The supply-demand dynamics in the multilayer ceramic capacitor (MLCC) market are undergoing a tangible shift.

According to data from UBS Evidence Lab, which tracks over 100 distributors globally, as of August 9, worldwide MLCC distributor inventory levels had fallen another 8% from four weeks earlier (July 11), setting a fresh historic low. In contrast, the value of that inventory rose 10% over the same period, while the unit price index climbed 7%. This widening divergence between falling volumes and rising prices is becoming increasingly pronounced.

The data shows this trend of lower volumes and higher prices is equally evident on a year-over-year basis: as of the end of July, inventory volumes were down 22% annually, while inventory value was up 6% and the unit price index had risen 13%. The distributor channel's unit price index is now approaching its highest level since January 2023, signaling that the price recovery cycle is accelerating.

UBS believes the tightening of supply and demand will first emerge from AI-related demand and the distributor channel before spreading to the broader market. This assessment provides a clear catalyst for MLCC-related stocks. UBS maintains Buy ratings on Samsung Electro-Mechanics, Murata Manufacturing, and TDK Corporation, while keeping a Neutral rating on Taiyo Yuden.

Inventory levels decline across major manufacturers, with prices rising across the board

Looking at individual manufacturer data as of August 9 compared with four weeks earlier, inventory volumes fell 8% at Murata Manufacturing, 20% at Samsung Electro-Mechanics, 1% at Yageo Corporation, and 7% at TDK Corporation, while Taiyo Yuden held steady. The downward trend in inventory volumes was evident across most manufacturers.

Inventory value, however, showed a mixed picture: Murata Manufacturing rose 8%, Yageo Corporation gained 13%, TDK Corporation increased 3%, Taiyo Yuden surged 32%, while Samsung Electro-Mechanics declined 4%.

On the unit price index front, all manufacturers recorded gains: Murata Manufacturing rose 6%, Samsung Electro-Mechanics climbed 14%, Yageo Corporation added 7%, TDK Corporation gained 8%, and Taiyo Yuden rose 13%.

Compared with the bottom of the previous inventory cycle, the inventory volume indices for Murata Manufacturing, Samsung Electro-Mechanics, TDK Corporation, and Yageo Corporation are all at or below those earlier levels, while Taiyo Yuden remains roughly 15% above its recent trough. Relative to the previous cycle bottom, the inventory value index has risen 19% at Murata Manufacturing, 29% at Samsung Electro-Mechanics, 45% at Yageo Corporation, 3% at TDK Corporation, and 81% at Taiyo Yuden, reflecting how price increases are providing substantial support to inventory valuations.

Supply tightness originates from AI and distributor channels, potentially spreading across the market

Two major Japanese MLCC manufacturers both explicitly noted in their April-June quarterly reports that distributor demand showed signs of overheating, and they signaled potential price hikes to correct the supply-demand imbalance. The current distributor unit price index is now near its highest level since January 2023.

UBS pointed out that while it cannot rule out that some distributor demand includes pull-forward orders, the rapid and significant decline in distributor inventory levels is an objective fact. Combined with the major MLCC manufacturers' April-June book-to-bill ratios (Murata Manufacturing at 1.47, Taiyo Yuden at 1.72), their July-September capacity utilization guidance (both companies at 95%), and upward revisions to AI-related sales guidance, UBS judges that supply tightness will first emerge from AI-related and distributor channels before transmitting to the overall market.

UBS currently maintains a Buy rating on Samsung Electro-Mechanics with a target price of KRW 2,500,000, a Buy rating on Murata Manufacturing with a target price of JPY 13,200, a Buy rating on TDK Corporation with a target price of JPY 4,950, and a Neutral rating on Taiyo Yuden with a target price of JPY 17,700.

From a valuation perspective, the 2026 expected price-to-earnings (P/E) ratios for these stocks range between 15.7x and 65.5x. Samsung Electro-Mechanics carries the most significant valuation premium, while TDK Corporation is relatively undervalued with a 2026 expected P/E of 21.5x. UBS believes that with the price uptrend underway and supply-demand conditions continuing to tighten, manufacturers with a higher proportion of premium products will benefit first.