ODMs to Resume Conventional Procurement Rhythm

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In the third quarter of this year, as global inflation gradually cools down, market inventories appear to be heading toward stability, driving ODMs to resume their conventional procurement rhythm. TrendForce reports that MLCC suppliers are also experiencing a resurgence, with their monthly average BB ratio—a key market indicator—rising from 0.84 in April to 0.91 in early July. In tandem, total shipment volume saw a remarkable 12% growth, climbing from 345 billion units in March to 389 billion units in June.

TrendForce reveals that the MLCC industry, having weathered market inventory adjustments and capacity shifts in 1H23, has seen its BB ratio and shipment volume gradually grow from the second quarter onwards. This comeback marks an end to the industry’s downturn. Industry experts are keen to observe how traditional peak season demands, back-to-school, and shopping sale promotions will influence the industry’s trajectory in 2H23.

Driven by orders for internet infrastructure, AI servers, and Apple’s latest device, ODMs are looking to ramp up procurement in 2H23

The US government is set to allocate $42 billion from its infrastructure budget to build a high-speed internet network across the country by 2030. This initiative is expected to stimulate the growth of network companies including WNC, Sercomm, and Arcadyan, while also increasing RF/High Q MLCC shipments from companies such as Murata, Yageo, and Walsin Tech.

Demand for AI has skyrocketed since the start of the second quarter. This has been particularly visible in the use of GPUs A100 and H100 in generative AI, propelling Nvidia’s performance. While the scale of these orders is smaller compared to those for enterprise servers or data centers, they have nonetheless spurred ODMs like Foxconn, Wistron, and Quanta to increase their procurement of advanced MLCCs (1u and above high capacitance, X6S & X6R high temperature resistant) from companies like Murata, Samsung, and Taiyo Yuden.

In another significant development, Apple’s much anticipated iPhone 15 is slated for release in late Q3. Major ODMs Foxconn and Luxshare began their preparations in late June. While the order volume forecast is expected to be on par with the same period last year, it has nevertheless caused a gradual increase in monthly shipment volume for Japanese companies Murata and Taiyo Yuden. Orders for internet infrastructure, AI servers, and the new iPhone 15 pushed Murata, Taiyo Yuden, and Samsung to outperform their break-even point (BB Ratio 1) in early July.

OEMs are cautious in stocking up, order visibility is limited, and suppliers maintain strict control over capacity utilization rates 

TrendForce observes that orders for mobile phones and notebooks have picked up since 2Q23. This rise in demand is matched by a concurrent normalization of inventory levels, encouraging both brands and ODMs to stabilize their inventory procurement activities. However, OEMs have adopted a more guarded approach to their order planning. The prevailing strategy involves dynamic inventory management, characterized by an influx of urgent and short orders rather than embracing a bullish outlook. As the industry moves forward with cautious optimism, suppliers are strictly controlling capacity utilization rates to maintain stability in the face of fluctuating demand. An impressive 90% utilization rate has been reported at Japanese facilities for Murata, TDK, and Taiyo Yuden. However, other suppliers, especially those operating in China, show more modest figures, with utilization rates hovering between 60 and 70%.