China’s upstream supply chain for multilayer ceramic capacitors (MLCCs) – tiny components dubbed “the rice of electronics” – is racing to expand capacity, as an artificial intelligence-driven boom triggers a surge in global orders. Shandong Sinocera Functional Materials, a major supplier of dielectric powder to MLCC manufacturers, told investors in a Shenzhen Stock Exchange filing on Wednesday that it was actively pushing to expand capacity for AI servers and vehicles, with parts of its new production lines already operational. “Looking ahead, as new capacity gradually ramps up, output and sales of MLCC powders are expected to rise further,” Sinocera said in the document, adding that it would continue to expand and ensure its supply aligns with market momentum. The company’s optimism follows a strong performance in the first half of 2026, when it reported sales growth of nearly 17 per cent year on year to reach 2.5 billion yuan (US$370 million), while net income rose 9 per cent. Dielectric powder is a core raw material used in MLCCs, which regulate electrical currents across products ranging from smartphones to high-performance AI hardware. The surge in demand comes as the sector enters what Goldman Sachs has described as the “largest and longest” cycle in MLCC history, driven by the insatiable computing needs of AI infrastructure. Other upstream suppliers have also rushed to pour investments into meeting the booming demand. Last month, Jiangsu Boqian New Materials, the world’s second-largest supplier of MLCC nickel powders in 2025, based on Frost & Sullivan data, pledged a total investment of 201.5 million yuan in three expansion projects designed to boost the production of metal powder, including nickel. Nickel powder is a critical raw material used to manufacture the electrodes inside the capacitors. High-end MLCCs used in AI servers and data centres have raised the standards for nickel powder performance while continuing to fuel demand for the firm’s products, according to Jiangsu Boqian. Meanwhile, Zhejiang Jiemei Electronic Technology, a core supplier of MLCC release film, is expanding beyond its current annual output of 400 million square metres, with an additional 580 million square metres planned to be released gradually. Release film is a highly specialised substrate used to manufacture the capacitors, and Zhejiang Jiemei supplies the world’s biggest MLCC manufacturers, including Japan’s Murata Manufacturing, South Korea’s Samsung Electro-Mechanics and Japan’s Taiyo Yuden, alongside major domestic players like Chaozhou Three-Circle. Sinocera shares climbed 3.4 per cent on Thursday to close at 69.53 yuan a share, while Jiangsu Boqian rose 3.9 per cent to 163.82 yuan a share. Zhejiang Jiemei Electronic and Tech’s similarly closed 3.7 per cent higher at 67.81 yuan a share.