CEO of Apple supplier sees sharp increase in demand for 5G phones in 2021

Demand for 5G handsets will rise sharply this year according to Bloomberg. The latter cites Apple supplier Murata Manufacturing for expecting 5G phone demand to reach half a billion units in the coming fiscal year. The supplier delivers ceramic capacitors to smartphone manufacturers including Apple. Murata notes that companies like Apple, Samsung, Oppo, Xiaomi and Vivo are looking to obtain enough components allowing them to replace some of the phone production that Huawei will lose this year due to U.S. sanctions. New rules put in place by the Commerce Department prevent foundries from shipping chips made with U.S. technology to Huawei.

To illustrate how heavy the demand is for Murata's components, company President Norio Nakajima said in a December interview that Murata’s factories won’t be taking a holiday break; that's because Murata is trying to catch up with mounting orders. President Nakajima added that "the situation is most severe with our cutting-edge capacitors for smartphone use. These handset makers are competing to grab our supply capacity once taken by Huawei, and I am not sure how much of it is backed up by their actual production forecast. I feel like the move is overheated, and thus expect their orders would drop in February and March." 

Murata's main product is the multilayer ceramic capacitors (MLCC) that regulates the flow of electricity on circuit boards found on products like smartphones and automobiles. Despite the executive's comments about the necessity of Apple, Samsung and other firms to make up for Huawei's gradual departure from the handset business, some analysts believe that Murata's president was being too conservative with this statement. For example, Ace Research Institute's Hideki Yasuda said that demand from consumers for 5G phones should keep Murata busy producing these parts for Apple and its rivals. On the other hand, while Nakajima does expect demand for its MLCC line to remain strong throughout the year, he does forecast a slight decline in demand after the Chinese Lunar New Year holiday in February. The executive sees a bounce of about 10% in MLCC sales starting with the the new 2021 fiscal year which begins midway through February.

Besides affecting supplies for 5G phones, there are severe supply shortages throughout the electronics industry which is causing delays in production of other tech products including game consoles like the Sony PlayStation 5 and Microsoft's Xbox Series X.

The bottom line is that Murata's president sees another month of production shortages for its MLCC ceramic capacitors before supplies start to increase. Based on his company's performance, he expects demand for 5G handsets to surpass 500 million units in the coming fiscal year. Nakajima said, "The industry had 300 million units of 5G smartphones during the current fiscal year, and I expect that to increase to at least 500 million in the next fiscal year. We will continue making capital expenditure to keep up with the growing demand."

Apple's 2020 iPhone 12 series is its first line of handsets to support the next generation of wireless connectivity which will deliver download data speeds 10 to 100 times faster than currtent 4G LTE signals. 5G will not only allow HD movies to be downloaded in seconds, it will lead to the creation of new businesses and technologies including self-driving automobiles. It also will improve healthcare as doctors will be able to get a better handle on patients' symptoms and problems even those ill are hundreds of miles away from the doctor.