The shortage of multi-layer ceramic capacitors is projected to continue for at least another year, according to industry executives. Many manufacturers plan to ramp up production over the next year as electric vehicles, factory robots and other applications drive up demand and make the parts harder to locate. But it is unclear whether manufacturers are going far enough.
These capacitors—more commonly known as MLCCs—are an essential part of almost every electronic device, helping to control the flow of electricity to the semiconductors inside. Smartphones have hundreds of these tiny devices, which cost less than a penny apiece, while every car uses thousands in each vehicle. The MLCC market is projected to grow from $5.5 billion to $7.4 billion over the next five years.
The shortage is exacerbated by the limited number of companies that produce MLCCs. Samsung Electro-Mechanics, Murata, and Taiyo Yuden are three largest manufacturers, holding 60 percent of the total market, according to Paumanok Publications. Murata plans to add another 10 percent of manufacturing capacity. Two months ago, Samsung said it was overwhelmed and would halt new orders.
“The capacity increases the industry is installing will come close to the demand of today, but not the demand of tomorrow,” said Per Loof, chief executive of Kemet, on a conference call with analysts last month. “These capacity increases are lagging 18 months behind the demand.” He said that Kemet’s annual revenues would grow 12 percent over the next year, up from its previous guidance of five percent.
“We can’t deliver more, but we’re delivering what we have,” Loof said.
The shortage is pressuring customers to consider alternatives, including tantalum-based polymer electrolytic capacitors (KO-CAPs), where the thickness and voltage allows. Kemet and other manufacturers are having trouble serving new customers and are boosting MLCC prices. Companies are careful about adding too much manufacturing capacity because they could be strapped with the leftovers.
Kemet executives say that the component shortage has become more severe since last year and it could continue for at least another year as the company invests more into manufacturing capacitors. The company reported revenues of $327.6 million in the last quarter, about 20 percent higher than the same quarter last year. Kemet’s margins also improved slightly, to 29 percent.
John Sarvis, chief executive officer of AVX, is facing the same challenges. The Greenville, South Carolina-based company plans to manufacture 20 percent more capacitors—ceramic and tantalum—over the next year. “But what we're seeing there is the delays and the longer lead times and the equipment manufacturers now are kind of limiting our ability to expand at a faster rate,” he said on a recent earnings call.
There other factors are intensifying the shortage. Many manufacturers are ramping up production of capacitors with smaller sizes and higher capacitance used in applications like cars and smartphones. Other companies are moderating production of capacitors for industrial and other markets since the margins are lower, according to industry analysts and electronics distributors.
In April, TTI said that manufacturers are focusing on "less commoditized technologies" with high voltage and flexible terminations, which are aimed at high-reliability markets like automotive and medical. "So while manufacturers are adding capacity, it’s generally not for commercial commodity parts – making this market condition even more difficult to navigate," the company said.
No one knows precisely how long the shortage could last. The Trump administration’s tariffs on Chinese imports could cool down production of electronic devices that use capacitors. The 25-percent tariffs impact certain types of capacitors, including a number of products manufactured by Kemet. The company said that it would charge customers to cover the additional costs from the tariffs.
