy. In order to avoid a situation in which employees are unable to return to the factory due to a positive COVID test in the area where they reside, some production line employees have been temporarily living in the factory. Korean executives are also living in the factory to enhance response times to rapidly developing circumstances. In addition, the Philippines, one of the major production centers of MLCC in Southeast Asia, has also experienced a sharp increase in the number of confirmed COVID-19 cases since January this year. Murata and Samsung, who currently have factories in the region, have not reported the impact of the local pandemic and TrendForce will continue to monitor these two industry players moving forward.

After Malaysia extended its MCO (movement control order) 3.0, the Filipino government also announced the implementation of ECQ (enhanced community quarantine) measures in Metro Manila until August 20 in response to the Delta variant’s rapid spread in Southeast Asia that began in July. According to the August edition of TrendForce’s MLCC Market Bulletin, Japanese MLCC supplier Murata operates a manufacturing facility in Tanauan City, primarily for large-sized automotive MLCC (0.06 x 0.03 inches to 0.12 x 0.06 inches) production.

This facility manufactures capacitors that meet the auto industry’s requirements of high capacitance, high voltage, and high temperature tolerance, and its monthly automotive MLCC production capacity accounts for about 18% of the industry total. As demand from the automotive market increases, Murata’s Tanauan-based facility is expected to maintain a high capacity utilization rate going forward.

Samsung likewise operates an MLCC manufacturing facility in the Philippines, albeit in Calamba City. While the Calamba facility is primarily responsible for manufacturing normal MLCC (which are low-end and mid-range MLCC with standardized size/specs), its monthly normal MLCC production capacity accounts for 15% of the industry total and is second only to Samsung’s Tianjin-based facility. As well, the Calamba facility operates at a capacity utilization rate of more than 90%.

TrendForce’s findings indicate that the aforementioned facilities are located approximately 67 km south of Manila and therefore do not fall under the ECQ order as yet. The two facilities are operating and shipping as normal. However, should the emergency implementation of ECQ in Metro Manila fail to contain the Delta variant, the pandemic would likely to make its way south, in turn affecting the two facilities. Both Murata and Samsung are on high alert against such an eventuality. On the other hand, given that Malaysia has yet to recover from the ongoing pandemic and lift its MCO 3.0 restrictions, Taiyo Yuden’s Malaysia-based MLCC manufacturing facility is operating at 80-85% capacity. The resultant shortfall of high-end MLCC supply will likely make it difficult for ODMs to procure sufficient high-end MLCC in 3Q21.

Various governments in Southeast Asia have implemented nationwide or regional lockdowns as well as movement control orders in order to curb the spread of the pandemic. As such, MLCC suppliers including Taiyo Yuden, Murata, and Samsung, all of which have facilities located in Malaysia and the Philippines, are now confronted with an increasing risk of uncertainties regarding their production capacities and shipment schedules. Looking ahead into the peak procurement period of 3Q21, TrendForce expects some ODMs to redirect their low-end and mid-range MLCC orders to Taiwanese suppliers such as Yageo and Walsin in the short run.

Recent reemergence of COVID-19 in China threatens the lifeblood of MLCC production

Home to 55% of the world’s MLCC production bases, China has seen a reemergence of the pandemic in August in Nanjing and Zhangjiajie. It should be pointed out that Murata and Yageo operate major MLCC manufacturing facilities in Wuxi and Suzhou, which, much like Nanjing, are also located in the province of Jiangsu. Should the pandemic continue to worsen in China, the global supply of MLCC would undoubtedly sustain significant damage as a result. Despite China’s aggressive efforts to contain the pandemic through comprehensive population testing and movement controls, the spread of the Delta variant still poses a global threat. Therefore, aside from the current state of disease containment in Southeast Asia, how China manages its pandemic situation will become another vital point of observation for the MLCC market.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

The indefinite extension of Malaysia’s MCO (movement control order) 3.0 has posed severe challenges for the global MLCC market, according to TrendForce’s latest investigations. The high-end MLCC segment, in particular, is expected to suffer the most severe shortage, and products that feature high-end MLCC, such as smartphones, notebooks, networking products, server, and 5G base station components, will likely experience a corresponding impact as well. With the imminent arrival of the traditional peak season for electronic products, ODMs may need to defer their whole-unit shipments due to potential delays in some MLCC shipments.

TrendForce indicates that some Japanese companies (MLCC suppliers Taiyo Yuden, crystal suppliers NDK and Epson, and electrolytic capacitor supplier Panasonic), as well as Taiwanese companies (R-Chip supplier Walsin Technology, etc.) have had their Malaysia-based manufacturing operations and lead times disrupted as a result of the latest MCO 3.0 extension. Notably, Taiyo Yuden was able to partially resume its Malaysian fab operations on June 14 and activate about 60% of its work force in accordance with domestic regulations, thereby gradually ramping up its domestic capacity utilization rate to 80%. However, given the extension of MCO 3.0 through July, Taiyo Yuden will unlikely be able to raise its production capacity any further.

According to TrendForce’s latest findings, most MLCC suppliers currently carry a healthy level of about 60 days’ worth of low-end and mid-range MLCC inventory as of June, although Japanese suppliers are still carrying less than 30 days’ worth of high-end MLCC inventory. In view of the persistent MCO 3.0 restrictions in Malaysia, MLCC suppliers with Japan-based manufacturing operations, such as Murata, Kyocera, and Samsung, are expected to benefit from client orders redirected from suppliers whose operations are primarily based in Malaysia.

Japanese suppliers are scrambling to ramp up capacity utilization rates in response to influx of orders from ODMs in 3Q21

With regards to various end products, Murata, Taiyo Yuden, and Kyocera, all of which are major suppliers of MLCC for iPhone and MacBook Pro, will see peak demand from 3Q21 to 4Q21 due to Apple’s upcoming release of new products in 3Q21. It should be pointed out that the MLCC used in Apple devices features specifications that are compatible with many notebooks, servers, and networking products from other manufacturers. Given Taiyo Yuden’s inability to raise its capacity utilization rates in July, ODMs are expected to aggressively compete for this particular type of MLCC in 3Q21.

On the other hand, demand for servers is expected to undergo a steady growth in 3Q21. Hence, not only are ODMs closely monitoring the supply of various ICs, but the extended restrictions in Malaysia has also hindered the supply of certain passive components, such as SP-Caps, Tan caps (tantalum capacitors), and high-end MLCC. To mitigate potential risks of their ODM clients redirecting orders for the aforementioned components elsewhere, Murata and Kyocera have now been placing a top priority on expanding their production capacities to meet client demand.

Finally, the overall demand for other IT products such as Chromebooks will likely experience a slowdown in 4Q21 as increased vaccinations in Europe and the US lead to a gradual easing of border restrictions. In addition, ODMs currently carry a relatively high level of low-end and mid-range MLCC inventory on average. As a result, low-end MLCC suppliers, such as Yageo, Walsin, and Samsung, will likely face pressure from certain clients lowering their orders for low-end MLCC.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com