Price increase of 50%! International electronic component giants aggressively raise prices, concept stocks fully analyzed, 11 stocks benefit the most (attached stocks)

In depth analysis of the passive component market: Due to the impact of the epidemic on production capacity, the supply-demand gap between MLCC and chip resistors continues to widen, with Guoju Electronics leading the way with a 50% increase. Understand how leading stocks in the passive component concept, such as Fenghua High tech and Sanhuan Group, directly benefit from the demand explosion and price increase trend brought by 5G and automotive electronics.

It is expected that passive components will continue to be in short supply before the end of the first quarter, and prices of resistors, capacitors, and other components will rise accordingly. Passive component manufacturers and other professionals will directly benefit from this situation.

According to supply chain sources, passive component leader Guoju Electronics plans to increase the price of multilayer ceramic capacitors (MLCC) from the originally planned 30% to 50% due to lower actual output than expected. In addition, the price increase of chip resistors has also been raised to 50%, effective from March.

Industry insiders believe that at present, the inventory level of passive components is too low, demand is higher than supply, and manufacturers have regained control. The 50% increase is also the largest increase in passive component prices since last year when prices stabilized.

The market gap for passive components is large

Passive components, also known as passive devices, refer to circuit components that do not affect the basic characteristics of signals and only allow signals to pass through without modification. The most common are resistors, capacitors, inductors, etc., mainly used in consumer electronics products, etc. The performance of electronic products is increasingly high, and the demand for passive components has also reached a new level. In addition, many emerging functions such as 5G and fingerprint unlocking have greatly promoted the demand for passive components.

In terms of market size, the passive component market reached 24.24 billion US dollars in 2016 and is expected to reach 328.9 billion US dollars in 2021, with a compound growth rate of 6.29%. With the gradual implementation of various cutting-edge features such as 5G, VR, AI, etc., the market space for passive components will experience exponential growth in the future. On average, 5G smartphones use over 1000 passive components, an increase of 20% to 30% compared to 4G smartphones.

The production of passive components has not continued to increase, but there is a possibility of a decrease. The supply of passive components was already tight in the fourth quarter of last year. The COVID-19 affected the resumption of production of passive component factories. At the same time, the inventory of finished products of downstream ODM/OEM factories and system factories continued to decline.

Passive components have a low unit price and account for a very small proportion of the final product cost, so price increases are not likely to be affected by too much downstream pressure. In order to ensure the safety of material sources, the client accepts price increases and will not adjust its product prices due to a significant increase in passive component quotes.

Global passive component manufacturers have production bases in mainland China, mainly concentrated in the coastal areas of East and South China. Industry insiders estimate that MLCC production capacity in Jiangsu, Hebei, Guangdong and other places accounts for about 30-40% of global supply. The COVID-19 has affected transportation and employee return rate, resulting in MLCC supply far below the demand for end products.

After the resumption of production in mainland factories, component procurement and inventory replenishment orders have been flying, and urgent orders for key components have emerged. Passive components cannot be supplied at full capacity in the short term, and the supply-demand gap is becoming increasingly large. It is expected that passive components will continue to be in short supply before the end of the first quarter, and prices of resistors, capacitors, and other components will rise accordingly. Passive component manufacturers will directly benefit from this situation.

Passive component prices keep rising and rising again

Guoju Electronics is currently the world's largest supplier of chip resistors, with a market share of 34%. At the end of last year, Guoju announced the acquisition of American passive component factory Jimei, becoming one of the top three passive component suppliers in the world. Its price increase has a significant impact on China and is likely to attract many passive component manufacturers to follow suit.

Since the second half of last year, on the one hand, the process of bottoming out product prices has been completed, and on the other hand, the demand for 5G and autonomous driving is high and supply is tight. MLCC manufacturers have been promoting the news of MLCC shortages and upcoming price increases.

At the end of November last year, passive component manufacturer Dayi Technology was the first to announce that it had completed a price increase for its resistor products. At the same time, Guoju closed its trading system, cleared unfinished and unconfirmed orders, and new orders will be determined based on the adjusted prices, resulting in a wave of fancy price increases. Samsung Electric raised MLCC prices for distributors in December last year, targeting commonly used part numbers such as 104 and 105, with an increase of about 5-10%.

Guoju's production bases in Suzhou and Dongguan resumed work on February 10th. It was announced that Guoju plans to raise the prices of multilayer ceramic capacitors (MLCC) and resistors for distributors and EMS customer factories starting from March, with an increase of about 30% and a continued bullish trend in the second quarter.

Guoju has already significantly increased the price increase to 50% before the effective date of the 30% price adjustment. Industry insiders predict that the mainland epidemic will have a more severe impact on the production of passive component indicator factories in mainland China than expected, leading to a continued widening of the supply gap and allowing Guoju to raise prices. For the price increase of 50% for the two major products, which is much higher than the original plan, Guoju stated on the 17th that the price is determined by market supply and demand, and is currently fully committed to meeting customers' urgent order needs.

The price increase of passive components affects the secondary market

After the holiday, the price increase of passive components has already affected the secondary market. According to statistics from Securities Times Data Treasure, the passive component index not only filled the gap caused by panic on the first day after the holiday, but also rose by 14% compared to before the holiday.

Fenghua High tech products include passive components such as MLCC, chip resistors, chip inductors, ceramic filters, etc. It is a leading manufacturer of MLCC in China. The company stated that due to the tight supply of MLCC, there is also an expectation of price adjustments for its MLCC products.

Jiemei Technology is a leading player in the MLCC thin carrier tape industry in China. Its products mainly include paper tape carriers, plastic tapes, adhesive tapes, release films, etc. Its customers include Samsung, Guoju, and others. The demand for carrier tapes is closely related to the electronic components industry

Torch Electronics is a leading MLCC supplier in China and a leader in military MLCC. Many new products such as tantalum capacitors and SLC will form new growth points for performance. Yangjie Technology's product line covers a full range of multi specification semiconductor discrete device products, including discrete device chips, power diodes, rectifier bridges, and other large-scale enterprises. Shunluo Electronics is a leading global manufacturer of chip inductors, specializing in passive electronic components - inductors. Sanhuan Group is a leading player in the domestic ceramic component field and can mass produce MLCC. The company's MLCC products have been widely used in fields such as home appliances, lighting, consumer electronics, industrial control, communication equipment, and automotive electronics. Guoci Materials is the largest MLCC electronic ceramic material supplier in China, with a market share of 80% in the domestic market. Zhenhua Technology originated from the third tier military electronic base and is an all-around leader in the field of military electronic components. Hongyuan Electronics' main business is the research and development, production, and sales of electronic components, mainly multilayer ceramic capacitors (MLCC). Huilun Crystal specializes in piezoelectric quartz crystal components and is one of the leading companies in the domestic surface mount piezoelectric quartz crystal component industry, used in the mobile phone and other industrial chains. Taijing Technology is a leader in the subdivision field of quartz crystal resonators, with a total of 17 products certified by more than ten well-known domestic and foreign application solution providers such as MTK and Huawei HiSilicon, benefiting from the explosion of the 5G industry chain.