J.P. Morgan Electronic Components: METI Production Statistics for February 2026: In Line with Seasonality, ABF Substrates Remain Strong

J.P. Morgan analyzed February 2026 METI production statistics for Japanese electronic components and semiconductors, finding overall domestic output aligned with historical seasonality. Passive components, particularly MLCCs, have remained soft since the second half of 2025, while ABF substrates showed sustained strength, benefiting Ibiden. Memory production stayed robust, and non-memory semiconductors tracked seasonal patterns. J.P. Morgan maintains Murata Manufacturing and Taiyo Yuden as top sector picks, expecting MLCC supply tightness to persist through mid-2026, with earnings growth driven by price stabilization in the second half. A key focus is whether AI demand can extend the current cycle beyond the typical six-quarter duration and whether Japanese component makers will adjust pricing strategies. In February, passive component production values fell 11% year-over-year and 2% month-over-month, dragged down by MLCCs, filters, and front-end modules. Specifically, MLCC values dropped 18% year-over-year, although ASPs rose 3% sequentially despite a 5% volume decline. Conversely, rigid module boards, including ABF substrates and FC-BGA, saw production values surge 40% year-over-year. Within semiconductors, discrete devices grew 6% year-over-year, MCUs declined 20%, and memory skyrocketed 213% year-over-year and 45% month-over-month. Top stock picks include Murata Manufacturing (Overweight, target 4,800 yen), Taiyo Yuden (Overweight, target 5,700 yen), Ibiden (Overweight, target 10,200 yen), TDK (Overweight, target 3,200 yen), and Hirose Electric (Overweight, target 32,100 yen). Downgraded or cautious names include Nippon Chemicon (Underweight, target 1,260 yen) and Nidec (Underweight, target 1,800 yen). The firm anticipates demand improvement from March onward, closely monitoring AI-driven cycle extension and potential strategic pricing shifts.