MLCC Market Faces Challenges in 2021 to Meet Chip Demands

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Published June 4, 2021

Mouser Electronics Technical Content Team | Estimated reading time: 2 minutes, 4 seconds.

The supply chain providing computer chips, specifically Multilayer Ceramic Chip Capacitors (MLCCs), has tightened up again, this time on a global scale. Blame it on the chip shortages.

Inventories of commercial- and automotive-grade components have faced depletion, resulting in extended lead times across many case sizes and suppliers. In the first quarter of 2021, the overall chip shortage became so problematic, a bipartisan group of U.S. lawmakers proposed subsidies to encourage the construction of more chip factories in the U.S.

An unforeseen surge in chip demand—resulting in changing habits fueled by the pandemic—means the shortage has not kept up and won’t for a while.

Count MLCCs in this continuing demand. MLCCs are ideal for applications in which small-value capacitances are required, including applications such as smartphone screens, stereo systems, and power circuits. As you can determine, MLCCs are ideal for home-based devices, things most people use while staying indoors because of the pandemic mandates.

In addition to our changing habits, several perfect-storm factors caused the MLCC shortage. Among them: Increased demand from communications, disrupted transportation factors, and weather and other disasters. In Austin, Texas, two chip factories were sidelined because of a winter storm. In Japan, a blaze also disrupted production at a chip factory.

Industries were also operating at less-than-peak capacities, including auto companies that had cut back on production, because of pandemic concerns. MLCC supply experienced a prolonged lull during 2019, and most of 2020 as many manufacturers reduced their workforces. International trade disputes didn't help matters, either.

Much of the bounce back depends on how fast production can pick up and meet demand. Some production of chips is back to normal, but the surge is keeping the pressure on. Ramping up chip factories takes startup time measured in years, not months. The cost of adding new factories are billion-dollar endeavors. Also, the conditions that caused the shortage haven't fully abated. In the meantime, manufacturers plan to intensify production consistently throughout 2021.

At this point, buyers face uncertainty. In a recent note to investors, Chris Rolland, an analyst at Susquehanna International Group, wrote that chip shortages could worsen in the spring as economies open up following lockdown easing and continuing vaccine rollouts. Lead times are entering a danger zone of above 14 weeks, the longest they've been since 2018. Advisory firm Forrester believes the shortage could last until 2023.

"While things appear red-hot for semis in the short term, we are growing more cautious over the long-term outlook as we believe the industry may be over-shipping to true demand,’’ Rolland wrote.

For those along the supply chain, it means continued uncertainty.

This article contains information from TTI and the Mouser Electronics technical content team.