As demand for AI servers soars, leading Japanese and South Korean multilayer ceramic capacitor (MLCC) makers are shifting further upmarket, opening the door for Chinese competitors to gain share in lower-end segments despite lagging their rivals in advanced technology.

MLCCs – often referred to as the “rice of the electronics industry” because of their ubiquity – are tiny electronic components that regulate and stabilise electrical currents in devices ranging from smartphones and electric vehicles to AI servers and data centres.

In what Goldman Sachs has described as “the largest and longest cycle in history”, leading Japanese and South Korean manufacturers are being inundated with orders for high-end MLCCs used in AI servers, fuelling expectations of capacity expansion and higher prices.

“The sharp increase in power consumption in AI servers, alongside rising chip complexity, is driving demand for MLCCs that combine miniaturisation, high capacitance, thermal resistance and long-term reliability,” said Kazunori Ito, director of equity research at Morningstar.

“The price erosion that typically accompanies intensifying competition is likely to be considerably more muted than in a normal year,” Ito said. “Indeed, high-end MLCC suppliers have announced a succession of price increases from 2026 onward, and we expect this trend to persist for some time.”

According to a recent note by Citrini Research, the market for server MLCCs was worth about US$1.3 billion in 2025, compared with a total global MLCC market of roughly US$15 billion. However, demand is expanding rapidly, with AI server MLCCs expected to grow by about 80 per cent.