Covid-19 Surge in Asia Threatens Manufacture of Ceramic Bits in iPhones and PlayStations

Hidden inside the newest smartphones are more than a thousand tiny bits of ceramic to control the flow of electricity. Inside an electric vehicle, there are more than 10,000.

They are called MLCCs, for multilayer ceramic capacitors, and the surge of Covid-19 infections across East Asia is raising the risk that factories won’t be able to make enough of them.

Murata Manufacturing Co.

6981 1.77%

of Kyoto, Japan, the biggest MLCC maker, closed a major factory for the final week of August because of a virus outbreak. Japan’s

Taiyo Yuden Co.

6976 3.01%

, another major maker, said in August that it suspended some operations at its factory in Malaysia because of employee infections.

“MLCC supply will remain very tight,” said Forrest Chen, an analyst at Taiwan-based research firm TrendForce.

The world has seen this year how a shortage of normally little-noticed components can hit the global supply chain. Global makers of cars and electronics have shut down factory lines and missed potential sales because they don’t have enough semiconductors.

Analysts say the MLCC situation isn’t the same as with semiconductors because there is a broader base of suppliers and because factory slowdowns caused by the semiconductor shortage have kept a lid on demand for MLCCs.

Still, companies are watching the trends closely because any shortage of MLCCs would have major repercussions. The components are sometimes called the rice of the electronics industry—both because a single one is smaller than a grain of rice and because they are a staple component that no iPhone, PlayStation videogame console or advanced car can live without.

Multilayer ceramic capacitors provide storage capacity for electrical energy and are made of ceramic material like a pot or vase. “Multilayer” refers to the multiple layers of conducting and insulating materials that give them higher performance in tight spaces such as the inside of a phone.

They are mostly made in Southeast Asia, Japan, South Korea, China and Taiwan. Several of those regions have been hit by the highly infectious Delta variant of Covid-19 recently.

MLCCs are sometimes called the rice of the electronics industry.


Yonhap News/Zuma Press

Murata, which says it accounts for 40% of the global market, closed one of its biggest MLCC facilities, in Fukui, central Japan, through this Tuesday following 98 Covid-19 cases. A Murata spokesman said that the company was using other plants to make up for the lost production and that he couldn’t say yet how the weeklong closure would affect supply.

As phones advance, the MLCCs inside get smaller, more powerful and more numerous. Earlier smartphones needed a few hundred of the components, while a smartphone with high-speed fifth-generation, or 5G, data service contains more than 1,000, according to Murata.

The same has happened with cars, especially EVs, as they pack in more electronics. The number of MLCCs in an EV is more than double the number in a gasoline-fueled vehicle, Murata says on its website. The company’s annual sales have tripled over the past decade, and its net profit last fiscal year rose to the equivalent of $2 billion, a record.

In Malaysia, which is suffering its worst Covid-19 outbreak, Taiyo Yuden’s MLCC factory had been running at full steam but had to dial back to 80% to 85% of capacity after the government required companies to operate with just 60% of their workforce as a Covid-19 preventive measure, according to TrendForce.

Mr. Chen, the TrendForce analyst, said it is taking Taiyo Yuden an extra five to 10 days to deliver customer orders beyond the usual 45 to 55 days because it needs to find vaccinated truck drivers and deal with extra procedures for cargo flights. That could tighten supply of advanced MLCCs for networking equipment and high-end phones, he said. Taiyo Yuden declined to comment on those figures.

The Philippines, where

Samsung Electro-Mechanics Co.

and Murata have MLCC factories, is also seeing record Covid-19 cases. Spokesmen for the two companies said their sites in the Philippines were operating normally.

Whether any of the MLCC issues will trickle down to consumers isn’t known, in part because the bigger problem is semiconductors.

During the semiconductor shortage, “Many auto companies had no choice but to cut their production. That slowed demand for other components as well,” said CW Chung, head of Asia technology research at Nomura.

The free market may help keep supply and demand in balance.

Yageo Corp.

, a Taiwan-based MLCC maker, said most of its plants were in China and Taiwan, where infection numbers remain low. The company has cranked up volume and is ready to handle rush orders, a spokesman said.

Write to Jiyoung Sohn at [email protected] and Yang Jie at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button