GoPro CFO, Brian McGee, admitted a reduced production result in the year of 2018, in a conference. Last year, the company planned to manufacture about 5 million cameras, but only managed to produce approximately 4 billion. The primary reason responsible for this reduced production is the shortage of a tiny electronic component, the MLCC (multi-layer ceramic capacitor) while the component is minuscule in its physical properties but has essential importance in the modern era’s electronic devices.
SHORTAGE OF MLCCs: A concern for the managers
In July 2018, TTI Inc., a US-based electronic components manufacturer, including MLCCs, informed its customers about the shortage of these capacitors and labeled it as a “worldwide shortage.” MLCCs being an integral part of today’s electronic manufacturing have a densely populated stack of orders lined up for no less than a year. Due to this, the supply-chain managers are forced to foresee the manufactural requirements of their companies and place the relevant orders.
The imbalance between the supply and demand started in 2017. The capacitors are used excessively in the production of vehicles, smartphones and the advanced market of Internet-of-things (IoT) devices. For example, Apple’s flagship iPhone X requires a total of 1,000 MLCCs. Whereas, an automobile like a Tesla needs ten times more MLCCs as compared to a smartphone, an estimated amount of 10,000 per vehicle. Due to the increasing demand for car manufacturers, the supply of these capacitors has been a blissful trade for its vendors.
William Lowe, CEO Kemet, an American capacitor manufacturer, told its investors in January that half of its country sales have derived from the production of ceramic capacitors. He also mentioned that the company has achieved a 14.2% year-over-year revenue growth.
On the other hand, everyday hasn’t been Sunday for the suppliers too. The profit margins on the electric components have grown incredibly slim, which has restrained the manufacturers from producing the products at a larger scale.
Murata, a Japanese manufacturer of MLCCs, is the largest manufacturer of MLCCs by market share. Recently, it announced an incremental plan of 10% in its production. Considering the announced increment in their productions, the company also announced a 30% increase in its prices.