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At a recent conference, GoPro CFO Brian McGee admitted that his company could not manufacture enough of his flagship action camera. McGee said GoPro hoped to be able to sell 5 million cameras, but could produce only 4.2 million in 2018.
The culprit is the shortage of a tiny electronic component called MLCC or multilayer ceramic capacitor. It costs less than a dime, but is essential to current products, from consumer electronics to automobiles.
Daniel Wolfe
The picture above shows the few tens of MLCCs on a Raspberry Pi circuit board. A single GoPro camera contains about 320 MLCCs. Other products have thousands.
TTI Inc., a distributor of electronic components including MLCCs, described the situation as a "global shortage" capacitor in a letter sent to its customers in July 2018. The message from the manufacturers is the same: there is a shortage and it is will be still until 2020.
Already, MLCC orders are backed up for almost a year. This means that supply chain managers must anticipate the demand for their products well in advance and can not quickly build new devices if these predictions turn out to be weak.
The demand for MLCC has exceeded the supply since 2017, mainly due to the sophistication of electronics in vehicles, the complexity of our mobile phones and the growing market of internet devices of things. For example, the latest iPhone X requires more than 1,000 MLCCs. This represents a 10% increase over previous models, according to the Nikkei Asian Review, and twice as much as the iPhone 6S.
A high-tech automobile such as a Tesla requires 10 times more MLCC than a phone, or about 10,000 per vehicle. Car manufacturers are increasingly needing these components to stimulate niche suppliers. Kemet, the US capacitor manufacturer, has made half of its sales of its range of ceramic capacitors, said CEO William Lowe investors during his call for profits in January. On the same call, Kemet announced revenue growth of 14.2% from one year to the next.
Meanwhile, vendors have been reluctant to increase the number of MLCCs because the profit margins on the components are so thin. Even with price increases over the past year, LDCs still cost less than half a cent. Murata, the largest manufacturer of MLCC by its market share, has announced a plan to increase production by 10%. The Japanese company has also increased its prices by 30% over the last year.
This is a delicate situation for the manufacturers of a generally conservative sector in its investments. New factories are expensive. This recession has left suppliers on billions of dollars in inventory, which has resulted in falling prices, according to Electronics Purchasing and Supply Chain News.
Even companies willing to badume the risk of increased production are hampered by the availability of equipment. The waiting times for the tooling needed to set up MLCC machines are constantly increasing. John Sarvis, president and CEO of the AVX component supplier, told investors, when calling its results in July 2018, that the company had plans to increase production by 20% in 2018. Sarvis stated that AVX had not achieved this goal because of the long lead times of the equipment manufacturers.
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