The indefinite extension of Malaysia’s MCO (movement control order) 3.0 has posed severe challenges for the global MLCC market, according to TrendForce’s latest investigations. The high-end MLCC segment, in particular, is expected to suffer the most severe shortage, and products that feature high-end MLCC, such as smartphones, notebooks, networking products, server, and 5G base station components, will likely experience a corresponding impact as well. With the imminent arrival of the traditional peak season for electronic products, ODMs may need to defer their whole-unit shipments due to potential delays in some MLCC shipments.

TrendForce indicates that some Japanese companies (MLCC suppliers Taiyo Yuden, crystal suppliers NDK and Epson, and electrolytic capacitor supplier Panasonic), as well as Taiwanese companies (R-Chip supplier Walsin Technology, etc.) have had their Malaysia-based manufacturing operations and lead times disrupted as a result of the latest MCO 3.0 extension. Notably, Taiyo Yuden was able to partially resume its Malaysian fab operations on June 14 and activate about 60% of its work force in accordance with domestic regulations, thereby gradually ramping up its domestic capacity utilization rate to 80%. However, given the extension of MCO 3.0 through July, Taiyo Yuden will unlikely be able to raise its production capacity any further.

According to TrendForce’s latest findings, most MLCC suppliers currently carry a healthy level of about 60 days’ worth of low-end and mid-range MLCC inventory as of June, although Japanese suppliers are still carrying less than 30 days’ worth of high-end MLCC inventory. In view of the persistent MCO 3.0 restrictions in Malaysia, MLCC suppliers with Japan-based manufacturing operations, such as Murata, Kyocera, and Samsung, are expected to benefit from client orders redirected from suppliers whose operations are primarily based in Malaysia.

Japanese suppliers are scrambling to ramp up capacity utilization rates in response to influx of orders from ODMs in 3Q21

With regards to various end products, Murata, Taiyo Yuden, and Kyocera, all of which are major suppliers of MLCC for iPhone and MacBook Pro, will see peak demand from 3Q21 to 4Q21 due to Apple’s upcoming release of new products in 3Q21. It should be pointed out that the MLCC used in Apple devices features specifications that are compatible with many notebooks, servers, and networking products from other manufacturers. Given Taiyo Yuden’s inability to raise its capacity utilization rates in July, ODMs are expected to aggressively compete for this particular type of MLCC in 3Q21.

On the other hand, demand for servers is expected to undergo a steady growth in 3Q21. Hence, not only are ODMs closely monitoring the supply of various ICs, but the extended restrictions in Malaysia has also hindered the supply of certain passive components, such as SP-Caps, Tan caps (tantalum capacitors), and high-end MLCC. To mitigate potential risks of their ODM clients redirecting orders for the aforementioned components elsewhere, Murata and Kyocera have now been placing a top priority on expanding their production capacities to meet client demand.

Finally, the overall demand for other IT products such as Chromebooks will likely experience a slowdown in 4Q21 as increased vaccinations in Europe and the US lead to a gradual easing of border restrictions. In addition, ODMs currently carry a relatively high level of low-end and mid-range MLCC inventory on average. As a result, low-end MLCC suppliers, such as Yageo, Walsin, and Samsung, will likely face pressure from certain clients lowering their orders for low-end MLCC.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

National governments in Southeast Asian countries, including Thailand, Vietnam, and Malaysia, have been instituting increasingly stringent pandemic control measures in response to the intensifying COVID-19 pandemic in these countries. Remarkably, these countries are all hotspots in the electronic component supply chain, and Malaysia, home to many semiconductor packaging and testing facilities as well as passive component fabs, has now come under the international spotlight as a result. In particular, Malaysia’s MCO 3.0 (Movement Control Order 3.0) lockdown, which was extended on June 1, specifically excludes the semiconductor industry, as this industry boasts relatively high market revenue. As such, packaging and testing facilities are currently operating normally in Malaysia, according to TrendForce’s latest investigations.

On March 18, 2020, the Malaysian government first implemented similar pandemic control measures, under which only about 50% of private businesses were allowed to operate. The semiconductor industry and medical services were notably excluded from the restrictions at the time, given the former’s high revenue and the latter’s critical importance during emergencies. Despite the heightened lockdown of the MCO 3.0, under which only certain essential economic activities are allowed to function, some aspects of the MCO 3.0’s restrictions are relatively more lenient, as this policy specifies only 40% of private business employees must adopt WFH. Incidentally, as previously mentioned, the MCO 3.0 does not apply to the semiconductor industry.

As manufacturing operations and lead times of passive components become constrained, end clients’ procurement activities remain uncertain in 2H21

On the other hand, TrendForce indicates that the passive component market, which is also a key industry in Malaysia, will likely face supply-side bottlenecks as a result of the MCO 3.0, affecting such suppliers as Taiyo Yuden, Walsin Technology, NDK, and Epson. Under the latest restrictions, product lead times in the passive component supply chain, along with the state of the transportation industry (which determines shipping and delivery schedules of passive components), will become key determinants of whether client orders can be fulfilled on time.

In addition, brands in Europe and North America will begin adjust their orders for late-3Q21 in June and July. Notebook brands including Dell and HP are not only expected to maintain their orders for 2H21, but also taking measures to ensure a steady supply of IC components, while Apple will begin procuring components for its upcoming iPhone 13 from the passive component supply chain in July. Although these orders are expected to provide upward momentum for the passive component market in 2H21, the resurgence of the pandemic in Southeast Asia, as well as whether the shortage of semiconductor components will be alleviated going forward, will affect clients’ procurement activities for MLCC (multilayer ceramic capacitors) in 2H21.

On the whole, although the packaging and testing operations of major IDMs (Intel, Infineon, and Texas Instruments) and OSAT operators (ASE, Amkor, TFME, and Hua Tian) in Malaysia remain unaffected for the time being, TrendForce believes that the MCO 3.0 will likely have an impact on the supply and demand of the global passive component market in 2H21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com