AI-Driven MLCC Divergence: Top Pick Murata, Downgrade Taiyo Yuden

Overview

This report focuses on the structural reshaping of the MLCC (multilayer ceramic capacitor) industry by the AI and data center wave. Morgan Stanley believes that as AI server demand for compact, high-capacity MLCCs grows exponentially, industry leader Murata Manufacturing will become the biggest beneficiary due to its technological generation gap and scale advantages, and is therefore named the top pick in the electronic components sector. In contrast, although Taiyo Yuden's earnings are also growing, its share price surged 445% in the first half of 2026, having fully or even excessively reflected optimistic expectations for its AI business, while its ability to supply high-end products lags significantly behind Murata, creating valuation callback pressure, hence the downgrade to Underweight.

Core views

AI/Data Centers Are Reshaping MLCC Demand Structure: The report forecasts that the global MLCC shipment value CAGR will reach 18.2% over the next three years, far exceeding the 6.5% of the past decade. Among this, high-value-added compact high-capacity MLCC demand for AI servers and data center applications is expected to grow at a CAGR of approximately 100%. The number of MLCCs required for AI server motherboards is approximately 10 times that of general-purpose servers, and as semiconductor processes shrink and voltages decrease, demands for capacitor stability and capacity density become more stringent, driving continuous evolution toward smaller sizes and larger capacities. Murata Manufacturing Possesses Irreplaceable Competitive Advantages: Murata held a 40.8% share of the global MLCC market in 2025 and is currently the only manufacturer capable of stably mass-producing the three key specifications (1608 size 100uF, 1005 size 47uF, 0603 size 10uF) of MLCCs required for AI servers. In contrast, when competitors will achieve stable mass production remains unclear. Murata not only leads in high-end products but also possesses overwhelming cost competitiveness in general-purpose products, and this "dual-wheel drive" is expected to further widen its profit margin gap. The report forecasts Murata's F3/27 operating profit will reach a record high of ¥431.9 billion, with ROE rising from 8.8% to 18.5%. Taiyo Yuden's Share Price Has Significantly Diverged from Fundamentals: Although Taiyo Yuden's MLCC business is also expanding, and the report has raised its earnings forecasts (F3/27 OP expected to be ¥45.2 billion), its benefit from AI/data center high-end MLCC is limited. The company only increased MLCC capacity by 5% in F3/26, limiting its ability to secure new orders, and its technology to increase capacity by expanding the effective surface area of dielectric layers has not yet entered full-scale mass production. As of June 15, Taiyo Yuden's share price corresponds to a F3/31 forward P/E of 39.1x, while Murata's is only 20.8x. The report believes that as earnings are reported, the market will gradually recognize the gap between the two companies' ability to deliver on AI business, and Taiyo Yuden's share price faces 35% downside correction potential.

Analysis framework

The report adopts a "technology moat + supply-demand matching" analytical framework to differentiate the investment value of the two companies. First, by disassembling the AI server hardware architecture, it quantifies the specific technical requirements for MLCCs in terms of quantity, size, capacity, and electrical characteristics, establishing high-end MLCCs as the core incremental market. Second, it deeply compares the two companies' mass production timelines, yield stability, and capacity expansion plans for specific specification products, identifying Murata's exclusive advantage on the supply side. Finally, combining DCF valuation with forward P/E analysis, it assesses whether current share prices reasonably reflect the above fundamental differences. For Taiyo Yuden, the report particularly emphasizes "share price gain vs. earnings growth" divergence analysis, pointing out that market expectations have linearly extrapolated the AI concept excessively while ignoring the actual pace limitations of product mix improvement.

Methodology notes

• Competitive and Strategic FrameworkMoat / competitive advantage

  Moat formed by technology gap and mass production stability

  In the precision electronic components industry, mere laboratory technical specifications are insufficient to constitute a barrier; only the ability to 'stably mass-produce' specific high-difficulty specification products constitutes a true moat. The report confirms Murata as the only manufacturer capable of stably supplying the full range of key MLCC specifications for AI servers, demonstrating its source of excess returns relative to competitors.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Volume and price driver decomposition of MLCC market growth

  The report does not make general predictions about MLCC market growth but decomposes it into 'shipment volume' and 'average selling price (ASP)' factors. Although ASP for the same specification products trends downward long-term, the overall ASP actually rises due to the increasing proportion of high-unit-price, high-capacity products driven by AI (Mix Shift). This structured analysis method avoids being misled by single price trends.

• Valuation MethodDCF Discounted Cash Flow

  Absolute valuation anchoring based on WACC and terminal value assumptions

  The report uses the DCF model as the core derivation tool for target prices (Murata WACC 6.1%, Taiyo Yuden 6.5%), combined with scenario analysis (bull/bear cases) to define reasonable valuation ranges. This helps provide a value benchmark independent of short-term momentum when market sentiment is overheated (such as after Taiyo Yuden's surge), identifying pricing deviations.

• Company Fundamental and Financial FrameworkROIC–WACC spread

  Spread analysis between return on capital and cost of capital

  When assessing shareholder return potential, the report focuses on the trend of ROE (return on equity) improvement relative to cost of capital. Murata's ROE is expected to rise from 8.8% to above 20%, significantly higher than its 6.1% cost of capital, indicating that its growth is creating real economic value; while even if Taiyo Yuden's ROE improves, if it cannot cover the excessively high valuation premium, it implies relatively insufficient capital allocation efficiency.

Asset mapping & comparison

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

• Murata Manufacturing (6981.T)

  Biggest beneficiary of AI/data center MLCC demand explosion, with strong technology exclusivity

  Strengths

  Only manufacturer stably mass-producing full range of key MLCC specifications for AI servers; global market share leader with continuous improvement; excellent cost control; diversified product line (batteries, power modules, etc.) synergies

  Weaknesses

  High sensitivity to macroeconomic and inventory cycles; significant foreign exchange fluctuation impact (1 yen appreciation reduces OP by ¥4.5 billion)

  Comparison

  Compared to Taiyo Yuden, leads by at least one generation in AI high-end product mass production progress, with more attractive valuation (F3/31 P/E 20.8x vs 39.1x)

  Risks

  AI server demand falls short of expectations; high-end smartphone sales weaken; significant yen appreciation

• Taiyo Yuden (6976.T)

  MLCC business growing but AI high-end contribution limited, share price has excessively reflected optimistic expectations

  Strengths

  MLCC business overall still expanding; capacity utilization improvement driving profit recovery; power inductors have growth points in 5G

  Weaknesses

  AI/DC high-end MLCC mass production timing uncertain; F3/26 capacity increase of only 5% limits order-taking ability; valuation significantly high

  Comparison

  Compared to Murata, lacks stable supply capability in AI core specification products, with market share declining (from 12.7% in 2020 to 11.3% in 2025)

  Risks

  Share price faces 35% downside correction risk; AI business delivery speed below market expectations; macroeconomic slowdown pressures general-purpose MLCC prices

Key data

• AI/DC MLCC Demand 3-Year CAGR~100%Compound growth rate of high-value-added compact high-capacity products
• Global MLCC Shipment Value 3-Year CAGR18.2%2025-2028 forecast, significantly higher than the past 10 years' 6.5%
• Murata MLCC Global Market Share (2025)40.8%Firmly first, with even higher share in AI high-end products
• Taiyo Yuden Year-to-Date Gain+445%As of June 15, 2026, far exceeding Murata's +210%
• Murata F3/27E Operating Profit¥431.9bnExpected to reach record high, exceeding company guidance of ¥380bn
• Taiyo Yuden F3/31E Forward PE39.1xSignificantly higher than Murata's 20.8x, indicating valuation premium

Impact & implications

For the electronic components sector, AI is not bringing a broad-based rally but rather intense structural divergence. Leading companies with core technology reserves and scaled manufacturing capabilities will obtain excess profits, while second-tier manufacturers even in the same track may fail to fully realize benefits due to product iteration lag or capacity bottlenecks. Investors need to be wary of valuation regression risks after 'concept hype', especially when share prices have risen sharply in the short term but lack corresponding high-end product shipment data verification. Murata Manufacturing is regarded as a defensive yet growth-oriented allocation choice due to its certainty, while Taiyo Yuden becomes a potential target for expectation gap correction.

Risks

• AI server and data center MLCC demand growth falls short of expectations
• Global economic stagnation or consumer electronics (smartphones, etc.) demand weakness
• Significant yen appreciation against US dollar erodes exporter profits
• Competitors accelerate high-end product R&D and mass production, shortening technology gap window

What to watch

• Actual shipment volume and revenue share changes of high-value-added MLCCs for AI servers
• Taiyo Yuden's mass production progress and customer certification status for MLCCs used in AI accelerator boards
• Product mix improvement and gross margin changes in quarterly earnings reports of both companies
• Global MLCC industry capacity expansion plans and supply-demand balance status