Murata Manufacturing: AI-Driven Demand for Cutting-Edge MLCCs and Highly Efficient Capex

Overview

This report summarizes Morgan Stanley’s management meeting notes on Murata Manufacturing Co., Ltd. (6981.T). The core thesis is that Murata’s investments in cutting-edge multilayer ceramic capacitors (MLCCs) are highly efficient, driven by surging demand from artificial intelligence (AI) and data centers (DC). Although the company does not plan to raise prices for existing products, average selling prices (ASP) and product mix are expected to improve continuously through higher-value new product rollouts. The firm maintains its Overweight rating with a target price of JPY 8,077.

Core views

Demand Side: AI and Data Centers as Key Growth Drivers. According to President Norio Nakajima, AI/DC-related MLCC sales share is expected to increase significantly—from 10–15% in FY3/26 to 20–25% in FY3/27—with year-on-year growth of 85–90%. Beyond data centers, growing demand for miniaturized, high-capacity MLCCs from AI edge devices will also sustain growth in advanced products over the medium term. Supply & Investment: Exceptionally High Capital Expenditure Efficiency. To meet the substantial increase in total capacitance required for AI/DC applications, Murata is adding JPY 80 billion in incremental capex on top of its annual 10% capacity expansion. This additional investment targets supplementary processes for advanced products and delivers far higher efficiency than conventional capacity expansion. It is expected to directly accelerate MLCC sales growth from 13% in FY3/27 to 20–25% in FY3/28. Pricing & Profitability: Structural Optimization Instead of Direct Price Increases. The company explicitly stated it has no plans to raise prices for existing MLCC products, and the likelihood of further price declines for these products is also diminishing. However, as higher-priced new advanced products gain traction, overall ASP will continue rising, and product mix improvement will be key to profitability growth. Technical Barriers: Capability in Packaging Substrate Capacitors. In the field of capacitor integration into GPU/TPU packaging substrates, Murata—despite technical challenges such as connection reliability—already possesses the capability to supply both embedded MLCCs and silicon capacitors, suitable for both embedded and surface-mount applications, demonstrating strong technological readiness in high-end packaging.

Analysis framework

The firm analyzed management’s remarks at the analyst meeting using an integrated approach combining 'volume-price decomposition' and 'capital expenditure efficiency analysis.' First, it quantified changes in AI/DC business share of total sales and growth rates to establish demand growth certainty. Second, it differentiated routine capacity expansion from targeted capex for advanced processes to assess the marginal profit and sales acceleration impact of the latter. Finally, it analyzed ASP trends through product mix evolution rather than relying solely on pricing assumptions, thereby deriving conclusions about accelerated profitability.

Methodology notes

• Industry/sector analysis frameworkVolume-price decomposition

  Volume-price decomposition

  Decomposing revenue growth into volume growth and price (ASP) changes. In this report, the firm notes that while volumes surge due to AI demand, ASP increases are driven primarily by higher shares of premium new products (structural optimization), not direct price hikes for legacy products—enabling more precise assessment of earnings quality.

• Corporate fundamentals and financial framework

  Capital expenditure efficiency analysis

  Assessing the return on incremental investment relative to output growth. The report emphasizes that the JPY 80 billion additional capex is directed toward 'supplementary processes' for advanced products, delivering substantially higher efficiency than standard capacity expansion—meaning each unit of capital invested yields greater sales and profit growth.

Asset mapping & comparison

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

• Murata Manufacturing Co., Ltd. (6981.T)

  Direct beneficiary and core supplier to AI/DC demand growth

  Strengths

  Technology leadership in advanced MLCCs, capability in packaging substrate capacitors, high capital expenditure efficiency

  Risks

  Global economic volatility causing demand and pricing weakness, weaker-than-expected high-end smartphone demand, FX volatility

Key data

• AI/DC-related MLCC Sales ShareFY3/26: 10–15% → FY3/27: 20–25%Expected to double within one year
• AI/DC-related MLCC Sales YoY Growth85–90%Forecast for FY3/27
• Additional Capital ExpenditureJPY 80 billionAllocated primarily to supplementary processes for advanced products
• MLCC Sales Growth ForecastFY3/27: 13% → FY3/28: 20–25%Accelerated by increased sales of advanced products
• FX SensitivityJPY 1 per USD movement impacts operating profit by JPY 4.5 billionOne of the downside risk factors

Impact & implications

The report concludes that Murata is entering a new growth cycle driven by AI infrastructure upgrades. Its additional capex is not merely scale expansion but strategic process enhancement targeting high-barrier, high-margin products—significantly strengthening profitability and competitive moats. For investors, focus should shift from traditional cyclical fluctuations to penetration rates of AI-related, high-value-added products.

Risks

• Significant fluctuations in demand and pricing for electronic devices due to global economic changes
• Weaker-than-expected demand for high-end smartphones
• FX volatility risk (estimated impact: JPY 4.5 billion on operating profit per JPY 1/USD move)

What to watch

• Whether AI/DC-related MLCC sales share reaches 20–25% in FY3/27 as projected
• Timelines and market acceptance of new advanced MLCC product launches
• Whether MLCC sales growth accelerates to 20–25% in FY3/28