A multilayer ceramic capacitor, or MLCC, is among the smallest and least expensive parts inside a computer. Each one costs just pennies. It does one job: hold a small amount of electricity and release it the instant a nearby chip needs it.
That job has become one of the harder problems in AI hardware. A modern AI rack needs these capacitors by the hundreds of thousands, and the small group of companies capable of making the best ones cannot produce them fast enough.
The AI trade has run this play before. Memory was supposed to be a commodity. Optics was supposed to be a niche. Both turned out to matter far more than the market assumed, for the same reason MLCCs may now: before a chip can compute anything, electricity has to reach it, cleanly, instantly and efficiently.
An MLCC is a capacitor, which means it is a very small, very fast reservoir for electricity. It stores a tiny amount of charge and releases it the instant a nearby circuit needs it.
The construction is what makes it useful. Alternating layers of ceramic and metal are stacked hundreds of layers deep and fired into a single solid chip. Stacking is how you fit meaningful storage capacity into something that has to sit millimeters from a processor.
An AI accelerator is an unusually demanding electrical customer. It draws enormous power, and it draws it unevenly, ramping up and down as workloads shift. Chips need electricity that is not simply plentiful but steady, and steadying it is what capacitors do.
Because that has to happen instantly, it has to happen physically close to the chip. So designers surround each processor with capacitors, packed in as tightly as the board allows. The denser and hungrier the processor, the more capacitors the design requires.
An ordinary server motherboard uses a couple thousand of these capacitors. A modern AI system, packed with accelerators drawing far more power in the same physical space, uses them by the hundreds of thousands.
That gap is the whole story. Building more computers requires more capacitors. Building more demanding computers requires disproportionately more of them.
MLCC production is concentrated in Asia in countries like Japan, Korea, Taiwan, and China. The industry sorts into three groups that behave very differently.
The parts that sit next to an accelerator have to deliver high capacitance in a very small footprint and hold up under heat and voltage stress. They have to be qualified into a customer's design, which takes time and is not easily reversed. This is where the pricing power lives.
Murata Manufacturing (6981 JP) is the global leader and the dominant supplier at the high end. Samsung Electro-Mechanics (009150 KS) is the other major supplier into AI server power delivery and has been adding capacity aggressively. TDK (6762 JP) is a diversified electronic components maker with a large passive components business and particular strength in automotive-grade parts. Taiyo Yuden (6976 JP) specializes in small-case, high-capacitance parts, the exact profile that dense computing hardware demands.
Why it matters: this is the layer with real barriers to entry, because customers qualify these parts into a design and do not casually re-qualify them.
Alongside the high end sits an enormous market for general-purpose parts going into phones, PCs, appliances, industrial equipment, and vehicles. These suppliers compete on breadth of catalog and manufacturing scale rather than on the most advanced specifications, and they benefit when tightness at the top end pushes buyers down the supply chain.
Yageo (2327 TT) is the largest of these suppliers and one of the most complete passive component platforms in the world, having expanded its range considerably through acquisition. Walsin Technology (2492 TT) is a major Taiwanese producer of capacitors and chip resistors with a growing automotive and industrial mix. Holy Stone Enterprise (3026 TT) rounds out the Taiwanese group, focused on niche and high-reliability applications alongside a components distribution business.
Why it matters: this layer is a read on the broader electronics cycle as much as on AI, and it is where capacity gets reallocated when the high end runs full.
China consumes far more of these components than it produces at the high end, and closing that gap has become a national priority. The domestic producers have spent years moving up from commodity parts toward higher specifications, backed by heavy capacity investment.
Chaozhou Three-Circle Group (300408 CH) is the most advanced of them, built on decades of expertise in engineered ceramics, and is pursuing a Hong Kong listing on the strength of AI-driven demand. Guangdong Fenghua Advanced Technology (000636 CH) is one of the country's largest passive component makers and a principal beneficiary of the localization push.
Why it matters: this is where new capacity is arriving fastest, and whether it can clear the qualification bar is what determines how long the top of the market keeps its pricing power.
It is a strange feature of modern computing that the most advanced machines ever built depend on one of the simplest components ever made. A capacitor does not compute, store data, or move information. It holds a small amount of electricity and gives it back at the right moment. The basic design has not fundamentally changed in decades.
What has changed is how many are needed and how effective they have to be. As processors draw more power and draw it faster, the job of keeping that power steady gets harder, and it gets solved by putting more capacitors in tighter spaces with better materials.
For most of their history, passive components like capacitors were the part of the bill of materials nobody thought about. Understanding what they do, and why AI needs so many of them, is a useful window into how the physical limits of electricity shape what computing can actually achieve.
Glossary
A capacitor is a component that stores a small amount of electrical charge and releases it quickly, used to steady the flow of electricity in a circuit.
A passive component is a component that does not generate or control power on its own, such as a capacitor, resistor, or inductor, as distinct from an active component such as a transistor or a chip.
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