>>MLCC Industry Faces "Longest Shortage Cycle in History"… Supply Deficit Expected to Persist Beyond 2027 - Major Taiwanese MLCC makers—Yageo, Walsin, Holy Stone, and PDC—are strongly upbeat on the industry outlook, driven by AI demand. The industry believes this shortage could surpass the 2018 passive component supercycle. - Walsin in particular projected that the MLCC shortage could persist beyond 2027. The company expects demand to rise even further once AI PCs and AI edge devices—markets far larger than AI servers—begin to proliferate in earnest. - Yageo's book-to-bill (BB) ratio has already moved above 1.3x, and the company is responding to rising orders by ramping line utilization and clearing bottlenecks. - That said, the pace of capacity expansion is constrained by equipment shortages. According to Holy Stone, lead times for high-end MLCC production equipment run 1 to 1.5 years, making capacity additions difficult. Holy Stone expects capacity to grow 20~30% YoY this year and a further 30~40% in 2027, but warned that next year's supply shortage could in fact intensify. - Walsin is likewise tripling CAPEX this year and pursuing capacity expansion for a second consecutive year, but noted that lead times from Japanese equipment vendors run 6 to 12 months, making it hard for supply growth to keep pace with demand. AI infrastructure demand, in its view, is only just beginning.

Sakai Chemical 4078 seeing delectric materials used in MLCCs for AI data centers 2x-3x in revs, per transcript. Electronic materials are 10% of total sales, around 20% segment margins. Trades around 15x ev/ebit and 1x p/b, with Zennor (9.3%) expected to make proposals to mgmt.

Sakai Chemical 4078 seeing delectric materials used in MLCCs for AI data centers 2x-3x in revs, per transcript. Electronic materials are 10% of total sales, around 20% segment margins. Trades around 15x ev/ebit and 1x p/b, with Zennor (9.3%) expected to make proposals to mgmt.

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The MLCC shortage is more severe than previously thought The opportunity is still upstream The two names I mentioned, NCI and Sakai, have performed great In fact, this is an industry I want to touch on in more depth later Materials sit at the top of the supply chain and are usually forgotten, which represents a great opportunity They give you time to watch a shortage form instead of trying to predict it. Once price increases start, you know it is time to buy materials suppliers, as long as supply is inelastic enough The same thought process can be applied beyond MLCCs, and I suspect the market will start catching up with names that still undeservedly trade at very low multiples, just because they are still treated like boring industrials and not AI-adjacent companies

The MLCC shortage is more severe than previously thought The opportunity is still upstream The two names I mentioned, NCI and Sakai, have performed great In fact, this is an industry I want to touch on in more depth later Materials sit at the top of the supply chain and are usually forgotten, which represents a great opportunity They give you time to watch a shortage form instead of trying to predict it. Once price increases start, you know it is time to buy materials suppliers, as long as supply is inelastic enough The same thought process can be applied beyond MLCCs, and I suspect the market will start catching up with names that still undeservedly trade at very low multiples, just because they are still treated like boring industrials and not AI-adjacent companies

Nippon Chemical might be a superior play to Sakai Chemical for exposure to MLCC materials. Electronic Ceramic Materials (materials for MLCC) is 25% of total revenue. But the segment its inside (specialty chemicals) saw operating profit dive even amidst a 23% YoY increase in Electronic Ceramic Materials. The drop in operating profit was caused by increased battery materials, some once off inventory costs, restructuring. If we assume (big ask) that they achieve a similar operating margin to Sakai's own Electronic materials segment - 20% Then in 2027 on a revenue of 12,000(mYen) (my own estimate) for the segment could produce a 2400 operating profit. For just that segment. Nippon's entire year end operating profit 2026 was 2400. It would take their EV/EBITDA from 8 to 4 in 2027 if price remained constant.

Things getting interesting in sugar land.

Nippon Chemical 4092.T is still trading below book which is quite striking. Their electronics segment (mostly MLCC materials exposure) tanked in operating profit in 2026 but ceramics went up. So next year, if the one offs and battery materials stabilize, could look FAR better for the segment. It’s not all exposure to AI - Server though. It’s also consumer electronics, automotive etc. But AI server MLCCs will mostly likely need the high end stuff- which is made using the hydrothermal or oxalate process. Sakai uses hydrothermal to produce BaTiO3 Nippon uses Oxalate. Also robotics which arrives in a few years is sure to stimulate far more demand. It looks really good here. Also, as an added bonus, the company has a facility (from 2022) that makes high purity red phosphorus- used for optics.

What's happening in the MLCC market First off, MLCC as a whole is a $15B market. MLCCs for servers were a $1.3B market in 2025 ($600m for AI servers, $700m for general servers) The AI server MLCC market is growing at 80% CAGR, and the general server MLCC market will also accelerate due to agentic AI increasing CPU demand (around 30%-40% CAGR) We will see negative growth in the smartphone/mobile MLCC market for at least 2026-27. Humanoids are another future high-growth market for MLCCs Book-to-bill ratio for most MLCC suppliers is over 1 now Reasons for price hikes- High Nickel & Silver are affecting all segments There is a supply-demand mismatch in the high-end (high capacitance, high voltage) segment, which is used in autos & servers High-end MLCC lead time is over 20 weeks Spot/distributor prices have increased by 20%-40% for low capacitance & consumer device MLCCs due to hoarding and double booking, especially in China OEM contracts have not seen large price hikes yet What's happening now: Rapid capacity expansion happening across the industry Murata expects blended ASP prices to remain flat (ASP going down in consumer electronics, expansion in AI server market) Tier 1 players like Murata, Taiyo Yuden, SEMCO building capacity to serve AI server MLCC market This will create opportunities for Tier 2/3 and Chinese suppliers to expand in the mid to low end market (Macronix effect) Future: MLCC production equiment & raw materials suppliers will be the biggest beneficiary of this CAPEX boom MLCC producer stocks have performed well, and it is finally spilling to raw material/equipment producers I expect them to outperform MLCC producers now