MLCC Sector Q3 Reports: Sanhuan, Fenghua and Others See First-Three-Quarter Profits Double, While Structural Shortages in High-End Products Persist.

Leading players Sanhuan and Fenghua delivered standout performances.

Data show that Sanhuan Group's revenue for the first three quarters was RMB 11.503 billion, up 76.74% year on year, and net profit attributable to shareholders was RMB 3.865 billion, up 97.35% year on year. In the third quarter alone, its operating revenue was RMB 5.079 billion, achieving a "three-step jump" (Q1 and Q2 revenue were RMB 2.681 billion and RMB 3.742 billion, respectively), while its gross margin jumped from 44.91% in the second quarter to 53.72%. This gross margin level stands out in the electronic components industry, indicating that changes in product mix contributed more than simple price increases. 

According to a report from Kailuan Securities, Sanhuan Group's strong performance in the first three quarters was mainly due to growth in its core business. Specifically, MLCC benefited from the implementation of industry price increases, the accelerated release of high-end capacity, and the dividend from overseas order transfers, achieving simultaneous increases in volume and price. 

Fenghua Hi-Tech showed even more extreme elasticity. Its net profit attributable to shareholders in the third quarter was RMB 351 million, up 470% year on year, and its net profit margin on sales rose quarter by quarter to 15.33%. The company disclosed key information during investor communications: orders are full, capacity utilization remains high, product prices are rising steadily, and the company continues to advance the high-end transformation of its main products, including MLCC, chip resistors, and inductors.

The commonality between the two leaders is that both possess vertical integration capabilities from materials to products. Sanhuan Group has more than 55 years of R&D experience in the field of electronic ceramic components. The company has mastered forming and sintering technologies for various types of ceramics, as well as the design and fabrication technologies for various precision molds, enabling it to meet the production and application needs of various industries for miniaturized and precision optoelectronic components, electronic functional parts, and new functional materials. Fenghua Hi-Tech likewise emphasizes a trinity layout encompassing materials, products, and equipment. In a price-increase cycle, the benefit of this structure is that cost pass-through is more controllable, and profits will not be eroded too much in intermediate links.

In addition, Dalikai (301566.SZ), whose RF/microwave MLCC products were once rated as a national-level manufacturing single champion product, reported a net profit of RMB 185 million for the first three quarters, up 46.22% year on year.

Upstream Materials Lag Half a Beat Behind

By contrast, upstream material suppliers are lagging behind the curve.

Boqian New Materials (605376.SH), a nickel powder supplier, posted a profit of RMB 227 million for the first three quarters, representing a 49.86% year-on-year increase. Jiemei Technology (002859.SZ), whose release film products have secured stable mass supply to the world’s leading MLCC and polarizer manufacturers, recorded earnings of RMB 223 million, up 26.93% year on year. Meanwhile, Sinocera (300285.SZ), a producer of MLCC dielectric powder, reported a profit of RMB 545 million, with a modest year-on-year growth rate of merely 11.43%.

During its performance briefing, Sinocera stated explicitly that amid incremental demand driven by intelligent new-energy vehicles and surging computing power for AI servers, capacity utilization for conventional MLCCs remains high. Newly expanded production capacity for high-end MLCCs is in the ramp-up phase, and relevant products have passed qualification with selected customers. Mass shipments are expected to kick off in the fourth quarter.

This indicates that volume ramp-up on the materials side trails the component segment by a margin. It takes time for powder materials to move from qualification verification to mass delivery, and downstream customers tend to be cautious about switching suppliers. As such, the earnings leverage of upstream players is inherently lagging behind that of midstream manufacturers. Nevertheless, one key point to watch is the delivery fulfillment of Sinocera’s “mass shipments” commitment in Q4, alongside the rising share of high-end products from upstream peers such as Sanhuan Group and Fenghua Hi-Tech. This will serve as a benchmark to gauge the efficiency of transmission across the industrial chain.

This pattern also aligns with the typical rhythm of market cycle transmission. Public information suggests this rally is driven by capacity reallocation among overseas leading vendors. Kaiyuan Securities explicitly notes that Samsung Electro-Mechanics plans to implement further price hikes for consumer-grade MLCCs in the fourth quarter, aiming to curb order intake and free up capacity for high-end product lines. Murata is shifting production of selected consumer and automotive-grade products, likewise tilting its capacity mix toward high-end offerings. As global leaders reallocate capacity toward high-value segments such as server applications, the supply-demand gap for high-capacitance consumer-grade MLCCs is widening. Domestic component makers have therefore become the primary beneficiaries absorbing the displaced capacity. Accordingly, it is logical that component manufacturers stand to benefit first.

Domestic enterprises have also made breakthroughs in high-end segments. For instance, according to a September research note from Fenghua Hi-Tech, high-end MLCC products (including high-capacitance, automotive-grade, medium- and high-voltage offerings) accounted for roughly 40% of the company’s total MLCC revenue in H1 2026.

Sanhuan Group is also advancing submicron lamination technology. Its MLCC portfolio covers standard parts ranging from 0201 to 2220 case sizes, medium/high-voltage and automotive-grade products. In addition, the firm has developed proprietary offerings including the patented M3L series, patented “S” series, flexible electrode products, and high-frequency Cu internal electrode components.

Key Observations to Watch

Looking beyond the third quarter, several variables will determine whether this rally can sustain itself on the financial statements of leading manufacturers.

First is the pace of capacity adjustments by overseas giants. Production shift and price hike strategies adopted by Murata, Samsung Electro-Mechanics and other players directly dictate the length of the window for domestic substitution. If overseas leaders further curtail supply of consumer-grade MLCCs amid stronger-than-expected AI demand, domestic top-tier vendors will reap greater benefits. Conversely, a phase-down in AI capital expenditure (CAPEX) may trigger capacity backflow or production loosening among overseas players, which will reshape the supply-demand balanceSEC.

Second is the rollout schedule and production yield of new high-end capacity. Both Sanhuan Group and Fenghua Hi-Tech are expanding capacity for high-end MLCCs, yet capacity ramp-up for high-end products is a gradual process. Brokerage estimates of earnings leverage are predicated on the rising revenue share of high-end offerings at each manufacturer. For example, if Fenghua Hi-Tech fails to lift its high-end product share further from the current 40%, we will need to reassess how much of its current profit growth is attributable to price hikes alone.

Thirdly lies supply-chain cost. Raw materials for MLCC electrodes are highly exposed to global commodity prices and exchange-rate fluctuations. Amid geopolitical turbulence, elevated commodity prices and the restructuring of global supply chains, sustained rallies in precious metal prices or further tightening supply conditions would expose manufacturers to upward raw material cost pressure. Sanhuan Group has stated it will mitigate such headwinds by refining its supply chain, driving technical cost reduction and scaling up production for better economies of scale. Fenghua Hi-Tech has also designated “ultra-aggressive cost reduction” as a key special initiative for the full year. Nevertheless, if raw material prices keep climbing while product price hikes fail to keep pace, the margin recovery may be interrupted.

Overall, within the MLCC segment, companies that upgrade their product mix toward high-end offerings faster, advance further in customer qualification and build deeper cost-control capabilities will capture the upside of this cycle. The strategic path is clear, yet differentiation ultimately hinges on the gradual, painstaking work of sample submission, qualification and mass production.