Caitong: Demand for high-end MLCCs is increasing, and powder materials are expected to achieve structural upgrades.

Caitong has released a research report stating that traditional demand for MLCC (multi-layer ceramic capacitors) is undergoing a structural upgrade, with significant demand from the automotive and AI sectors driving high-end product growth. Over the past five years, the global market size for MLCC has steadily increased, with downstream consumer electronics and other fields accounting for 45% of the total market share, while the automotive sector represents 18%. Alongside product intelligence and miniaturization, the unit value in the consumer sector has increased, supporting a steady rise in traditional demand. The downstream unit demand in sectors such as automotive and AI has doubled, leading to increased demand for high-end MLCCs, resulting in a dual enhancement of "volume and price." Key points from Caitong are as follows: There is a clear differentiation in the MLCC industry hierarchy, with Japanese and Korean companies at the top tier, while domestic companies are catching up to the second tier. Japanese and Korean companies, leveraging their previous accumulations and advantages in the industrial chain, occupy the first tier. Domestic companies are rapidly expanding their production capacity and continuously investing in the industrial chain and R&D. Some of these companies have managed to break through blockades to achieve small shares in high-end supply, accelerating their race towards the top tier from a second-tier position. According to data from the China Electronic Components Industry Association, Japanese companies have the highest overall market share in their region at 54.5%, while mainland China MLCC manufacturers account for about 9.2% of the global market. Differences in downstream MLCC extend to upstream powders, where there is a lack of high-end entry points for MLCC powders. The performance of MLCC powders is relatively important. After Japanese companies established their own supply of upstream materials, the supply chain became relatively closed, making it difficult to penetrate under stable supply conditions. Outside of the powder segment, only some leading firms can self-supply; in the export market for MLCC powders, five of the top seven global manufacturers are from Japan. The top three manufacturers, Japan's Sakai Chemical, America's Ferro, and a Japanese chemical firm, hold market shares of 28%, 20%, and 14% respectively. In recent years, leading domestic powder companies like Shandong Sinocera Functional Material have steadily increased their supply to Korean and Taiwanese MLCC manufacturers, breaking through barriers of mid-range products and gradually entering the high-end powder market. Various factors, such as the overflow of high-end orders, the localization of the supply chain, and rare earth control, are driving domestic powder material companies to achieve structural upgrades. Similar to most industrial chains, MLCC powders and downstream development have a complementary trend. As this round of high-end demand continues to expand, top companies may see some overflow of orders after reaching full production, which will encourage upstream materials to upgrade their product structures. As one of the important players in the global AI sector, China is a major AI demand market, and under the overarching policy of ensuring supply, the domestic MLCC industrial chain is beginning to gain opportunities for high-end layout. Combined with the constraints imposed by rare earth control on formula powders, it is estimated that future incremental supplies from overseas powder leaders will be limited, which is advantageous for ceding some high-end market share and accelerating the structural upgrade of domestic powders. Risk Warning: Risks of downstream demand falling short of expectations; risks of capacity expansion exceeding expectations; uncertainties concerning rare earth export policies; risks of raw material price fluctuations; risks of disruptions in rare earth inventories or increased alternative sourcing channels.