The Chinese automotive market is experiencing a price war for automotive-grade MLCC products

Market research firm TrendForce predicts that MLCC shipments will hit a three-quarter low in the first quarter of 2024.

In the second quarter, AI server demand continued to grow steadily, while other consumer electronics orders were lower than expected due to traditional seasonal demand and preparations for China's May Day holiday and 618 shopping festival. Overall, AI server orders and stable ICT product demand (although without high seasonal growth) helped stabilize capacity utilization. As a result, MLCC shipments are expected to grow 6.8% to 1.2345 trillion units in the second quarter, which will also drive a slight increase in revenue during the same period.

In the United States, the ECIA trade association reported that sales in the broader category (passive and electromechanical components) improved in April from the previous month. The expectation for May is that market sentiment will continue to rise as passive and EM components continue to exceed the ECIA index baseline of 100, reaching 133.4 and 124.6 respectively.

MLCC's BtB ratio is expected to be about 0.92 in the second quarter

TrendForce pointed out that due to factors such as price and application, consumers' interest in AI-related products has not met expectations. For example, the average monthly ODM orders for Meteor Lake models of US commercial notebook brands in the second quarter are only 200,000 to 240,000 units, a significant drop from the usual monthly level of 500,000 units for new platforms in the same period. In addition, in the Chinese smartphone market, only Huawei maintained stable inventory due to the hot sales of the new Pura 70 series, while the inventory of other brands slowed down, resulting in a 5-7% month-on-month decline in MLCC orders.

Due to the stable demand in the ICT industry in the second quarter, OEM and ODM manufacturers are more conservative in planning MLCC orders, so MLCC suppliers are also more cautious in managing production capacity and inventory, mainly focusing on emergency, short-term and transfer orders. TrendForce believes that if ODM manufacturers maintain the current stocking rhythm, the average order-to-shipment ratio of MLCC suppliers in the second quarter will rise slightly to 0.92, a 2.2% increase from the previous quarter.

China's automotive-grade MLCC product price war begins

Due to the continued sluggish growth in market demand in the first half of the year, suppliers have become increasingly cautious about the traditional peak season demand in the second half of the year. In late May, MLCC suppliers began to negotiate prices with ODMs for the third quarter. As OEMs are more conservative in planning peak season orders, the average quarterly increase is only 8%~10%, which is lower than the previous peak season level, and consumer-grade product prices remain stable or slightly decline. MLCC suppliers only adjust prices for some large-capacity or special-specification products to prioritize demand growth in industries such as AI servers.

In contrast, the Chinese auto market is experiencing a price war for automotive-grade MLCC products as Chinese automakers make a big push into the domestic and European markets. This competition continues despite the recent sharp increase in U.S. import tariffs on Chinese electric vehicles.

The Chinese government is actively promoting the development of industries such as electric vehicles, batteries, and solar panels, attracting European automakers to cooperate with Chinese companies in development and production. For example, the cooperation between Volkswagen and Xiaopeng Motors, Stellantis and Leapmotor, and Mercedes-Benz and Geely. Therefore, MLCC suppliers may continue to adjust prices every quarter to meet customer demand, putting prices under pressure.

Given the growing importance of the Chinese market, MLCC suppliers are facing increasing pressure to maintain their position in the Chinese market.

Mainstream manufacturers

Murata: 

Optimistic about the demand for MLCC in the computer market, especially in the fields of personal computers and AI servers. In the fourth quarter of fiscal year 2023, the capacity utilization rate of its main MLCC production facilities was 80-85%. In fiscal year 2024 (April 2024-March 2025), the capacity utilization rate is expected to be 85-90%.

Samsung Electro-Mechanics: 

Despite the decline in full-year performance, Samsung Electro-Mechanics' component division responsible for MLCC business in the first quarter of this year achieved sales of 1.023 trillion won, a significant increase of 24% compared with the same period last year. Due to the seasonality of smartphones and personal computers in North America, demand for IT MLCC has been weak, but the supply of MLCC has expanded.

TDK: 

It is expected that the consolidated net profit will increase by 5% year-on-year in fiscal year 2023, and it has implemented expansion and invested about 50 billion yen in the construction of a new production building to increase MLCC production capacity to cope with the increase in demand for electric vehicles.

Yageo: 

In the first quarter of this year, the performance increased by 4.2% quarter-on-quarter. In terms of subdivided products, MLCC accounted for 20%, tantalum capacitors 16%, resistors 13%, magnetic components 30%, sensors 12%, and other components 9%. .

Sanhuan Group: 

Achieved a technological breakthrough of 1 micron thickness of MLCC dielectric layer and entered mass production. Products cover mainstream specifications. High-capacity MLCC for automotive use has passed automotive certification and has begun to be introduced into the automotive supply chain.

Huaxin Technology: The new plant for automotive MLCC and resistors is planned to be operational this year, with a production area of 19,500 square meters.

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