AI orders are "scary"! Sunlight triggers a surge of more than 300% within the year, Rubin's second half could exacerbate high-end MLCC shortages.

Tokyo-based multi-layer ceramic capacitor (MLCC) manufacturer Taiyo Yuden Co. is facing a "terrifying" level of demand shock for high-end AI server components. Production capacity is nearing its limit, and the risk of supply chain disruption is on the rise. The CEO of the company, Katsuya Sase, stated that the company will have to accelerate capital spending to expand capacity. MLCC is a miniature component used to regulate and stabilize the current of electronic devices and is now becoming a bottleneck in the construction of AI data centers. Currently, Taiyo Yuden and Murata Manufacturing Co. together account for the vast majority of the global high-end MLCC supply share. "The current order volume is truly intimidating," Sase confessed. "The market pressure is enormous, and if any supplier falters, we could be instantly crushed." AI servers require tens of thousands of high-power capacitors. As the power consumption of next-generation AI platforms like NVIDIA's Rubin chip continues to rise, and server space becomes increasingly tight, this demand will further increase. Murata Manufacturing's MLCC products have a wide coverage, while Taiyo Yuden focuses on the high-end capacitor sector. Currently, the shortage of core components in data centers has begun to threaten the pace of global AI data center construction. "When there are only two major suppliers in the market and demand is so huge, the pressure on both of us is immense," Sase said. "If there could be a third manufacturer supplying these products, the pressure on me would be much less." Sase believes that the fierce technological competition between global tech giants and chip manufacturers will continue to support the demand for MLCC for at least the next few years. With the launch of the Rubin chip in the second half of this year, the market space is expected to further expand. These optimistic expectations are driving the strong performance of Taiyo Yuden, Murata Manufacturing, and TDK Corp., which are all capacitor manufacturers. Among them, TDK has benefited significantly from its stable automotive electronics business. In early trading on Friday in the Tokyo market, the stock prices of all three companies reached historical highs, with Taiyo Yuden's stock price surging by up to 12%, and the accumulated increase since the beginning of the year exceeding 300%. According to a report released earlier this month by research firm Trend Force, a single NVIDIA GB200 card requires about 6,500 MLCCs, while the next-generation Rubin architecture, which doubles the power design and significantly increases power management complexity, will increase the single board MLCC usage to about 12,000. The report points out that the strong demand for AI chips has led to a tightening supply of high-end MLCCs, and recent price negotiations also indicate that prices of these components may rise. However, Taiyo Yuden stated that it will not raise MLCC prices due to supply-demand relationships, with Sase stating that this is an industry custom for component suppliers. But due to prioritizing capacity to ensure AI customers, the company has been unable to meet the order needs of some consumer electronics manufacturerstraditionally, consumer electronics manufacturers only sign 3-month contracts, while cloud service providers (large-scale data center operators) typically have contracts lasting over a year. Currently, some consumer electronics manufacturers are seeking to extend contracts to 6 months. Earlier this month, Taiyo Yuden announced plans to invest 270 billion yen (approximately $17 billion) over five years ending in March 2031, compared to 281 billion yen in capital expenditures in the previous five-year cycle. Sase stated that although the unit investment demand for expansion may decrease in the future, the company still needs to increase investment to match market demand, while at the same time, other component manufacturers are also starting a new wave of investment. Toyo Research Advice analyst Hideki Yasuda stated, "Competitors are seizing market share through aggressive capacity expansion, and Taiyo Yuden's current pace of expansion is worrisome." In addition, Taiyo Yuden also plans to expand its metal inductor business to enrich its product portfolio. The company is working to improve the efficiency of metal inductors and, compared to traditional ferrite inductors, with the advantage of a smaller size, these products are expected to enter the AI server supply chain.