MLCC Supply and Demand Tightens Further, Distributor Inventory Hits Record Low, Prices Rise 7%

The supply and demand for multilayer ceramic capacitors (MLCCs) is tightening further. According to a recent report by UBS, global MLCC distributor inventory has declined by another 8% compared to four weeks ago, hitting a new record low. Meanwhile, inventory value has risen by 10%, and the unit price index has increased by 7%. Driven by strong AI demand and capacity utilization reaching 95%, the trend of declining volume and rising prices is becoming increasingly evident, with supply pressure spreading from distribution channels to the broader market.

Data from UBS Evidence Lab, a division of UBS, tracking over 100 global distributors, shows that as of August 9, MLCC distributor inventory had decreased by 8% compared to July 11, further setting a new historical low. However, inventory value increased by 10% during the same period, and the unit price index rose by 7%, making the trend of falling volume and rising prices even more pronounced.

On a year-on-year basis, as of the end of July, MLCC distributor inventory had decreased by 22% compared to the same period last year, yet inventory value increased by 6%, and the unit price index rose by 13%. The current unit price index in distribution channels is approaching the highest level since January 2023, indicating that the pace of MLCC price recovery is accelerating.

UBS believes that tightening MLCC supply and demand may first emerge from AI-related demand and distribution channels, then spread further into the overall market, providing support for the operations of related companies.

Prices from major manufacturers are rising across the board.

Regarding the performance of major manufacturers, in the four-week period ending August 9, Murata Manufacturing's inventory dropped by 8%, Samsung Electro-Mechanics plummeted by 20%, Yageo Corporation declined by 1%, TDK decreased by 7%, and Taiyo Yuden remained unchanged, indicating that channel inventory continues to decline for most manufacturers.

Inventory value trends showed divergence. Murata Manufacturing increased by 8%, Yageo by 13%, TDK by 3%, and Taiyo Yuden surged by 32%, while Samsung Electro-Mechanics declined by 4%. However, unit price indices rose across all manufacturers: Murata by 6%, Samsung Electro-Mechanics by 14%, Yageo by 7%, TDK by 8%, and Taiyo Yuden by 13%.

Compared to the previous inventory cycle low, Murata, Samsung Electro-Mechanics, TDK, and Yageo have all reached or fallen below their previous levels in terms of inventory index; Taiyo Yuden is about 15% higher than its recent low point.

In contrast, inventory value indices for all companies are generally above the previous cycle low. Murata increased by 19%, Samsung Electro-Mechanics by 29%, Yageo by 45%, TDK by 3%, and Taiyo Yuden by a significant 81%, reflecting that rising prices are clearly supporting inventory value.

AI demand is driving supply pressure.

Two major Japanese MLCC manufacturers noted in their April–June financial reports that distributor demand has shown signs of overheating and indicated they may raise prices to improve supply-demand imbalances. The current unit price index in distribution channels is close to the high point since January 2023, also indicating rising market price pressure.

UBS points out that while some distributor demand may include early ordering, the rapid and significant decline in channel inventory remains a clear fact. Murata and Taiyo Yuden’s order-to-shipment ratios for April–June reached 1.47 and 1.72 respectively, and both companies forecast capacity utilization of 95% for July–September, along with upward revisions to AI-related business sales outlooks, all indicating further tightening of MLCC supply and demand.

High-end product manufacturers are expected to benefit first.

With supply and demand continuing to tighten and a price increase cycle beginning, UBS believes MLCC manufacturers with a higher proportion of high-end products are likely to benefit first. UBS maintains a 'Buy' rating for Samsung Electro-Mechanics, Murata Manufacturing, and TDK, and a 'Neutral' rating for Taiyo Yuden.

UBS’s target prices are 2.5 million Korean won for Samsung Electro-Mechanics, 13,200 yen for Murata Manufacturing, 4,950 yen for TDK, and 17,700 yen for Taiyo Yuden. The 2026 estimated P/E ratios for these stocks range from 15.7x to 65.5x, with Samsung Electro-Mechanics showing the most significant valuation premium, while TDK has a relatively low valuation at 21.5x for 2026.