Source: Taipei Times news
Yageo Corp (國巨), the nation’s biggest passive component supplier, yesterday said that customer demand is still two times as large as its shipments, indicating that persistent supply constraints would carry over into the mid-term.
The company is bullish on demand for multilayer ceramic capacitors (MLCC) due to an increase of applications in electronic devices and new orders from customers of Yageo’s Japanese rival Murata Manufacturing Co, it said.
Murata has announced it would pull out of certain traditional MLCC markets and focus on high-end MLCCs for electric vehicles, Yageo said.
The Japanese company plans to stop taking orders for traditional MLCCs from March next year and stop production of such products by spring 2020, Yageo said, citing information received from customers.
Murata’s exit would increase demand for components by other manufacturers by 20 percent and would further squeeze already tight supply, the company said.
“Yageo is capable of supplying 95 percent of the items [originally supplied by Murata], including high-capacity MLCCs… There are no technological barriers for us,” Yageo chairman Peter Chen (陳泰銘) told investors in a teleconference call yesterday.
The additional orders would not necessarily be for low-end products and Chinese manufacturers would face technological barriers to supplying such components, Yageo said.
As a result, the company expects the supply crunch to continue into the near and medium term, supporting MLCC prices at a reasonable level, Chen said.
MLCC prices are only just bouncing back to what they were seven years ago, he added.
There are no signs that supply will ease, as customers have requested emergency shipments to avoid production disruptions, Chen said.
“As of last week, the company’s book-to-bill ratio still stands at 3, meaning that orders are twice as high as our shipments,” Chen said. “Most customers have seen their inventory fall to a very low level.”
To better meet demand ahead of the peak season next quarter, Yageo aims to boost its inventory to 45 days of shipments, from 35 days last quarter, the company said, adding that that would still be far below a healthy inventory of 60 days.
The supply constraint is caused by supply shortage of chip resistors due to stricter environmental requirements in China, the main manufacturer, Chen said.
Regulatory tightening has disrupted production of chip resistors and key components, he said.
Yageo is the largest chip resistor maker in the world.
Higher wages and component costs have also prevented chip resistor and component suppliers from expanding capacity, Yageo said.
The company’s shares surged 2.54 percent to a record high of NT$1,210 yesterday on the forecast supply constraints.
