ABF substrates remain strong; MLCC momentum is weak but not a cause for excessive concern
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ABF substrates remain strong; MLCC momentum is weak but not a cause for excessive concern
JPMorgan believes that Japan's electronic components and semiconductor output value in May 2026 was broadly in line with seasonality, with rigid module substrates and memory standing out, while MLCC production data was weak but export data still showed a gradual recovery.
- In May, domestic output value for electronic components and semiconductors declined month over month due to Golden Week, broadly in line with seasonality over the past 20 years.
- Rigid module substrates, including ABF substrates/FC-BGA, continued to see rising output value and ASP, a positive signal for Ibiden.
- METI MLCC production value was significantly below seasonality, but MoF export value and unit prices still improved, so the report believes there is no need for excessive concern at present.
- Memory output value and ASP jumped sharply, making it the most prominent bright spot among semiconductor subsegments.
- Top picks are Rohm and Murata Manufacturing, with recommendations on Ibiden, Rohm, Murata Manufacturing, and Hirose Electric.
Report interpretation
Overview
This report interprets Japan's METI electronic components and semiconductor production statistics for May 2026, and combines them with MoF trade data, seasonality, and company fundamentals to assess industry trends. The core conclusion is that the overall decline in output value was mainly in line with Golden Week seasonality; MLCC production value was weak but export data did not deteriorate; aluminum electrolytic capacitors and electronic substrates remained relatively resilient; rigid module substrates such as ABF substrates/FC-BGA continued to be strong; and memory output value and ASP saw a significant jump.
Core views
The report maintains a constructive stance on the electronic components sector. Industrial machinery demand is expected to recover strongly around the April-June earnings season, and automotive demand has also largely emerged from inventory correction. AI server demand may keep MLCC book-to-bill at 1.3-1.4 in April-June. Ibiden benefits from strong ABF substrate demand and may see catalysts from capacity expansion; Rohm benefits from the recovery in analog and discrete markets, especially with high exposure to automotive and industrial machinery; Hirose Electric's fundamentals are strong, with April-June earnings likely to exceed guidance; and Murata Manufacturing is the top pick among passive components.
Analysis framework
The report mainly uses METI production statistics to observe domestic Japanese electronic component and semiconductor production volume, output value, ASP, and year-over-year and month-over-month changes, and compares them with the past 20 years of seasonality. For MLCC, the report also compares export value and average unit price in MoF trade statistics to judge whether weak METI production value represents real demand deterioration.
Methodology notes
Use year-over-year and month-over-month changes in output value, production volume, and ASP to measure conditions in electronic components and semiconductors.
The report compares May 2026 data with seasonality over the past 20 years to determine whether the decline was merely due to Golden Week seasonality or reflects changes in demand momentum.
Use export value and average unit price to validate the MLCC trend in METI production statistics.
The report points out that METI and MoF data have diverged since December 2025, so it places greater emphasis on MoF export data for MLCC.
Map product trends in ABF substrates, MLCC, analog and discrete semiconductors, and connectors to Ibiden, Murata Manufacturing, Rohm, and Hirose Electric.
The report infers short-term earnings and catalysts for related companies through changes in product-line conditions.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Ibiden (4062)Beneficiary of ABF substrates/FC-BGA and rigid module substrates
- Strengths
- Output value and ASP for rigid module substrates continue to rise, which the report says is a positive signal for Ibiden.
- Weaknesses
- It remains necessary to monitor whether there will be new capacity expansion announcements and whether demand is sustainable.
- Comparison
- Compared with weak MLCC production statistics among passive components, the ABF substrate trend is stronger.
- Risks
- If AI server and advanced packaging demand slows, or capacity expansion progresses more slowly than expected, valuation and earnings expectations may come under pressure.
- Murata Manufacturing (6981)Core name in MLCC and passive components
- Strengths
- The report names Murata Manufacturing as the top pick among passive components and believes AI server demand is supporting MLCC orders.
- Weaknesses
- METI-basis MLCC production value is clearly below seasonality, and the trend line has shifted from flat to slightly declining.
- Comparison
- Compared with Taiyo Yuden, Nichicon, and Nippon Chemi-Con, the report shows a stronger preference for Murata Manufacturing.
- Risks
- If MoF export data also weakens, the MLCC recovery thesis will be challenged.
- Rohm (6963)Beneficiary of recovery in analog and discrete semiconductors
- Strengths
- It has high exposure to automotive and industrial machinery, and the report expects strong sales and order trends; tighter supply-demand for Tier 1 Si MOSFETs may also spill over to Tier 2 manufacturers.
- Weaknesses
- Destocking may still continue in April-June, with earnings expansion more likely to begin in July-September.
- Comparison
- Compared with some passive component companies still digesting inventory pressure, Rohm benefits more from the recovery in analog and discrete markets.
- Risks
- If the recovery in automotive and industrial machinery is weaker than expected, order improvement may be delayed.
- Hirose Electric (6806)Beneficiary of connectors and industrial machinery recovery
- Strengths
- The report expects April-June results may exceed guidance and maintains a bullish stance on fundamentals.
- Weaknesses
- The connector production value trend line is broadly flat, and the industry data itself has not shown a strong breakout.
- Comparison
- Within the recommended basket, Hirose Electric reflects more of the industrial machinery recovery logic, while Ibiden reflects the ABF substrate logic.
- Risks
- If industrial machinery demand recovery is insufficient, the scope for earnings upside may narrow.
- Taiyo Yuden (6976)Passive component and MLCC-related name
- Strengths
- The report states that its rating is Overweight.
- Weaknesses
- Short-term quarterly earnings visibility is low, and profit levels remain relatively low versus the stock price increase.
- Comparison
- The report prefers Murata Manufacturing more within passive components.
- Risks
- If April-June results fail to confirm earnings improvement, share price volatility may rise.
Key data
- MLCC production valueUS$370 million，YoY -17%，MoM -17%METI basis, significantly below typical seasonality.
- MLCC export valueUS$411 million，YoY +9%，MoM -12%MoF basis, which the report believes better reflects recent improvement.
- Passive components output valueUS$750.0 million，YoY -12.6%，MoM -11.4%Below seasonality in May, indicating insufficient momentum.
- Aluminum electrolytic capacitor output valueUS$104.7 million，YoY +1.1%，MoM +0.9%Output value maintained a gradual upward trend and was relatively resilient.
- Rigid module substrate output valueUS$175.9 million，YoY +24.2%，MoM +20.3%Including ABF substrates/FC-BGA, significantly stronger than seasonality.
- Memory output valueUS$1,811.0 million，YoY +548.4%，MoM +29.6%Both output value and ASP rose sharply.
- Discrete semiconductor output valueUS$201.1 million，YoY -18.8%，MoM -5.2%Overall still weak, but the report is positive on the recovery of Rohm-related analog and discrete demand.
Impact & implications
The implications of the data for the electronic components sector are somewhat mixed but overall constructive: ABF substrates, rigid module substrates, and memory provide clear upward momentum, while the recovery in industrial machinery and automotive demand supports fundamentals in April-June and July-September; weak MLCC production statistics limit short-term certainty, but improving export data reduces concerns about a rapid deterioration in demand. At the single-stock level, Ibiden, Murata Manufacturing, Rohm, and Hirose Electric are more direct beneficiaries of the trends emphasized in the report.
Risks
- METI MLCC production statistics and MoF export statistics continue to diverge; if export data weakens later, the current view that there is no need for excessive concern may prove invalid.
- Passive component output value is below seasonality, indicating that the demand recovery remains uneven.
- Short-term quarterly earnings visibility is low for Taiyo Yuden, Nichicon, and Nippon Chemi-Con, and earnings releases may bring volatility.
- Although there are signs of recovery in Rohm-related analog and discrete markets, April-June may still be dragged by destocking.
- If demand for ABF substrates/FC-BGA falls short of expectations, the optimistic view related to Ibiden may pull back.
What to watch
- Whether April-June 2026 earnings from electronic component companies validate the recovery in industrial machinery and automotive demand.
- Whether MLCC book-to-bill continues to stay at 1.3-1.4, and whether AI server demand remains sustained.
- Whether MoF MLCC export value and average unit price can continue to rise.
- Whether Ibiden announces new capacity expansion plans.
- Whether Rohm begins to show earnings expansion in July-September.
- Whether Hirose Electric's April-June results exceed company guidance.
- Whether the exceptionally high growth in memory output value and ASP is sustainable.