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Iris Deng

Global inventories of multilayer ceramic capacitors (MLCCs) – tiny components dubbed “the rice of the electronics industry” – have dropped to a record low as the industry grapples with surging demand from artificial intelligence infrastructure.
Worldwide distributor inventory volume for the components – which act as electrical buffers in circuit boards and are increasingly used in massive volumes in high-performance servers – declined 8 per cent by August 9 compared with four weeks earlier, extending a downward trend, according to a Wednesday report by UBS Evidence Lab.
MLCCs have emerged as the latest AI-driven investor darling following memory chips and optical modules. With average unit prices continuing to climb, the total value of distributor inventory jumped 10 per cent over the same period, the UBS report showed.
Year-on-year data to the end of July showed a 13 per cent rise in the unit price index, distributor volumes plunging 22 per cent and inventory value up 6 per cent.
“We believe supply-demand tightness could start with AI-related and distributor channels and then spread to the overall market,” wrote UBS analysts led by Shingo Hirata in the report.
Inventory levels at major manufacturers followed a similar trend to distributors. By August 9, Japan’s Murata Manufacturing and South Korea’s Samsung Electro-Mechanics (SEMCO) saw volume declines of 8 per cent and 20 per cent, respectively, compared with four weeks earlier.
While these leading MLCC producers have expanded manufacturing capacity, the output has struggled to keep up with soaring demand as the sector enters what Goldman Sachs called the “largest and longest” cycle in its history – fuelled by the intense computing loads required by modern data centres. Citrini Research projected that demand for AI server-grade MLCCs was likely to grow by about 80 per cent annually.
Asset managers on Wall Street are racing to bet on new hardware bottlenecks in the broader AI supply chain. On Wednesday, Defiance ETFs launched the first US-listed exchange-traded fund (ETF) specifically targeting MLCCs and passive electronic components powering AI infrastructure.
“The market has spent three years pricing the chips. CAPA is about what powers them,” said Sylvia Jablonski, chief investment officer of Defiance ETFs, when referring to the fund, which tracks major MLCC companies including Japan’s TDK Corporation, Murata and SEMCO.
“Capacitors are the least appreciated layer of the AI buildout ... we believe the companies supplying this layer sit at a structural demand inflection,” Jablonski said in a statement.


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UBS data shows a major squeeze on MLCCs, setting the stage for what some believe could be the longest demand cycle in the sector’s history


UBS data shows a major squeeze on MLCCs, setting the stage for what some believe could be the longest demand cycle in the sector’s history.


AI server boom fuels record supply crunch for the ‘rice of electronics’

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}UBS data shows a major squeeze on MLCCs, setting the stage for what some believe could be the longest demand cycle in the sector’s history

UBS data shows a major squeeze on MLCCs, setting the stage for what some believe could be the longest demand cycle in the sector’s history