AI Boom Triggers Global MLCC Crisis as Prices Skyrocket Up to 20x

The MLCC Market Surge: A Global Supply Chain Crisis

In Shenzhen’s Huaqiangbei electronics market, a component no larger than a postage stamp has become the hottest commodity this year. Chinese vendors of multilayer ceramic capacitors (MLCCs) are experiencing a massive wave of soaring prices driven by the global artificial intelligence boom. These tiny components are essential for regulating electric currents, and their importance has led to a scramble among manufacturers worldwide to keep up with demand from AI server clusters and electric vehicles.

The resulting supply crunch has sent the spot market into overdrive, with prices jumping two- to fourfold since Chinese New Year for high-capacitance MLCCs. According to a distributor surnamed Wu, who mainly sells components from Japanese industry leader Murata Manufacturing to fellow traders and secondary distributors, there are no signs of prices cooling down.

While high-capacity components are driving demand, the price hikes are hitting the spot market across the board. Some models have surged from 10 yuan per 1,000 units to 40 yuan (US$5.90), Wu said. However, while inquiries are flooding his shop, actual transactions remain sluggish as buyers balk at the inflated price tags.

Other merchants report even steeper climbs that began accelerating through April and May. One merchant surnamed Zheng, who deals in MLCCs from South Korea’s Samsung Electro-Mechanics (SEMCO) and domestic firms like Chaozhou Three-Circle Group, said that highly sought-after models, such as the 0805 22μF MLCC, have seen prices skyrocket by over 20 times.

Both imported and domestic products have been surging, Zheng said. Another trader of SEMCO MLCCs said that frequent stock shortages have plagued his business since April due to production struggling to keep pace with demand.

What is playing out on the chaotic floors of Huaqiangbei is what Goldman Sachs has described as “the largest and longest cycle in history.” Leading Japanese and South Korean manufacturers are currently inundated with orders, fuelling expectations of a severe, prolonged supply crunch.

Industry Warnings and Market Projections

The industry is increasingly facing the risk of a “structural shortage” in the second half of this year, according to a report released on Wednesday by Taipei-based market research firm TrendForce.

Next-generation AI platforms are undergoing frequent design modifications in their final qualification stages, drastically multiplying the number of high-end MLCCs required per motherboard, the firm said.

The usage of one type of MLCC in Advanced Micro Device’s MI450 platform recently surged by a staggering 632 per cent – jumping from 1,440 units per board to 10,544 units – after engineers swapped out all aluminium electrolytic and tantalum capacitors, TrendForce said.

The report noted that MLCC demand would hit a “new peak” later this year as tech giants like Google, Amazon Web Services and Meta Platforms ramp up production for their custom AI chips.

As major manufacturers prioritise long-term contracts, clients relying on the spot market face hefty price premiums and severe shipment delays, TrendForce said.

Rising Prices and Market Challenges

According to macro research firm Citrini, spot and distributor prices for consumer-grade MLCCs have already risen 20 to 40 per cent due to defensive stockpiling and double-booking.

This trend highlights the growing challenges faced by businesses reliant on the spot market, where prices are volatile and availability is uncertain. With demand outstripping supply, companies are forced to navigate a complex landscape of rising costs and logistical hurdles.

The situation underscores the critical role that MLCCs play in modern technology and the broader implications of supply chain disruptions. As AI continues to evolve and expand, the need for reliable and affordable components will only grow, making the current market dynamics a key concern for industries worldwide.