AI server boom fuels record supply crunch for the ‘rice of electronics’
Global inventories of multilayer ceramic capacitors (MLCCs), essential components for electronics, have fallen to a record low. This shortage is driven by surging demand from artificial intelligence infrastructure, according to a UBS Evidence Lab report. Distributor inventory volumes declined 8 percent by August 9 compared to four weeks prior, with manufacturer levels at Murata Manufacturing and Samsung Electro-Mechanics also dropping by 8 percent and 20 percent respectively. Despite the volume decrease, the total value of distributor inventory rose 10 percent in the same period, reflecting a 13 percent year-on-year increase in unit prices through July. This points to a potential extended demand cycle for MLCCs, which are critical for high-performance servers.
The AI server boom is creating a significant supply crunch for MLCCs, dubbed the “rice of electronics,” with global inventories hitting record lows. This situation is particularly critical for Asian manufacturers like Japan’s Murata Manufacturing and South Korea’s Samsung Electro-Mechanics (SEMCO), which saw inventory volume declines of 8 percent and 20 percent respectively by August 9. The squeeze on these tiny components, vital for high-performance servers, reflects a broader challenge in the AI supply chain beyond just memory chips and optical modules. Our view is that this component shortage will likely drive up production costs for AI hardware in Asia, potentially impacting the competitiveness of regional server manufacturers. The 13 percent year-on-year rise in MLCC unit prices through July suggests that the cost increases are already materializing. The thing to watch is how quickly these manufacturers can expand capacity or if alternative component sourcing strategies emerge to mitigate the price and supply pressures, especially as AI infrastructure demand continues its rapid ascent.
