Chinese manufacturers of multilayer ceramic capacitors (MLCCs) – tiny components required in great numbers to regulate electrical flow in electronic devices – are riding a stock rally on the back of explosive first-half earnings, fuelled by insatiable global demand for artificial intelligence infrastructure. Shares of Shenzhen-listed Guangdong Fenghua Advanced Technology, one of the country’s leading producers of consumer-grade MLCCs, surged by the exchange-imposed 10 per cent daily limit on Wednesday morning. It marked the second time the stock hit the ceiling this week, capping a rally of more than 180 per cent so far this year. Meanwhile, Suzhou GYZ Electronic Technology jumped 20 per cent to hit the daily limit on Shanghai’s Nasdaq-style Star Market, and Chaozhou Three-Circle, a major domestic manufacturer of high-capacitance MLCCs, saw its Shenzhen-traded shares climb around 8 per cent, putting its year-to-date gain above 130 per cent. Its Hong Kong shares also rose 5 per cent on Wednesday. Upstream suppliers also benefited from the momentum, with Jiangsu Boqian New Materials gaining nearly 6 per cent and Shandong Sinocera Functional Materials rising almost 3.5 per cent on Wednesday. Often described as the “rice of the electronics industry” because of their tiny size and ubiquity, MLCCs are essential components in products ranging from smartphones and electric vehicles to AI servers. The sector’s rally comes as the rapid buildout of power-hungry AI data centres and computing clusters continues to drive high demand for high-capacitance MLCCs, creating supply constraints across the supply chain. Monthly shipments from the world’s top three suppliers, namely Japan’s Murata Manufacturing, South Korea’s Samsung Electro-Mechanics (SEMCO) and Japan’s Taiyo Yuden, hit a five-year high in June, according to a report by market research firm TrendForce on Tuesday. The report showed that single-month shipments surged to 140 billion units for Murata, 98 billion for Semco and 40 billion for Taiyo Yuden, with momentum continuing into July. While Japanese and South Korean giants dominate the supply of advanced MLCCs used in AI servers and data centres, their focus on higher-end products has created opportunities for Chinese manufacturers to gain market share in lower-end segments. “A sustained spillover of consumer-grade MLCC orders is benefiting distribution channels and suppliers in Taiwan and mainland China, thereby driving up their quotes,” TrendForce’s report said. AI data centre-driven MLCC shortages had already expanded from high- to low-capacitance products, according to a report by investment bank Jefferies last week. Chinese manufacturers were expanding more aggressively than the Japanese and South Korean leaders, but it would take them a long time to produce high-capacitance MLCCs for AI data centres, if they could even do so, the Jefferies report said. The momentum has already been reflected in sharp profit gains for some of mainland China’s top players. Guangdong Fenghua projected first-half profit would surge 62 to 80 per cent to 300 million yuan (US$44 million), while Three-Circle expected a 45 to 65 per cent gain to 2 billion yuan. Some domestic players are investing to upgrade their production and ramp up capacity to meet the growing demand. Suzhou GYZ, previously focused on smartphone camera modules, recently pledged to invest 1.5 billion yuan to expand capacity for high-performance MLCCs.