US-China trade row adding to uncertainties
The demand for Multiple Layer Ceramic Capacitors (MLCCs) won’t pick up until at least the fourth quarter, according to industry sources on June 21.
Previously, experts had expected a turnaround by Q3. On the contrary, the oversupply has yet to be relieved, while demand from China remains soft.
“For both low and high-end capacitors, we don’t see an upturn until the end of this year,” said an employee at an MLCC distributor in Korea. “In April, we thought inventories may drop to normal levels by May or June when Chinese smartphone makers like Oppo and Vivo place more orders, but things have changed with the trade war between the US-China trade war.”
In its Q1 earnings announcement, Samsung Electro-Mechanics – one of the world’s largest producers of MLCCs – had also expected a turnaround by as early as the second quarter on the launch of new smartphone models. “It’s now unable to offer a clear answer,” said another industry watcher.
Adding to the sector’s woes, the semiconductor chip market isn’t doing any better, and market watchers don’t expect any dramatic turnarounds until next year.
Things don’t look any brighter over in Japan, another major country supplying electronic parts.
The Japanese media has already predicted that many of the country’s suppliers would be affected following the US government’s decision in May to put it on the Entities List. Other companies are discouraged to do business with firms placed on this list.
In March, Huawei had already taken precautions to bulk up on MLCC from Japanese companies, but the impact on Japanese suppliers are now expected to be bigger than expected.
According to Mizuho Securities, Huawei accounts for around 5% of the revenues of Murata Manufacturing, the largest MLCC producer in the world. When Murata receives less orders, it’s naturally forced to lower the parts prices, and this has a spill-over effect on other suppliers, such as Samsung.
That’s not all. Low-end MLCC supplier Yageo of Taiwan saw its May revenues stay nearly flat, inching up just 0.3% to 3.26 billion New Taiwan dollars (123 billion won). On-year, it reflected a 48.7% decline. Accumulated sales from January to May stood at 17.9 billion Taiwanese dollars, down 18.4% from the year before.
Yageo said demand from China has been spiraling on the Washington-Beijing standoff, and that the prolonged uncertainties are casting a shadow over markets like North America, Europe and Asia.
“The price cuts at Taiwanese MLCC manufacturers were expected only up to the third quarter, but now we can’t be sure, what with the sanctions on Huawei,” said Noh Geun-chang, a researcher at Hyundai Motor Investment Securities.
One MLCC film manufacturer in Korea expected improvement in the latter half of the year, possibly by September, on account of events such as the anticipated launch of high-profile smartphones, Single’s Day in China and Black Friday in the US.