Summary of Key Points
MLCCs (Multilayer Ceramic Capacitors), which are as small as grains of rice, have seen their prices soar by 3 to 5 times due to the surge in demand from emerging sectors such as AI servers and new energy vehicles, with prices even changing hourly. These seemingly insignificant components act as a "quick-acting remedy" for high-end chips, as they help stabilize circuit voltages. A single NVIDIA graphics card in an AI server requires 6,500 MLCCs. The global MLCC market has long been dominated by Japanese manufacturers (accounting for 55% of the share, with 70% in the high-end AI sector), thanks to their advantages in materials, manufacturing processes, and customer relationships. Chinese companies, leveraging local emerging demands (such as new energy vehicles) and rare earth resources, are making progress across various links of the supply chain but still need to address shortcomings in material formulations, precision manufacturing, and mass production yields.
1. Why Have MLCCs Suddenly Become So Expensive? AI Servers Are the Driving Force
MLCCs are small capacitors used on circuit boards to store and release electrical charge, ensuring stable voltage for chips. High-end chips (such as GPUs) generate large current fluctuations during intensive operations, and MLCCs can quickly replenish the energy, preventing voltage instability that could cause chip failures—hence their nickname as "quick-acting remedies."
The demand for MLCCs has skyrocketed with the rise in AI servers; a single NVIDIA GB200 graphics card requires 6,500 of these components, and the number may increase to 12,000 in the next generation. Coupled with the high demand from new energy vehicles (which use 18,000 MLCCs per vehicle, six times that of fuel-powered cars), the imbalance between supply and demand has driven up prices, with merchants hoarding inventory, leading to price fluctuations on a daily basis.
2. Japanese Manufacturers Have Dominated the MLCC Market for Decades
Japanese manufacturers' dominance is not due to technological monopolies but their mastery of the manufacturing process:
1. Material Formulation Is Crucial: The ceramic medium (barium titanate) used in MLCCs must be precisely formulated—the fineness of the powder particles, the amount of rare earth added, and the sintering temperature all affect performance. For example, Murata reduced costs by using nickel electrodes and adjusted the formula to increase the rare earth content from 2% to 20%, achieving both stability and cost-effectiveness.
2. Ultra-Precision Manufacturing: MLCCs increase capacity through multiple layers; the more layers and the thinner the medium, the better. Japanese companies like TDK can produce up to 1,000 layers (each layer at the sub-micron level, finer than a human hair), while domestic manufacturers can only reach around 500 layers. Even minor errors in processes such as printing and cutting can lead to short circuits, but Japan's precision manufacturing capabilities allow them to mass-produce high-end products.
3. Strong Customer Relationships: High-end customers (such as Apple and Bosch) have extremely high requirements for MLCC stability, requiring thousands of tests before switching suppliers. Murata has maintained a 12-year partnership with Apple and has won multiple supplier awards from Bosch, creating a cycle where the strong remain dominant.
3. China's Pursuit of MLCCs: Opportunities Amid Emerging Demands and Rare Earth Resources
In the past, Chinese companies struggled to enter established supply chains in consumer electronics. However, with emerging demands in AI servers and new energy vehicles, opportunities have emerged:
- Local Demand: China is the world's largest new energy vehicle market, with production and sales expected to exceed 16 million units by 2025, each requiring 18,000 MLCCs. The demand for AI servers is also growing, and local customers are more willing to support domestic products.
- Advantageous Upstream Resources: China controls 70% of global rare earth production and 90% of refining capacity. Rare earth doping is essential for high-end MLCC performance, giving Chinese companies a significant advantage.
- Supply Chain Development: Chinese companies are making progress, with companies like Fenghua High-Tech (which has established a high-end production base) and Sanhuan Group in the finished product segment, as well as Guoci Materials and Jiemei Technology in the upstream areas of ceramic powder and release film production.
4. What Does China Need to Achieve to Overcome Challenges?
There is still a gap: In 2025, China will import $6.2 billion worth of MLCCs, with a reliance on Japanese products for high-end applications. To catch up, three issues need to be addressed:
1. Supply Chain Collaboration: Domestic companies must work together with upstream suppliers (such as those producing ceramic powder and release film) to ensure their materials and processes meet high standards.
2. Manufacturing Processes and Yields: Improving mass production yields for high-end MLCCs is critical, requiring an increase in the number of layers from 500 to 1,000 and a reduction in medium thickness from 1 micron to sub-micron levels, with precise control at every step.
3. Customer Validation: High-end customers (AI server manufacturers and automakers) need extensive testing to ensure the stability of domestic MLCCs. Only after passing these tests can Chinese products enter mainstream supply chains, fostering a cycle of demand, feedback, and continuous improvement.
Conclusion
Although small, MLCCs are essential components in high-end manufacturing. Japan has perfected their production through decades of experience, while China is leveraging emerging demands and its resource advantages to catch up. Whether China can succeed in this field tests the country's overall industrial capabilities from materials to manufacturing processes—a necessary step towards breaking into the high-end manufacturing sector.