Renewed AI/DC focus on high-value-added MLCCs and ABF substrates, with Murata and Ibiden identified as key beneficiaries

Overview

This investor presentation compares demand, inventories, capacity, earnings forecasts, and valuations across Japanese electronic components companies. Its central conclusion is that traditional smartphone applications face commoditization pressure, while AI servers, data centers, and automotive electrification are enhancing earnings opportunities for high-value-added MLCCs, ABF package substrates, connectors, lithium-ion batteries, and HDD components. The overall industry view remains In-Line, with a focus on Murata, Ibiden, TDK, Hirose Electric, and Niterra.

Core views

The report first sets its industry view at In-Line rather than turning broadly bullish on the electronic components sector because earnings trajectories vary significantly across applications and companies. Murata Manufacturing is the top pick, with attention focused on utilization rates and earnings expansion for high-value-added MLCCs; Ibiden was upgraded by two notches to Overweight on August 4; TDK's catalysts come from rechargeable batteries and HDD-related products; Hirose Electric benefits from connectors for general industrial machinery and AI servers; and Niterra continues to grow through spark plugs, exhaust-gas oxygen sensors, and electrostatic chucks for semiconductor manufacturing equipment. Alps Alpine is also rated Overweight, while Minebea Mitsumi and Mabuchi Motor, among others, are Equal-weight and Taiyo Yuden and others are Underweight, showing that the report emphasizes structural opportunities rather than a broad-based industry rally. Regarding end demand, the report identifies smartphone commoditization as the primary pressure on margins for traditional electronic components: price compression and slowing technological innovation could reduce the potential for increasing content value per device. By contrast, automotive electrification and the expansion of AI/DC infrastructure generate demand for more components, higher specifications, and more complex packaging. Accordingly, the report assesses which companies can translate demand shifts into improved utilization, product mix, and earnings across multiple dimensions, including quarterly and annual sales, operating profit, capital expenditure, depreciation, inventory days, regional sales and production, and foreign-exchange sensitivity. MLCCs are the first core theme. The report positions Murata as the MLCC market leader and compares the shares of the world's five largest ceramic capacitor manufacturers, as well as MLCC sales, production, inventories, and medium-term earnings forecasts. Product upgrades involve not only higher unit volumes but also miniaturization and greater capacitance: 016008 MLCCs are 75% smaller than 0201 MLCCs, while automotive electrification increases the number of MLCCs required per vehicle. The report also reviews upstream materials and equipment such as barium titanate, barium carbonate, nickel paste, and firing furnaces, illustrating that competitiveness in high-value-added MLCCs depends on materials, miniaturization, processes, and mass-production capabilities rather than merely end-market shipment volumes. Murata is therefore identified as the top pick; although Taiyo Yuden is also a major MLCC manufacturer, the report assigns it an Underweight rating, reflecting differences in earnings outlook and valuation. ABF package substrates are the second theme and the one most directly linked to AI servers. The report explains AI infrastructure demand using quarter-on-quarter and year-on-year trends in cash capital expenditure by 14 cloud service providers, then further examines the dimensions, layer counts, and customer sales mix of ABF package substrates for NVIDIA. The report expects Ibiden to maintain a nearly 100% share of ABF substrates for NVIDIA FC packages due to technological competitiveness that is difficult to match; rising sales of high-value-added AI server products and improvements in customer and product mix should offset the higher costs associated with new production-line launches and support sustained earnings growth. The base-case target price is ¥27,500; the DCF uses a 2.8% risk-free rate, 1.52 beta, 3.2% risk premium, 7.7% WACC, and assumes 0% perpetual growth from F3/36. Bull-, base-, and bear-case values are ¥36,000, ¥27,500, and ¥10,000, respectively. Bull-case operating profit is ¥141.9bn in F3/27, ¥237.3bn in F3/28, and ¥500.7bn in F3/31; the bear-case figures are ¥77.0bn, ¥93.7bn, and ¥163.7bn. The report also notes that the likelihood of upside to F3/31 earnings guidance has increased. Connectors and automotive-related components constitute the third theme. The report compares the size of the global connector market, its application mix, compound growth rates by application, and sales of major suppliers, concluding that Hirose Electric could benefit from earnings expansion in connectors for general industrial machinery and AI servers. Niterra holds a 47% global share in both automotive spark plugs and exhaust-gas oxygen sensors; although total spark-plug demand is unlikely to grow significantly, the report expects its share to rise gradually and the company to generate high profits through the aftermarket. Exhaust-gas oxygen sensors benefit from increasingly stringent environmental regulations. In non-automotive businesses, the report believes earnings from electrostatic chucks for SPE bottomed in F3/24 and will continue to grow. Niterra's base-case operating profit is forecast at ¥158.2bn in F3/27, ¥174.4bn in F3/28, and ¥254.4bn in F3/31; the bull-case figures are ¥183.7bn, ¥202.4bn, and ¥293.4bn, while the bear-case figures are ¥113.2bn, ¥101.5bn, and ¥73.7bn. Its ¥12,600 target price is based on a DCF using a 5.7% WACC and 0% perpetual growth from F3/36. TDK's growth thesis spans multiple businesses. The report expects the passive components and sensor application businesses to continue improving after bottoming in F3/25; lithium-ion battery profit growth in F3/27 could be relatively moderate due to factors such as rising cobalt prices, but expanding sales of high-value-added silicon-anode products and backup battery units for data centers support medium- to long-term lithium-ion battery earnings growth. Increasing demand for nearline HDDs in data centers will also continue to expand earnings from HDD heads and suspensions. TDK's target price is ¥4,900, with the DCF using a 2.6% risk-free rate, 1.31 beta, 3.2% risk premium, 6.5% WACC, and 0% perpetual growth from F3/36. The report also covers the earnings contribution from Alps Alpine's new smartphone camera actuators, Meiko Electronics' PCB business and sales plans for its main Vietnam base, as well as HDD heads, motors, and the supply chain, although conclusions in these areas still need to be assessed against each company's medium-term forecasts and actual demand realization. The report takes a more cautious view of companies undergoing earnings recovery. Minebea Mitsumi's earnings bottomed in F3/24, and its global share of miniature ball bearings exceeds 60%, providing continued support for medium- to long-term growth; the Access Solution business is also expected to improve through cost reductions and market-share gains. However, the semiconductor and electronics business is unlikely to reach a new high in the near term, and most of the recovery is already reflected in the share price. It is therefore rated Equal-weight with a target price of ¥5,300. Its base-case operating profit is ¥121.5bn in F3/27, ¥137.8bn in F3/28, and ¥186.3bn in F3/31. Mabuchi Motor is also Equal-weight, with a target price of ¥1,750; the report expects recovering global automobile production and increased staffing to drive gradual improvements in earnings and ROE, with base-case operating profit of ¥27.2bn in F12/26 and ¥29.9bn in F12/27, while rising costs and declining automobile production constitute the downside scenario. On valuation, the report primarily uses DCF to determine individual stock target prices, then cross-checks bull-, base-, and bear-case scenarios using P/E, P/B, ROE, and the cost of capital. In addition to the companies discussed above, Minebea Mitsumi's DCF uses a 2.6% risk-free rate, 1.27 beta, 3.2% risk premium, and 5.8% WACC; Mabuchi Motor uses a 2.6% risk-free rate, 0.83 beta, 3.2% risk premium, 5.3% WACC, and 0% perpetual growth from F12/36. The valuation comparison table shows Ibiden's forecast P/E declining from 63.2x in F26e to 21.2x in F30e while ROE rises from 15.6% to 21.3%; Murata's forecast P/E falls from 39.5x to 15.1% while ROE rises from 12.2% to 20.8%; and Niterra's forecast P/E falls from 14.6x to 8.5x while ROE rises from 14.9% to 17.2%. The report's core judgment is that whether premium valuations can be absorbed depends on whether AI/DC and automotive electrification demand can translate into sustained product-mix upgrades and earnings growth.

Analysis framework

The report first compares covered companies horizontally across ratings, target prices, sales, operating profit, capital expenditure, depreciation, inventories, P/E, P/B, and ROE, and then breaks down demand by end application across smartphones, automobiles, AI servers, and data centers. It subsequently analyzes MLCCs, ABF substrates, connectors, automotive sensors, lithium-ion batteries, PCBs, and the HDD supply chain and competitive shares, before validating risk-reward through medium-term earnings forecasts and DCF, P/E, and P/B under bull-, base-, and bear-case scenarios.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF target-price valuation

  The report discounts future cash flows using each company's WACC and determines base-case target prices using a 0% perpetual-growth assumption; the risk-free rate, beta, risk premium, and terminal-value start period are set separately for each company.

• Valuation MethodPE/PEG valuation

  Forecast P/E cross-check

  The report converts target prices or scenario-based fair values into forecast P/E multiples for different fiscal years to illustrate whether earnings growth can absorb current valuations.

• Valuation MethodPB valuation

  P/B downside-scenario pricing

  In bear-case scenarios where earnings fall below market expectations or ROE weakens, the report assesses share-price downside using levels such as 0.9x or 1.0x P/B.

• Industry/Industrial Analysis FrameworkUpstream, Midstream, and Downstream Industry-Chain Transmission

  Electronic components supply-chain mapping

  The report traces cloud-provider capital expenditure and end-device demand downstream to ABF substrates, MLCCs, connectors, and HDD components, while tracing upstream to MLCC material and production-equipment suppliers.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Production, shipments, inventory, and utilization analysis

  The report combines production, shipments, inventory, inventory days, and capacity-utilization rates to assess demand strength and whether order improvements can translate into profit.

• Valuation Method

  Bull-, base-, and bear-case scenario analysis

  The report varies assumptions for sales volumes, market share, product mix, and operating profit, then estimates fair value under different scenarios using the same or explicitly adjusted exchange rates and DCF conditions.

• Company Fundamentals and Financial Framework

  ROE and cost-of-capital comparison

  Some bear-case scenarios directly compare ROE with the cost of capital to determine whether a company can still generate returns above its capital requirements and to help explain P/B pricing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Murata Manufacturing（6981.T）

  The MLCC market leader and the report's top pick, benefiting from demand for high-value-added MLCCs and higher utilization rates.

  Strengths

  MLCC market leadership and capabilities in high-value-added products.

  Weaknesses

  Smartphone price compression and slowing technological innovation could affect margins for related components.

  Comparison

  The report rates it Overweight, while MLCC peer Taiyo Yuden is rated Underweight.

  Risks

  Utilization rates or earnings expansion for high-value-added MLCCs may fall short of the report's expectations.

• Ibiden（4062.T）

  A key beneficiary of ABF package substrates for AI servers, upgraded by two notches to Overweight on August 4.

  Strengths

  The report considers its ABF packaging technology difficult to match and expects it to maintain a nearly 100% share of NVIDIA FC package substrates.

  Weaknesses

  The launch of new production lines will increase costs.

  Comparison

  The target price is ¥27,500, with a risk-reward range of ¥10,000 to ¥36,000.

  Risks

  If sales of high-value-added ABF substrates and product-mix improvements are insufficient, earnings and valuation could decline significantly under the bear case.

• TDK（6762.T）

  Benefits from improving earnings in high-value-added lithium-ion batteries, data-center backup batteries, passive components, sensors, and HDD components.

  Strengths

  Its businesses span multiple categories of high-value-added electronic components, with data centers and medium- to long-term lithium demand providing sources of growth.

  Weaknesses

  Lithium-ion battery profit growth in F3/27 could be relatively moderate due to factors such as rising cobalt prices.

  Comparison

  Rated Overweight, with a target price of ¥4,900.

  Risks

  Rising cobalt prices could pressure near-term lithium-ion battery earnings.

• Hirose Electric（6806.T）

  Demand for connectors used in general industrial machinery and AI servers is expected to drive earnings expansion.

  Strengths

  Connector businesses serving industrial and AI server applications.

  Comparison

  Rated Overweight, with a target price of ¥36,600.

• Niterra（5334.T）

  Achieves sustained earnings growth through automotive spark plugs, exhaust-gas oxygen sensors, and electrostatic chucks for SPE.

  Strengths

  It has a 47% global share in both spark plugs and exhaust-gas oxygen sensors, as well as a high-margin aftermarket business.

  Weaknesses

  Overall demand for spark plugs is unlikely to grow significantly.

  Comparison

  Rated Overweight, with a target price of ¥12,600.

  Risks

  A lack of growth in automotive-related sales and limited earnings improvement in SPE-related businesses would correspond to steadily weakening operating profit under the bear case.

• Minebea Mitsumi（6479.T）

  Earnings are recovering gradually, supported by miniature ball bearings and the Access Solution business.

  Strengths

  Its global share of miniature ball bearings exceeds 60%, while Access Solution can benefit from cost reductions and market-share gains.

  Weaknesses

  The semiconductor and electronics business is unlikely to reach a new high in the near term, and most of the recovery is already priced into the shares.

  Comparison

  Rated Equal-weight, with a target price of ¥5,300.

  Risks

  The semiconductor and electronics and Motor, Lighting & Sensing businesses may underperform the base case.

• Mabuchi Motor（6592.T）

  A recovery in global automobile production and growth in automotive motor sales support long-term earnings improvement.

  Strengths

  Net financial assets and shareholder returns could provide some support under the downside scenario.

  Weaknesses

  The earnings recovery is relatively gradual.

  Comparison

  Rated Equal-weight, with a target price of ¥1,750.

  Risks

  Rising costs and declining automobile production could cause profit to fall in F12/26.

• Taiyo Yuden（6976.T）

  As a major MLCC manufacturer, it is included in comparisons of production, inventories, and medium-term performance.

  Strengths

  It has MLCC production capabilities and competes among the major manufacturers.

  Weaknesses

  The report assigns it an Underweight rating.

  Comparison

  Its rating contrasts with Murata, which is rated Overweight and identified as the top pick.

Key data

• Report dateAugust 24, 2026Publication date shown on the report's cover page
• Japan industry viewIn-LineOverall industry stance
• 016008 MLCC dimensions75% smaller than 0201 MLCCUsed by the report to illustrate the MLCC miniaturization trend
• Ibiden's share of NVIDIA FC package substratesExpected to be nearly 100%The report expects it to maintain a dominant share of ABF package substrates for NVIDIA
• Ibiden target price¥27,500Rated Overweight; the price on August 19, 2026 was ¥19,715, and the report lists a base-case price differential of 39%
• Ibiden DCF parametersRisk-free rate 2.8%, beta 1.52, risk premium 3.2%, WACC 7.7%Perpetual growth rate of 0% from F3/36
• Ibiden risk-reward rangeBull case ¥36,000/base case ¥27,500/bear case ¥10,000The bull and base cases are derived from DCF, while the bear case incorporates P/B
• Niterra's global share of automotive productsSpark plugs 47%; exhaust-gas oxygen sensors 47%The report expects the shares of both product categories to rise gradually
• Niterra target price¥12,600Rated Overweight; the base-case DCF uses a 5.7% WACC
• TDK target price¥4,900Rated Overweight; the price on August 19, 2026 was ¥3,006, and the report lists a base-case price differential of 63%
• TDK DCF parametersRisk-free rate 2.6%, beta 1.31, risk premium 3.2%, WACC 6.5%Perpetual growth rate of 0% from F3/36
• Minebea Mitsumi's miniature ball-bearing shareOver 60%The report believes this business can continue to deliver medium- to long-term earnings growth
• Minebea Mitsumi target price¥5,300Rated Equal-weight; the report believes most of the earnings recovery is already reflected in the share price
• Mabuchi Motor target price¥1,750Rated Equal-weight; the base-case DCF uses a 5.3% WACC

Impact & implications

The report believes earnings divergence among Japanese electronic components companies will increasingly depend on product value-added and end-market mix rather than simple growth in total industry volumes. AI/DC capital expenditure, automotive electrification, and demand for high-specification components favor Murata, Ibiden, TDK, Hirose Electric, and Niterra, which possess advantages in technology, market share, and product mix; smartphone commoditization, low-growth traditional applications, and costs associated with new production lines could constrain margin and valuation recovery at other companies.

Risks

• Smartphone price compression, commoditization, and slowing technological innovation could reduce electronic component margins.
• Higher costs from the launch of Ibiden's new production lines could offset part of the growth in ABF substrate sales.
• Niterra faces a downside scenario involving no growth in automotive-related sales and limited earnings improvement in the SPE business.
• TDK could be affected by factors such as rising cobalt prices in F3/27, resulting in relatively moderate lithium-ion battery profit growth.
• Minebea Mitsumi's semiconductor and electronics business is unlikely to achieve a new earnings high in the near term.
• Mabuchi Motor could experience declining profit due to rising costs and lower automobile production.

What to watch

• Track utilization rates, production, inventories, and earnings expansion for Murata's high-value-added MLCCs.
• Track quarter-on-quarter and year-on-year changes in cash capital expenditure by 14 cloud service providers.
• Track Ibiden's AI server ABF substrate sales, NVIDIA-related market share, and new production-line costs.
• Track the opposing effects of smartphone price compression and automotive electrification on the electronic components product mix.
• Track Niterra's shares in spark plugs and exhaust-gas oxygen sensors, as well as earnings from electrostatic chucks for SPE.
• Track TDK's cobalt costs, high-value-added silicon-anode products, data-center backup batteries, and nearline HDD demand.