Small Part Making Big Impact on Electronics Industry

Every day, people around the globe are utilizing some piece of electronics-based technology, especially in the developed world, where cell phones, computers, and gaming consoles are a part of almost everyone’s lives. Technological advancements, such as electric cars and automated labor, are adding to this constant exposure and rising demand for battery power. An essential piece of these batteries is the multilayer ceramic capacitor (MLCC) which, depending on the size of the device, can be less than a half of a millimeter in length.

The production of MLCCs varies from manufacturer to manufacturer, but the premise is similar to ceramics. Various chemicals, compounds, and metals are mixed and heated. Multilayering creates a cheap and efficient product, while also maintaining stability with the ceramic component. MLCCs themselves cost less than a penny. The small part is in high demand, with, up to 10,000 MLCCs needed for electric powered vehicles. As electronics continue to improve, demand for the micro-units rises. The iPhone X, for instance, requires double the number of MLCCs.

Source(s): Paumanok Publications and Wall Street Journal

Shortages of this small but crucial part have begun, leading to questions about the future production of electronics. Three manufacturers, Murata Manufacturing Co., Samsung Electro-Mechanics Co., and Taiyo Yuden Co., dominate the industry. With rising demand, these companies are looking for larger price margins, meaning higher prices will likely be passed down to consumers. Shortages themselves typically come with higher costs due to high demand even though the actual price of the MLCC is low. On the flip side, companies needing the parts will try to drive down the price to compete with other businesses, which may help consumers.

In 2017, demand for the part skyrocketed, and suppliers did not prepare since smartphone demand plateaued that same year.

Because of this high demand, the part has been in full production to catch up, and this has had consequences for electronics manufacturers like Sony. Companies like Sony will have to wait up to six months for an MLCC order. Before the spike in demand, order requests were met quickly. Consumers have been seeing the impact of this, with shortages for Sony’s PlayStation 4 beginning around March 2018 and continuing through this summer.

The manufacturers of MLCCs have been investing heavily in their production with Murata investing $2.7 billion into production and increasing its output by 10% which would put their annual production at over 1 trillion MLCC units.

Looming tariff issues between the U.S. and China also threatens consumers with a higher price and lower supply of electronics, especially considering how most of the MLCC producers based out of Asia.

Some estimates have the shortage lasting through 2020. While most companies have been able to meet demand despite these issues so far, if the supply does not catch up to consumer demand, consumers can expect to see more shortages like the one for PlayStation 4s later this year.

 

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