The MLCC sector is widely seen as a cyclical growth industry, with prices swinging sharply during upswings. Looking back at the last two market cycles, shifts in supply were the main driving force. Steady growth in market demand created a supply shortage, which pushed prices up. As prices rose, distributors and end customers built up more inventory, driving prices even higher. The trend only reversed when high inventory levels met weaker demand.
Demand for MLCCs from AI-powered data centers is surging. AI servers run at higher power, leading to a sharp rise in demand for small-sized, high-capacitance MLCCs. From regular servers to 8-card servers and rack servers, the MLCC usage per server card has jumped several times over.
We estimate that AI servers will need more than 200 billion pieces of MLCCs by 2028. These MLCCs have strict specifications, and each unit takes up 4 to 7 times more production capacity than standard products. Combined with fast-growing demand for regular servers, the equivalent shipment volume of MLCCs for data centers will top 2 trillion pieces in 2028, accounting for 20% to 25% of the total market. This will lift the industry’s overall demand growth rate to over 15% in 2027 and 2028, compared with below 10% from 2023 to 2026.
A new business boom is on the way. The industry saw slow growth in past years, so major manufacturers have been cautious about expanding production. Limited production equipment and raw materials also make it hard to add large new capacity in the short term. We expect the supply-demand balance to tighten further in the second half of this year, and a notable supply gap will emerge in the next two years.
At present, leading global MLCC producers are running factories at high capacity utilization rates, and some have started to raise product prices. We believe a new upward cycle has begun. We recommend domestic leading MLCC maker Sanhuan Group, and also suggest keeping an eye on Fenghua Hi-Tech. For upstream suppliers, you may follow Jiemei Technology and Tianli Holdings, which provide paper carrier tapes and release films.
Risk Warning: Capital expenditure cuts by overseas cloud service providers, intensifying market competition and falling product prices.
UF capacitors, produce PIN to PIN alternative to replace tier-1 brands at better price, lead time around 2 weeks for majority parts. If you are seeking a reliable Chinese manufacturer to mitigate price hikes from major brands, please send your RFQ for interested parts to: connie@ufcapacitors.com.
Please refer to the cross-reference list below.
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UF Capacitors' |
Vishay |
TDK/Epcos |
Murata |
AVX |
Kemet |
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VJ0201 Series |
C1005 Series |
GRM Series |
0603 Series |
C0201 Series |
