JPMorgan: AI Server Demand to Drive MLCC Industry into New Growth Cycle

Huo Xing Finance reports that on June 15, J.P. Morgan stated in a recent research report that, as demand for AI servers, general-purpose servers, and automotive electronics continues to grow, the supply-demand balance in the MLCC market is expected to tighten significantly over the next few years, potentially entering a shortage state between 2027 and 2028. MLCCs are fundamental components widely used in electronic devices, historically tied primarily to smartphone, PC, and consumer electronics cycles. However, the key drivers of demand are now shifting. J.P. Morgan believes that servers—particularly AI servers—are becoming the most important source of new demand. Compared to conventional consumer electronics, AI servers demand higher power stability and stricter component specifications, requiring significantly more high-capacity, high-performance MLCCs. The report forecasts that global MLCC industry revenue will grow robustly between 2025 and 2028, driven primarily by rising product prices and improved demand structure. J.P. Morgan expects the industry’s supply-demand balance to shift from approximately 10% oversupply in 2025 to around 5% shortage in 2027, expanding further to roughly 6% shortage by 2028. Supply-side constraints are central to this outlook. Although manufacturers are expanding capacity, high-specification MLCCs cannot be measured simply by traditional production volumes. Products for AI servers and automotive applications are larger in size, technologically more demanding, and have lower yields. J.P. Morgan notes that assembly yields for certain AI server MLCCs may be only a fraction of those for standard products, meaning nominal capacity increases may not quickly translate into effective supply. Automotive electronics also provide another stable source of demand. As electric vehicles, hybrid vehicles, and intelligent features become more prevalent, the number of MLCCs per vehicle continues to rise. The report projects that by 2030, high-growth applications such as automotive, servers, and humanoid robots will collectively account for more than one-third of total MLCC demand. On the investment front, J.P. Morgan maintains an overall positive outlook on major Asian MLCC manufacturers but shows a stronger preference for Japanese and Taiwanese firms over Korean ones. The rationale is that Murata, Taiyo Yuden, TDK from Japan, and Yageo from Taiwan offer more attractive valuations and greater potential earnings elasticity. In contrast, Samsung Electro-Mechanics, while also benefiting from industry tailwinds, has already seen significant stock price appreciation and relatively weaker valuation upside. However, the report also cautions that the market has already priced in some optimistic expectations. MLCC-related stocks have risen substantially year-to-date; whether this momentum can continue will depend on whether AI server demand continues to exceed expectations, whether capacity expansion remains constrained, and whether prices for high-end products can sustain their upward trajectory. For investors, key indicators to assess the strength of this cycle will include industry pricing trends, inventory levels, and manufacturers’ guidance on production yields.