Uncertain U.S. tariffs and falling demand pose risks for 2H25 MLCC market

TrendForce’s most recent MLCC research report emphasizes the prevailing uncertainty surrounding reciprocal tariffs imposed by the U.S., which hinders the global economic outlook. Despite a 90-day period to navigate these challenges, businesses and markets are exhibiting increased risk aversion and caution, disrupting the supply-demand equilibrium in the initial part of 2025. This disruption raises concerns that the anticipated seasonal uptick in the second half of the year might not materialize as expected.

The survey conducted by TrendForce indicates that OEMs and ODMs advanced shipments of North American Chromebooks and specific consumer notebook orders to the first quarter, thereby dampening the procurement momentum typically observed in the education notebook sector that commences in April. For instance, projected MLCC orders for education models for the second quarter from Dell and HP have been revised downward by 20-25% quarter-on-quarter. The relocation of some Q3 North American orders into the second quarter by OEMs post the tariff postponement is a critical aspect to monitor.

In the AI server domain, order and inventory momentum are holding up well. ODMs with operation capacity in Mexico are maintaining normal shipping activities, protected by the USMCA agreement. However, there is an underlying possibility of renewed discussions on U.S.-Mexico trade tariffs.

The ongoing fluctuation in demand and restrained space for supplier discounts are focal concerns highlighted by TrendForce. Declining end-market demand alongside escalating operating expenses are putting MLCC vendors in a predicament. The risk of OEMs scaling back their order quantities and the mounting pressure to reduce prices compound the challenges faced by suppliers.

The repercussions of the trade conflict have transcended into global currency markets, with the Japanese yen emerging as a preferred safe-haven currency. Since April, the yen has appreciated from 150 to 141 against the U.S. dollar. Consequently, prices of MLCC products, especially low and mid-range capacitance commercial and automotive-grade variants, have dipped below pre-pandemic levels. Heightened price competition in 2024 has already eaten into profit margins for premium MLCCs utilized in AI servers.

Given the looming threat of an economic downturn, uncertain market demand, and potential currency fluctuations, MLCC suppliers are under growing pressure and are expected to enforce stringent pricing policies with limited scope for concessions. This operational stress necessitates a strategic shift within the industry to navigate through these turbulent times effectively.