The passive component market is howling cold, affected by the weak consumer electronics market. Since the second quarter of this year, the financial reports of MLCC enterprises Murata, Samsung Electric, Sun Indy, Sanhuan Group, Fenghua Hi Tech and others have continued to decline.
According to the recent data of TrendForce Jibang Consulting, the average BB Ratio (Book to Bill Ratio; order shipment ratio) of MLCC suppliers in the fourth quarter will decline to 0.81 due to the double attack of low peak season and conservative ODM's attitude to pull goods.
However, there was also good feedback from the market. In the third quarter, traders who actively cut prices and grabbed orders in China's spot market began to stop offering and supplying goods recently, which led some second-line mobile phone brand manufacturers to urgently seek support from their original suppliers. This means that the inventory reduction in China's spot market is nearing the end.
01
MLCC's corporate financial report fell for three consecutive quarters
First of all, from the financial report data of passive component enterprises, the performance of most manufacturers continued to decline in the second and third quarters, and they held a conservative view on the first quarter of next year.
For Murata, it is estimated that the consolidated net profit (US accounting standards) in fiscal year 2022 (as of March 2023) will decrease by 5% year-on-year to 297 billion yen. It is expected that the consolidated operating income in this fiscal year will increase slightly compared with the previous fiscal year, reaching JPY 1.82 trillion, but the operating profit will decrease by 10% to JPY 380 billion. These figures were lower than previously expected.
Samsung Electric's financial report data shows that its sales in the past third quarter were 2383.7 billion won and its operating profit was 311 billion won. Compared with the same period last year, sales decreased by 164.1 billion won (6%), operating profit decreased by 144.8 billion won (32%), sales decreased by 71.9 billion won (3%), and operating profit decreased by 49.1 billion won (14%).
Sun Ludian released its financial report from April to June 2022. Also affected by epidemic and other factors, the company's revenue fell 2.5% year on year. However, the revenue of the capacitor sector (MLCC sector) grew 2.6% year on year. It is estimated that the annual revenue will increase by 10.1% in 2022.
Previously, the sun induced electricity said that MLCC crop rate (capacity utilization rate) was estimated to be about 90% from April to June this year, and since demand was estimated to increase after July to September, the crop rate was estimated to rise to 90-95%. In the latest financial report, the sun induced electricity changed the above statement. The company pointed out that the company's order amount in the last quarter decreased by 29% compared with the same period last year, including the order amount of the capacitor department decreased by 30% year on year. As a result, Sun You Power considered reducing the capacity utilization rate of capacitance (MLCC) from July to September 2022 to around 85%.
The financial report data of Sanhuan Group shows that the operating income in the first three quarters was 3.954 billion yuan, a year-on-year decrease of 13.79%; Net profit was 1.243 billion yuan, a year-on-year decrease of 27.19%; Non net profit deducted was 1.042 billion yuan, a year-on-year decrease of 33.59%.
Fenghua High Tech also recently announced its third quarter results. Its Q3 revenue was 801 million yuan, a year-on-year decrease of 36.35%. Its net profit attributable to the parent company was -55.2595 million yuan, a year-on-year decrease of 114.79%, and its non net profit was -66.3113 million yuan, a year-on-year decrease of 127.46%. Its non net profit deducted in a single quarter fell from 119 million yuan in Q1 to 819.15 million yuan in Q2, and then fell into a loss in Q3. It is reported that Fenghua High Tech's revenue in the first three quarters was 2.919 billion yuan, a year-on-year decrease of 26.20%, and its net profit attributable to the parent company was 313 million yuan, a year-on-year decrease of 64.43%.
Although the financial report data is not satisfactory, combined with the following inventory and price trends, the MLCC industry may develop better in the fourth quarter of this year and the first quarter of next year.
02
The price is close to halving, and keeping the profit is the top priority
According to MLCC industry chain related sources, the current price of MLCC has been cut by half compared with the same period last year, and many enterprises have fallen into the selling price inversion. Since this year, the demand for mobile phones, laptops, tablets, televisions and other terminals in the traditional consumer electronics market has been sluggish, the performance of the data center in the latecomer market has been flat, and the inventory of large passive component manufacturers has been rising, which can only continue to reduce prices to alleviate the pressure.
From the current inventory level, according to the TrendForce Jibang consulting survey, as of the first ten days of November, the self owned inventory level of MLCC suppliers is still about 90 days on average, while the average inventory level of channel agents is also 90~100 days. If the average inventory level of MLCC is still 3~4 weeks (about 30 days), there is still a distance from the average healthy level of the overall market (total agents, suppliers, ODM) of 120 days.
However, in the past, ODM should have been close to zero inventory, but the recent resurgence of the epidemic situation will make it more difficult for ODM to let go of the epidemic prevention stock. In addition, the demand in the first quarter of next year may be affected by the downturn in economic activities, showing a lighter market situation in the off-season. Therefore, under the pressure of no increase in order demand and no decrease in inventory, ODM has a huge inventory cost backlog, and it is hard to avoid that ODM procurement will actively ask for prices.
However, the price reduction that has lasted for many months has continuously squeezed the supplier's profit margin. According to the TrendForce Jibang Consulting Survey, the supplier realized that even if the price reduction is felt for two consecutive quarters, it is difficult to improve the ODM's ability to pull the goods. At the same time, in the face of financial reporting pressure and the fact that most of the consumer grade medium and low volume value items have no profit to offer, the supplier's attitude towards price reduction has become conservative, and it is the primary task to keep the price level stable and keep the profits so that the company can successfully survive the industrial winter.
03
Energy storage dormant, MLCC manufacturers expand production against the trend
In recent two years, MLCC manufacturers have never stopped expanding their production. In the second half of 2021, facing the rising demand for MLCC, domestic and foreign enterprises have started a wave of expansion. Although the market situation has declined rapidly this year, the manufacturers are determined to expand production in the future based on long-term demand. In the past two years, Murata, Sunpower, Kyocera, Samsung Motor, Fenghua Hi Tech, Sanhuan Group, Yuyang Technology, Microcapacity Technology and other manufacturers have expanded their production on a large scale, and many manufacturers will have more production capacity in 2023. In addition, since this year, Kyocera, Murata and Fenghua Hi Tech have also announced new investment plans again. Among them, Fenghua High Tech announced at the beginning of this year that the company's application for non-public offering of shares was approved by the Development and Examination Committee of the CSRC at the beginning of this year. It is reported that the total amount of funds raised by Fenghua Hi Tech through non-public issuance does not exceed 5 billion yuan, which will be used for the "construction project of high-end capacitor base in Xianghe Industrial Park" and the "technical transformation and expansion project of 28 billion new chip resistors per month". On August 17, Kyocera announced that it would invest 15 billion yen to build new plants and increase MLCC, aiming to double MLCC sales in 2025. On November 7, Murata, another Japanese manufacturer, also announced that its subsidiary Wuxi Murata Electronics Co., Ltd. in China had started construction of a new MLCC material plant in Wuxi in November 2022. The new plant was expected to be completed by the end of April 2024, with a total investment of about 44.5 billion yen.
In addition, TDK will spend about 50 billion yen to build a factory in Japan to produce electric vehicle parts. According to the Nikkei Asia Review, the new factory is located next to an existing factory listed in northern Iwate, Japan, and will produce multilayer ceramic capacitors (MLCC). It is planned to be completed and put into operation by the end of 2024.
04
Seeking new heights, manufacturers aim at the automotive market
Contrary to the weak consumer electronics market, as the shortage of semiconductor IC gradually alleviates in the automotive market, the momentum of pulling goods is stable, becoming the main operating focus of suppliers next year. This can also be seen from the production expansion track of the above MLCC manufacturers.
As early as the end of 2021, solar induced electricity will regard MLCC for vehicles as the main layout direction in the future. In its production expansion announcement at the end of 2021, Solar Inducement put MLCC demand in the field of electric vehicles at the forefront. "MLCC is indispensable in the field of electric vehicles, communication infrastructure represented by servers and base station communication equipment, 5G smart phones and other fields." The company said.
In addition, Samsung SEMCO, in coordination with the Group's 2023 strategic plan, will fully expand the global automotive market business from the semiconductor, panel, passive components, camera modules and other business divisions. In 2023, the automotive MLCC capacity will be expanded by a total of 2 billion (monthly capacity) in Busan and Tianjin;
Murata's vehicle capacity expansion continues to grow by 10% every year. After the second quarter of next year, it will increase by 3 billion (monthly capacity) in Fukui, Chuyun, and the Philippines, with a total capacity of 25 billion (monthly capacity). The leading position is stable.
In addition, under the introduction of Kemet MLCC technology, Guoju is expected to expand 1.5 billion (monthly capacity) in Kaohsiung Daihatsu in the second quarter of next year.