Expect MLCC Industry Improvement in 2H20
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Murata presented solid FY4Q19 earnings and FY2020 guidance. We view it as positive for related domestic companies that Murata’s capacitor sales guidance remains similar y-y (volume up 5~10%, price down 5~10%) and that its planned increase in production capacity has been scaled back.
Murata presents better outlook than feared
Murata’s FY4Q19 earnings arrived far above consensus. Despite the impact of Covid-19, orders for components have increased on the launch of new smartphones by major customers, including Apple, with cost reductions also looking favorable. We view it as positive for related domestic firms such as SEMCO and Samwha Capacitor that Murata’s capacitor sales guidance remains similar y-y and that its planned increase in production capacity has been scaled back from 10% to 5~10%.
Despite increased demand from expanding 5G investment and inventory buildup at smartphone makers such as Apple, sales at Murata’s capacitor business (main product: MLCCs) decreased 5.1% q-q due to ASP decline and production disruptions. Despite the overall slowdown in demand caused by Covid-19, it looks positive that: 1) new MLCC orders came in similar q-q; and 2) the shutdown of MLCC plants in China, the Philippines, and Malaysia has reduced supply volume—resulting in backlog growth of 17.5% q-q.
Murata’s FY2020 guidance (Mar 2020~Mar 2021) also proved favorable relative to concerns. In particular, Murata presented a similar level of capacitor sales versus last year’s figure (volume up 5~10%, price down 5~10%). Major assumptions behind Murata’s guidance include global smartphone demand decline of 10% y-y, automobile demand contraction of 20% y-y, and 5G smartphone shipments of 240mn units.
Expect MLCC industry improvement in 2H20
The outlook for the MLCC industry from Japanese and Taiwanese players is bright. While 1H20 earnings decline looks inevitable due to slowing demand for IT and automobiles, overall industry improvement is anticipated in 2H20 on the back of demand recovery.