Taiwan MLCC makers have seen market demand slow down significantly since the beginning of the fourth quarter amid a spate of undesirable factors, and the past strong demand growth momentum is not expected to come back until after 5G technologies and applications enter full commercialization, according to industry sources.
The sources said the biggest negative factor is the US-China trade war, which has dampened market buying sentiment and quickly driven up MLCC inventory levels at suppliers as their customers have remarkably cut orders and trimmed shipment demand.
In addition, their PC customers have been forced to defer shipments due to CPU supply shortfalls, and smartphone sales increases are also slowing down, all affecting the demand for MLCCs.
Following sharp price hikes seen over the past year, MLCC is now no longer a seller’s market and prices are unlikely to rise further even in case of suppliers reducing production. In fact, makers are still keen to purchase equipment for capacity expansion, which may join the US-China trade war to end the golden days for the MLCC industry earlier than expected, the sources commented.
The sources estimated leading passive component suppliers Yageo and Walsin Technology to suffer a sequential revenue decline of 30% in the fourth quarter of 2018, undermined by both seasonality and trade conflicts between the world’s two largest economies.
To counter, Yageo has decided to have its plant in Suzhou, China undergo annual maintenance and reduce MLCC production workforce in the fourth quarter. Despite the firm’s production cut, spot market prices still show no sign of pickup and dealers have difficulties depleting their inventories.
For MLCC makers, the smartphone market provides huge demand and entails relatively better profitability than other sectors. But as the 4G smartphone market has matured, replacement demand for 5G models is not expected to boom until after 2020, and therefore makers will have to brace for a recession in market demand in the next 1-2 years, industry sources indicated.