Plant Tours

IRC Corporation Advanced Film Division; Corpus Christi, Texas

May 30, 2010 By Dennis Leave a Comment

By Dennis M. Zogbi, president of Paumanok Publications Inc.
PASSIVE COMPONENT INDUSTRY MAY/JUNE 2005
IRC’s Corpus Christi facility houses advanced thin and thick film resistor technology for specialty applications in a variety of value-added and application specific end-use market segments.

Factory Description:
IRC’s Advanced Film Division (IRC-AFD) is located in Corpus Christi, Texas, and represents one of the most advanced resistor manufacturing operations in North America. The company produces both thin and thick film resistors, employing both base and precious metals for resistive elements. They use a variety of substrates, including ceramic, silicon and aluminum. The factory in Corpus Christi has 253 employeess. Revenue growth in the Advanced Film Division was approximately 8% in 2004 on a year- over-year basis and the operation was profitable.

IRC-AFD History
IRC Corporation was founded in Philadelphia in 1923, and purchased by TRW Corporation in 1968. The company was in turn acquired by Crystalate LLC in 1986 and by TT Electronics in a hostile take-over ocurring in 1990. TT Electronics is a British-based holding company, which also includes IRC-Wirewound and Film Technologies Division, Welwyn Components Limited, BI Technologies, MMG Corporation, Neosid and Optek. TT Electronics’ total electronic component sales in 2004 were approximately $1.2 billion USD.

Resistor Products:
The company currently manufactures 4 resistor product groups destined primarily for the automotive, computer and defense industries. These product groups include tantalum nitride thin film resistors (36%), copper thick film resistors (35%), platinum temperature sensors (26%), and a small resale products operation (3%), where certain products are purchased from other vendors and sold by the company. Tantalum nitride resistors are a major strength for the company, as the metal offers extremely tight tolerances (down to 0.01%). The components are considered value-added precision, with average selling prices in the $0.50 range for each part. The company also produces an advanced line of thick film resistors based on copper paste, produced captively by IRC with copper powder and flake purchased from the merchant market.

Technology Platforms:
The primary technology platforms noted at this plant center on sputtering of tantalum nitride resistive elements on ceramic and silicon substrates for thin-film resistor applications, and thick film resistor products based on copper film technology. The company is also skilled in applying both thin and thick film resistive layers in ceramic, silicon and aluminum substrates. The copper thick film product line is just as unique as the tantalum nitride thin-film product line–the resistors do not rely on precious metals (like ruthenium and palladium), used by other vendors. The company produces their own thick film pastes in house from purchased copper powders and flakes. Their tantalum nitride process is quite advanced and requires advanced clean room environments and processing similar to that found in the semiconductor industry.

Sales by End-Use Market Segment:
IRC’s Advanced Film Division sells the majority of its resistors to the automotive electronic subassemblies market segment (45%), followed by the computer segment (includes power supplies, battery chargers and laptop computers) (24%), military/aerospace (14%), instrumentation and control (10%), medical test/scan equipment (4%), and telecommunications infrastructure equipment (including subscriber line interface cards) (3%). According to the company, many years ago, about 90% of revenue was from the sale of precision resistor products to the defense industry; in 2004 (as shown in the following graph), defense revenues account for only 14% of the business, while automotive and computer end-use markets now account for a combined 69% of total revenues. IRC notes that as time progressed, both the automotive and computer markets needed precision resistors to keep up with changing demands. Other markets that also required very precise resistors include instrumentation and control equipment, medical test/scan equipment, and telecommunications infrastructure equipment, drawing IRC into these markets as well.

Revenues by World Region:
IRC AFD sells the majority of its product lines in North America (85%), followed by the Far East (13%) and Europe (2%). The company has seen growth in its product lines in Asia and may consider building a factory somewhere in Asia in the future. European sales are small because the product line is handled by their sister company Welwyn (out of England); Welwyn manufactures their own resistors and prefers to sell those, as opposed to the IRC product line. The company sees significant growth opportunities for their precision resistor products in rapidly expanding Chinese automotive markets.

Distribution Channels:
The IRC Advanced Film Division sells approximately 68% of its product line direct to large customers in automotive electronics, computer, defense/aerospace, instrumentation and control and telecommunications infrastructure equipment applications. The remaining 32% of revenues is derived from sales to large global distributors of passive electronic components. The company noted there was a 15% reduction in revenues in 3rd and 4th quarter 2004, due to decreased demand from global distributors. The company noted sales for Q1 2005 should be flat to up slightly on a quarter-to-quarter basis. Distributors are making purchases again, but their patterns for 2005 are unpredictable, most likely as a result of difficulty in determining proper inventory levels for both lead-free and lead bearing resistors (this would apply to all passive components).

Product Differentiation:
IRC AFD is considered unique in the resistor business because of their focus on thin-film resistors and resistor networks, robust precision thick film resistors, and innovation in tight tolerance resistor development that has been critical in the development of key defense, automotive and instrumentation and control products.

Tantalum Thin-film Resistors:
IRC AFD is known in the global resistor industry as a primary producer of tantalum nitride thin-film resistors on silicon, ceramic and metal substrates. Senior technical personnel who work at IRC AFD were instrumental in the development of tantalum nitride thin-film resistors by Bell Laboratories (in Indianapolis, Indiana) more than 25 years ago. The product was developed by Bell Labs as a precision resistor for field applications that were not effected by humidity, which has a tendency to destroy nichrome metal film resistors in the field. Thin-film resistors produced by IRC AFD truly are thin in comparison to other resistive elements. The company notes they can produce films from 300 to 1000Å thick, which at its thinnest is about 50 atoms stacked on top of each other. The other benefits of using tantalum in resistors are its high melting point (3000°C), the fact that resistance values will not begin to change until 2000°C, and that the TaN resistive element is self-passivating, resisting shorts. Although the majority of thin-film resistor production at IRC AFD is TaN based, the company also has the ability to sputter aluminum,

For tantalum nitride, different substrates may be applied which ultimately affect performance or price. TaN on a ceramic substrate provides the end-user with tight tolerances, tight TCR, high stability and mechanical strength, and can be produced in low-profile designs. Silicon substrates are specified when high ohmic values are required, or lower cost is necessary when compared to the ceramic substrate. The company can produce these thin-film resistors in traditional resistor network configurations, like isolated, bussed, R2R ladder networks and voltage dividers.

The company can also produce thin-film resistors in flip chip packages with ball grid arrays to customer specifications. Sample customers of the tantalum thin-film resistor product-line include Hella Lighting, National Instruments, GE Medical Systems, Cisco Systems, IBM and General Dynamics.

Platinum Temperature Sensors:
IRC AFD produces a unique platinum temperature sensor module for General Motors. The patent for this design is owned by General Motors produced by IRC AFD under a sole source arrangement. The sensor module is used for mass airflow temperature control with rapid response time and helps GM meet certain EPA regulations. The design replaces older bulk ceramic modules using crimped wire as the resistive element. Concerns at GM were over the ceramic nature of older technology and its tendency to crack. GM approached IRC AFD and asked them to produce millions of mass airflow resistor assemblies per year. Although the automotive market segment represents the largest portion of demand for platinum temperature sensors, IRC notes they produce a chip version (platinum on silicon) for temperature compensation for additional customers like JDS Uniphase (Telecom), Mettler-Toledo (load cell), Schlumberger (downhole pump) and Rosemount (flow meter head). IRC notes the platinum on silicon chip they produce is very precise, with a very linear temperature response. The product is finding new applications in temperature compensation every day.

Thick film Resistors:
IRC AFD produces thick film resistors from a proprietary copper paste they manufacture in Corpus Christi. The company can also produce tin-oxide thick film resistors and nitrogen fired cermet (precious metal-based) resistors. Substrates are either 99.5% or 99.6% alumina. Primary applications for the thick film resistor product line are for current sensing applications in voltage regulators, battery packs, hard disc drives, automotive lighting, automotive fuel pump shut-off, automotive seat heaters, motorized seats and window lift motors. New developments at IRC AFD in thick film resistors include the Anotherm® resistor, designed for LED (light emitting diode) applications. The Anotherm® resistor enables LED lights to produce more light with less heat. Paumanok Publications, Inc. believes that this technology holds tremednous promise for the company. IRC Advanced Film Division of TT Electronics is a unique resistive component manufacturer. With the ability to take standard resistive technology and move into nontypical component manufacturing, AFD is the leader in its field of expertise. IRC AFD is moving into more custom applications with their tantalum nitiride, platinum temperature sensor and thick film technology capabilities.

Additional Resources: (1) Linear Resistors: World Markets, Technologies & Opportunities: 2009-2014 ISBN # 1-893211-24-X (7/2009) (2) Resistor Networks, Arrays and The Trend Toward Integration: Global Markets 2004-2008 ISBN # 1-893211-77-0 (2004)

IRC Advanced Film Division in Corpus Christi, Texas

Filed Under: Plant Tours Tagged With: IRC International Resistive Corporation, Tantalum Nitride Resistors, Thin Film Integrated Passives

An Interview With Lelon Electronics Corp.

September 30, 2007 By Dennis Leave a Comment

Lelon Electronics Corporation
Passive Component Industry magazine (PCIM) recently discussed Lelon’s growth and outlook with Mr. T. C. Wu,
President of Lelon Electronics Corp.

PCIM: Lelon Electronics is now in its 31st year and has enjoyed measurable growth since its early days. How many employees and production facilities do you operate currently and where are they geographically located?
Lelon: We have four factories—one in Taiwan, two in China, and one in Malaysia (joint-venture business with Elna Japan). Our total capacity is 820 million pieces per month and we have 3000 employees.

PCIM: Your organization has a well- diversified electrolytic capacitor product line. One product of particular interest is your aluminum V-chip component. Can you provide us with your capacity expansion details for the
V-chip product line?

Lelon: In the second quarter of 2007, we produced 170 million pieces per month. By the fourth quarter of 2007, it will be increased to 200 million/month. Our planned production for 2008 is 250 million/month. The aluminum V-chip products range in size from 3 x 5.3 mm to 16 x 16.5 mm. Our new products include a 4.5 mm (height) V-chip and a V-chip series featuring low ESR and high reliability (5,000-hour life).

PCIM: What type of polymers is Lelon currently working with and what other type of dielectrics will we see from Lelon in the future? Polythiophene or polypyrrole? Do you use the dip or vacuum method for cathode development?

Lelon: Lelon uses the polythiophene in our polymer cap. Polythiophene is the safest polymer, with high conductivity and temperature stability. Currently, we use the dip method and we are working on vacuum impregnation machines.

PCIM: Another product line of interest is your conductive polymer aluminum capacitors. Can you provide us with the capacity expansion plans of this product line?

Lelon: Currently, we produce 18 million pieces per month. Our planned production in 2008 will jump to 40
million/month. One of our companies in the Lelon Group is Lifu Machinery, which manufactures the production equipment for polymer aluminum capacitors. So, we can expand the capacity quickly in response to the increased demand in the market. Our yield is very high because we are mature in manufacturing this product.

PCIM: A relatively new development with your organization is capacitors for vehicle applications. Please provide us with some details on this.

Lelon: All of Lelon’s manufacturing sites were TS-16949 certified in 2006. We have established production and test equipment to meet the strict requirements for automotive applications. Currently, we are supplying parts for tire-pressure monitoring, car entertainment, and security systems. We are working with major car application providers to be listed in the Approved Vendor List (AVL) for “Original Equipment.” We expect to get approval in the second half of this year.

PCIM: In addition to producing its own brand of electrolytic capacitors, Lelon is a manufacturer for other suppliers. Currently, what type of products are you supplying and what are the percentages of the Lelon brand versus non-Lelon branded components that you sell?

Lelon: Ten percent of our sales in 2006 were for non- Lelon brand components. Polymer aluminum capacitors, standard through-hole, V-chip, snap-in, and axial are all manufactured for the Lelon brand and for the non-Lelon brand.

PCIM: As you are well aware, raw materials have seen a dramatic price increase recently. What steps has Lelon taken to preserve quality of your components while retaining or increasing your margins? What type of price increase have you experienced in anode and cathode foils? Can you etch your own foil in-house?

Lelon: We didn’t change the original design or material suppliers to achieve cost reductions. We continuously expand our production capacity and sales, enabling us to reach a better economic scale, which, in turn, enhances our negotiation ability with material suppliers. Additionally, we keep investing in our IT system to improve workflow. We gain profit mainly through efficiency in workflow and inventory management, not from materials. The cost for both anode and cathode foils has increased, and we think the price will not come back down in the near term. We have a subsidiary company under the Lelon Group called Liton Technology, which produces etched foils and formed foils in China and Taiwan.

PCIM: What end-use market segments are strengths of Lelon and in what markets are you looking to improve market share?

Lelon: Besides many consumer products, we have significant growth in computers (motherboards and graphic cards), communications, audio, security, and power. We are now focusing on automotive applications, high-power inverters, and energy storage applications. PCIM: Please provide details on Lelon’s annual sales year to date and what type of growth has it enjoyed over the past five years?

Lelon: 2003 USD 75.7 million
2004 USD 106.5 million
2005 USD 113.9 million
2006 USD 121.1 million
2007 USD 60.2 million (First half of 2007. We expect to have a significant growth in sales this year.)

PCIM: The passive electronic component industry has experienced increased market consolidation recently. Is growth by acquisition a plan Lelon has considered? If so, please give of some insight as to what Lelon may consider.

Lelon: Acquisition has been part of our plan for growth. Either to acquire or to be acquired is an option for us. We will consider the market position and the benefits to our shareholders and our employees after consolidation, as we consider these opportunities for acquisition.

PCIM: Lelon is in a joint venture with Surge Components Inc. How has this joint venture contributed to your success in North America?

Lelon: Surge Components, also known as Surge-Lelon, is the Lelon sales/marketing office for North America and has worked hard for Lelon for many years by helping us achieve approval status to become a major supplier at many top companies in North America. The Surge- Lelon marketing channels include a network of independent sales representatives and authorized distributors. All this and more has increased our North American sales significantly. Our partnership with Surge is a strong one, and we expect our sales to continue to grow rapidly in North America because of this special relationship.

PCIM: Years ago, there was a concern in the industry about the use of water-based low ESR products. What has Lelon done to address this concern?

Lelon: The issues of water-based low ESR capacitors have had a profound impact on the industry. Electronic engineers have been very cautious with the low ESR capacitors since then. Actually, this kind of issue continued to occur in recent years. To prevent continued case bulging problems from occurring, we recommend polymer aluminum electrolytic capacitors to our customers as the best choice to replace water-based low ESR capacitors. As the price of polymer aluminum capacitors has settled down to a reasonable level, more designs have adopted polymer aluminum capacitors to ensure the long-term reliability of the product. We expect the market demand for polymer aluminum capacitors will continue to grow in the coming years. Lelon has been one of the limited number of suppliers for polymer aluminum capacitors selected at first-tier computer motherboard and graphic card makers. Lelon is capable and has been ready for this trend. In closing, I’d like to say thank you to our loyal customers throughout the world. It’s because of you that we continue to reinvest our profits, expand our product line, increase our capacity, and work diligently for continuous improvement in all areas.

Additional Resources: (1) Aluminum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 0-929717-47-3 (8/2010) (2) CAPACITOR FOIL: Global Market Outlook: 2008- 2013 ISBN # 0-929717-85-6 (2008)

Filed Under: Feature Story, Financial News, Plant Tours Tagged With: Aluminum Electrolytic Capacitors, Lelon Electronics

Q & A: Stackpole Electronics, Inc.- On The Global Medical Electronics Market

November 30, 2006 By Dennis Leave a Comment

Dennis M. Zogbi, publisher of Passive Component Industry Magazine, talked with Kory Schroeder, Product Engineering Manager for Stackpole Electronics, Inc., in October 2006 to get an update on the market environment and discuss how they are addressing trends in the global medical test and scan equipment market and the medical implant market. Stackpole Electronics, Inc. is a leading global manufacturer of resistors, supplying to the worlds largest OEMs, contract manufacturers, and distributors.

PCI: We know Stackpole supplies passive electronic components to the medical equipment and implant markets. What type of medical electronic companies do you supply passive electronics components?

Schroeder: Our largest customers are in the portable and implantable heart defibrillator markets.

PCI: Does Stackpole offer both high voltage >500 VDC and high frequency >900 MHz for medical devices?

Schroeder: We offer two SMD chip resistors with high voltage capability as well as a two-leaded resistor series with capability for voltages above 500 volts. We have three SMD inductor technologies for high-frequency use: multi-layer, thin film, and wirewound. Finally, we have single-layer disk varistors for voltages above 500 VDC, as well as small multi-layer varistors for high-frequency transient protection.

PCI: GE told me they were afraid of tin whiskers in passives complying with RoHS—should they be afraid?

Schroeder: The probability of failure due to tin whiskers is far less than what many medical (and military, for that matter) customers think. The combination of a nickel barrier under the plated termination coupled with the use of matte tin instead of glossy has reduced the occurrence of tin whisker growth to a negligible level from our point of view.

PCI: Do you have thin-film technology for the medical implant market?

Schroeder: Yes, including a moisture-resistant Nichrome resistor.

PCI: Are you expanding your capacity for CY 2007?

Schroeder: Yes. The biggest planned increases are in thin film (30% increase) and wirewounds (20% increase).

PCI: How do you see medical electronics markets in the future? Can you give us insight into other implantable markets that are emerging? How about test and scan markets emerging that are pushing the envelope or raising the eyebrows of your design engineers?

Schroeder: The future of medical electronics looks very strong. More and more new applications come forth each day, driven by an aging population with increasing disposable income. Because of this, they are willing to spend their dollars getting the latest tests during their checkups, for example. There are also increasing numbers of preventative medical devices. One particular customer is building devices designed to save an estimated 30% of first-time heart attack victims. These devices are not in competition with the larger, pricey devices from the medical giants. Instead, theoretically, it will increase the market for the pricey devices by saving the lives of patients who initially wouldn’t be a candidate to use the expensive device. Another emerging market driver is the push to make critical life-saving devices, such as defibrillators, more accessible to the public. By reducing the cost and size of these devices, it makes it practical to put portable defibrillators on board ambulances, airplanes, and in other public places. This trend is causing an increased interest in three particular areas:

1) moving leaded components to SMD and down-sizing existing SMD parts to smaller SMD packages, 2) precision 3) SMD devices, and 3) high-voltage SMD.

PCI: Regarding growth potential of passive electronic components in the medical industry, in your opinion, will the growth favor the exploratory segment of medical test and scan equipment or medical implants?

Schroeder: While we don’t have a broad enough customer base to truly give an accurate market picture, for us it is the exploratory segment that is growing more rapidly. Even with all the new implantable devices currently and with more arising each week, they still have a much more limited market as compared to exploratory devices.

PCI: Medical implants and the passive electronics components they contain have very stringent requirements. Do you anticipate an increase in competition in this application-specific market due to the high-reliability factor and liability concerns?

Schroeder: Reliability requirements will keep a lot of competitors out of the market, certainly. As the products move into their mature phase of their product cycle, however, there is bound to be increased competition. At that point, there will be much less risk and less chance of some unknown barrier arising.

Readers Who Viewed This Article Also Went Here: (1) Passive Components In Medical Implants: World Market Study: 2005-2010 ISBN # 1-893211-51-7 (2005)

Filed Under: Feature Story, Financial News, Plant Tours Tagged With: ICD capacitors, Implantable Defibrillator Technology, Medical capacitors, Medical Electronics

Man Yue Electronics: Experiencing Rapid Growth in a Mature Market

November 30, 2005 By Dennis Leave a Comment

By Dennis M. Zogbi, President, Paumanok Publications, Inc.

Man Yue Electronics Company Limited, of Chai Wan, Hong Kong in the People’s Republic of China, produces aluminum electrolytic capacitors in five separate configurations. These include radial leaded, axial leaded, surface mount V-chip, screw terminal, and snapmount versions, which are sold primarily in greater China under the Samxon® brand name.

Man Yue Aluminum Electrolytic Capacitor Products:

• Radial Leaded Aluminum Capacitors
• Axial Leaded Aluminum Capacitors
• Aluminum Capacitors
• Screw Terminal Aluminum Capacitors
• Snap-Mount Aluminum Capacitors

Forty-Nine Percent Year-over-Year Growth in Revenues Between 2003 and 2004 Man Yue Electronics reported an increase of 49% in aluminum electrolytic capacitor sales value in one year, with revenues growing from $86 million USD in 2003 to $128 million USD in 2004. This year, 2005, also shows increased year-over-year revenues in aluminum electrolytic capacitors.

The growth of Man Yue is fascinating because most other top tier suppliers are experiencing only 5% or 10% growth for the year, while Man Yue has distinguished itself with growth rates nearing 50% year-over-year.

Revenues by World Region: 2004
In 2004, approximately 78% of aluminum electrolytic capacitor revenues for Man Yue Electronics came from sales to greater China, which includes the People’s Republic of China, Hong Kong, and Taiwan. An additional 13% of revenues was sourced to other Asian countries outside of greater China, while only 9% of revenues came from North America and Europe combined.

Rapid Growth across the Board on a Region-by-Region Basis: 2003-2004
Man Yue Electronics reported rapid growth in all world regions in 2004, with sales into Taiwan increasing by a whopping 96% year-over-year, going from $25 million in revenues in 2003 to $49 million USD in revenues in 2004. Growth in sales of aluminum electrolytic capacitors in mainland China also increased by 19% year-over-year for the company, growing from $42 million in revenues in 2003 to $50 million in revenues for 2004. This growth occurred while sales to other Asian regions increased by 31% year-over-year, growing from $13 million in 2003 to $17 million USD in 2004. Rapid growth was also recorded in sales to the West (USA and Europe), which increased by 71% year-over-year, from $7 million USD in 2003 to $12 million in 2004.

Production Facilities and Capacity to Produce: 2004
Man Yue Electronics maintains three major production facilities for aluminum electrolytic capacitors in China. These include the Samxon Dong Guan plant, the Wuxi Heli Electronics plant, and the Man Yue Xiamen plant; the combined monthly output capacity is 520 million pieces per month, or 6.2 billion pieces per year. The Samxon plant in Dong Guan was established in 1994 and represents the largest production facility for the company, with monthly production capacity for aluminum electrolytic capacitors at 400 million pieces (4.8 Billion Pieces Annualized). The plant, which is located in the Xin An Industrial Area, employs 2,500 people and occupies 50,000 square meters. Man Yue’s Wuxi Heli Electronics plant, which also opened in 1994, is located in Wuxi, People’s Republic of China. It has a monthly production capacity of 80 million aluminum capacitors per month (960 billion pieces annualized).

Man Yue’s newest plant, which was opened in 2002, has monthly production capacity of 40 million aluminum electrolytic capacitors, or 0.5 billion pieces per year. The plant, occupying 2,300 square meters and employing 132 people, is located in Xiamen province, People’s Republic
of China.

Reasons for Growth in 2004 and 2005:
According to senior executives of Man Yue Electronics, their growth in 2004 and 2005 is directly related to the fact that they are a quality supplier in Mainland China to global EMS and OEM electronics firms. These firms are now asking the company to export to other customer locations throughout the world. The rapid growth of the company in Taiwan and in the West in 2004 and 2005 is directly related to this new phenomenon that is affecting other Chinese producers of quality product lines, both inside and outside the electronics industry.

Filed Under: Feature Story, Financial News, Plant Tours Tagged With: aluminum capacitors, Capacitor Foil

IRC Wirewound and Film Resistor Technology Facility in Barbados

May 30, 2005 By Dennis Leave a Comment

By Dennis M. Zogbi, president of Paumanok Publications Inc.
PASSIVE COMPONENT INDUSTRY MAY/JUNE 2005

Worker Productivity Levels in Barbados Play an Important Role in Profitability

In February 2005, Passive Component Industry Magazine visited IRC Corporation’s Wire and Film production facility on the Island of Barbados to determine if production of passive components in the Americas can be profitable when compared to China.

The key to understanding the correct geographical location for the production of passive components is to understand the many factors that ultimately affect cost of goods sold. Many of these factors are variable and most countries can adjust these variables in order to either attract new business or keep existing businesses. Competing local, state and national governments can adjust or postpone a variety of costs that are seemingly fixed.

These costs include property, utilities, import and export duties, and a variety of business related taxes ultimately under control of the government in question. What becomes more difficult to measure is the value of worker productivity and the level of education of the local workforce.

Other important factors to consider when building or relocating a plant are freight costs (for importation of raw materials and exportation of finished products), the presence or absence of worker’s unions, and the proximity of the plant to the customer. each of these criteria ultimately affect the operating margins of the components produced.

Allan Cole, Dir. Sales & Marketing, Al Hilton, VP IRC/WAFT Div., Paul Lewis, Managing VP IRC/WAFT Div. Barbados

The Measurement of Productivity:
Labor productivity is measured as the value of real manufacturing output produced per hour of labor invested. Productivity becomes a byproduct of the education system, coupled with a strong family-instilled work ethic and pride in getting the job well done.

The best work ethics derive from close families whose combined activities resulted in basic survival of the group sometime in near-term history. The ability to have a high paying manufacturing job allows for better wages and greater buying power, which builds an upper-middle class, which can consume the high-tech products that are the end-result of the passive component supply chain. In China, Korea, Taiwan and other Asian countries, education is held in extremely high regard, and families will move from upscale to low-cost housing to access specific school districts. The costs for private education are much higher in Asia than they are in the United States. In fact, the priority for a child’s education in Asia a typical household budget can exceed that of basic living costs. This is why children in foreign countries begin to perform better than children in the United States after the fourth grade. As a result of differentiation in education between world regions, productivity levels in Japan, China, Taiwan and other SE Asian countries are higher then those in the West.

However, in both Barbados and Costa Rica there is a serious initiative in higher education as a tool for economic growth, and significant government support for the people in terms of attracting business to the Island the exploit the higher education initiatives. It is apparent from the chart above that a combination of productivity and wages moves certain countries (like China and Korea) further into the spotlight for return on investment. How many readers have traveled to Seoul for example, and started meetings at 7:30am that did not end until 10:30pm, and were repeated every day during your travels there? In the Americas, productivity levels are much lower, even when compared to industrialized Europe. In the Americas, a preference for production is apparent in Mexico, Barbados and Brazil, because of higher relative productivity levels, coupled with low wage rate and lower freight charges. This supports continued development of electronic components and subassemblies in these countries. It also supports some level of local expertise in electronics subassemblies, especially in DC motors, lighting, power supplies and television sets.

IRC’s Government Funded 10,000 Foot Expansion in Barbados

Necessity for Design Innovation:
The United States still has depth, breadth and spirit for innovation, which attracts design engineers for advanced applications in legacy businesses like automotive electronics, telecommunications infrastructure, medical, mining, downhole pump, laboratory and defense related endues market segments. There is still dominance in the field of advanced semiconductor technology and the decoupling of these designs. Dominance of Intel, Texas Instruments and AMD in semiconductor devices globally ensure print position for passive component manufacturers as support components for these advanced semiconductor designs. Microprocessor demand is rapidly moving into portable designs, so global print position as a decoupling solution for the Pentium 5 Chip next year would mean years of sustainable revenue in a rapid growth market. It is for this reason that even though Asian manufacturers have low cost production solutions, they still need eyes and ears on the ground in the USA and Europe, and to either develop or co-brand with a local suppliers who have good access to design engineers.

Hourly Wage for Workers in Manufacturing by Country:
According to the Bureau of Labor Statistics, relative costs of labor in 2002 (the latest accurate data available) in Shanghai, People’s Republic of China, are 20% of that in the continental United States. Proximity to the massive Chinese market is the unbeatable
factor, which seriously limits freight costs. The latest manufacturing trend in passive components has been to produce Chinese component manufacturing facilities for 100% China component consumption.

The Caribbean Basin also offers extremely low wages, so the debate about this region becomes one of freight, productivity and raw material costs. It was our intention upon visiting the IRC resistor manufacturing facility to gauge productivity and compare it to that of workers in China. The comparison can only be made between Chinese populations that have conspicuous income, like Shanghai. In fact, the case frequently made for the population of China as a total market is moot, because it is the percentage of that population that can afford to buy goods and services, that have conspicuous income, which amounts to about 350 million people, or approximately the size of the USA and Western Europe. The importance of China is that the percentage of those with conspicuous income is growing at an average annual rate of about 15%, which is much more rapid than growth rates in the Americas and Europe. Another important factor is that labor costs in many other provinces average as low as $0.33 per hour, which means China has tremendous potential for growth in manufacturing and that this specific extension of the Revolution in China can keep growing for 40 years.

Manufacturing and Proximity to Market:
There is little doubt among economists that consumption in the United States and Europe will remain strong, but manufacturing and consumption will continue to move toward the Far East. If the USA and Europe remain strong consumers, proximity of manufacturing to consumer markets, coupled with quality manufacturing and high productivity rates, suggests the Caribbean Basin may offer attractive alternatives to Asia now and in the future. Barbados, our target country, noted their second largest export to sugar cane was electronic components, including the large IRC resistor facility, a smaller Ohmite facility, and a motor drive manufacturer. Similar low cost centers of manufacturing for passive electronic components in the Americas include Kemet (Mexico), AVX (Mexico), Cornell-Dubilier (Mexico), AVX (El Salvador) Bourns (Costa Rica), and EPCOS (Brazil). Each of these manufacturers produce product lines for legacy slow growth businesses in North America that remain intact, with emphasis upon automotive electronic subassemblies, power supplies, HID ballasts, mining electronics, downhole pump toolhead electronics, instrumentation, DC/DC converters, set top boxes and television sets. In Europe, we note a similar occurrence, with EPCOS using sub contractors in Eastern Europe to obtain lower labor costs in regions with high productivity rates among the population.

Finished Resistors Waiting for Export From Barbados to the United States

Freight Costs:
Most of the new production facilities for passive component manufacturing in China (AVX, Kemet, Murata) are designed for the production of passive components consumed locally. Exports from China to the rest of the world are not currently the focus of these manufacturers, because freight costs can be high, with average container costs approaching $5,000 to $6,000 for land and sea shipping to the USA and Europe, including insurance. Freight costs favor Mexico because of the land-only shipping. Another cost is associated with sending representatives to the vendor to negotiate deals and develop relationships. This can cost as much as $50,000 per year per person for the United States and perhaps half that cost for China.

Government Incentives:
As we noted at IRC in Barbados, the government was extremely supportive of local industry and seemed to have an added incentive in their “high-tech” manufacturing labor source because of local declines in the sugar cane industry. The local government helped IRC expand their existing facility by 10,000 square feet and continues to give the company tax incentives in a concerted effort to keep and attract more electronic component manufacturers to the Island.

IRC Resistor Production Facility and HQ in Barbados

Unionization:
The IRC plant in Barbados is unionized, which is surprising and somewhat of a rarity in the Caribbean. The union, we were informed was a legacy from its former ownership by TRW. Unions, or the tendency for the local population to form unions; have discouraged both acquisitions and relocation of production facilities in the past, and can have a negative impact on global government’s wish to attract high-tech, high paying jobs to their respective countries.

Future Valuation of China’s Currency:
What cannot be gauged is the future valuation of China’s currency. When the Chinese Yuan Renimbi is eventually floated, and should it be tied to the Euro, Yen or US Dollar, the value of the Yuan may be much higher than expected. Economists vary on valuation of the Yuan, with some suggesting 8 USD to 1 Yuan, while others suggest the Yuan is about 30% of the USD. However, it should be noted that it costs the equivalent of $35 USD to take a taxicab from the airport to downtown Shangai and about twice that much to take a taxicab from JFK airport to downtown Manhattan, so valuation of the Yuan in real terms could by as close as 2 Yuan for every $1 USD. Should this ultimately be the true valuation of the Yuan, costs to produce in China would skyrocket, making production in locales like Mexico and the Caribbean Basin more cost effective than China. It is for this reason that the Chinese Interior Ministry is pushing back the date when the Yuan is valued.

We note that in terms of massive industrial equipment and related tooling, costs of similar parts with high quality are reported in China as 20% of the cost in the USA, so there is a disparity among valuation.

Summary and Conclusions:
A case is made for making considerations other than labor costs when choosing to produce in China. Also, it is important to understand the huge costs associated with freight and joint venture development with trade partners in China. Also understand that just -in-time delivery can be difficult when core parts are seaborne, so JIT costs may be factored in air freight, which is much more expensive per container than sea freight. Moratoriums on utility costs seem to be the norm regardless of country, but certain countries are making a concerted effort to attract manufacturers. The locations are low cost, but offer proximity to local tourism, ensuring good food and accommodations. This is also applicable in Costa Rica, (also recommended for production of passive components in the hemisphere). The invariable cost is locating a manufacturing plant where living in that country appeals to innovative talent (brand name scientists and production staff) who would jump at the chance to live and work in proximity to it. This attraction is lost where many low cost production facilities are located. In the instances of plant locations like Barbados and Costa Rica, the locations have a tendency to attract top minds in the field, because to live comfortably, have access to a laboratory or production plant and enjoy a tropical paradise is a value-added incentive. Such a balance breeds innovation and offers happiness, especially to the old school people who still do business on a handshake regardless of the brand they carry.

Attractiveness of the manufacturing location to top employees also holds some value in addition to labor rates, unions, freight and insurance costs, JIT delivery for lean manufacturing, and productivity comparisons. The ability to attract inspired leadership to
educate and train holds an additional value that cannot be underestimated when choosing the place to build a production plant.

Footnotes:
{1} It is fascinating to note the increasing number of countries launching s:ales campaigns to attract manufacturing to various parts of the globe. They usually target an industry like electronics to attract high-paying jobs to their countries. Many islands in the Caribbean Basin have been overrun by financial concerns looking for client tax havens. This trend is under extensive scrutiny by the United States Internal Revenue Service, and governments in the Caribbean Basin who are identifying with this are looking to their agricultural markets and finding sugar cane declining rapidly, due to health trends in the US; the only other viable markets center on science, technology and electronics.

[2] Nixon’s visit to Beijing in 1972 caused a rapid increase in demand for satellite, computer mainframe and telecommunications infrastructure equipment for the purpose of embracing peace through communications. During the same year, China committed itself to embark on discovery and development of science and technology to bring the country into the future. This commitment to education in science and technology in 1972 paid off huge dividends for the country from 1995 through 2005, and will continue to do so for the next ten years and beyond.

Readers Of This Article Also Ventured here: (1) Linear Resistors: World Markets, Technologies & Opportunities: 2009-2014 ISBN # 1-893211-24-X (7/2009)

Filed Under: Feature Story, Plant Tours Tagged With: Nichrome Resistors, Resistors, Wirewound Resistors

Korea Plant Tours: Tigers of Passive Components

January 30, 2005 By Dennis Leave a Comment

By Dennis M. Zogbi
President, Paumanok Publications Inc.
PASSIVE COMPONENT INDUSTRY JANUARY/FEBRUARY 2005

Dennis Zogbi, Paumanok CEO with Senior Staff of Samsung Electronics

In the fourth quarter of 2004, I took a tour of some key electronics facilities in the Republic of Korea to determine trends and directions with respect to consumption of passive electronic components. Here are the results of this fact-finding tour.

Samsung Electronics, Suwon City, Korea
Samsung Electronics (SEC) manufactures and exports a wide range of consumer and industrial electronic equipment and products like wireless handsets, memory chips, TFT-LCD, PCs, peripherals, monitors, TVs and home appliances. Paumanok estimates 2004 revenues at approximately 58 trillion won ($55.8 billion USD), up 32% from 2003 revenues of 44 trillion won ($42.4 billion USD). SEC revenues were divided into five major product segments, including telecom/handset sales (33% of total revenue), semiconductor sales (32%), TFT-LCD displays (15%), digital media (14%) and large home appliances/ other (6%). Paumanok estimates total DRAM sales for SEC to have been 1.35 billion units for 2004, and flash memory unit sales of about 600 million units. LCD monitor shipments for the year were an estimated 30 million sets (these devices are V-chip aluminum capacitor intensive). Paumanok estimates 2004 handset unit sales at 87 million units, up an estimated 35% over 2003. Total passive component requirements for SEC handsets are an estimated 25 to 30 billion pieces. GSM handsets accounted for 70% of unit shipments, CDMA accounted for 29% of shipments and TDMA accounted for 1% of unit sales. About 86% of total handsets shipped by SEC had color displays for the year (4Q estimates 95% of handset shipments were color displays), while 42% of handset shipments contained camera modules in 2004 (53% of 4Q shipments had camera modules). SEC is focused on long-term growth and stability, which based on the past several years, has proven successful for the business. Since 1999, average growth rate of the top line was 17%, with a substantial net margin of 13%.

Paumanok believes SEC’s success continues to be based upon its excellent global sense of brand building. SEC was successful at convincing the world that it offered an excellent product at a fair price, regardless of the line produced. In global marketing, the company is now more adept at brand building than Sony. Regardless of Sony’s higher display in Times Square, Samsung’s is far more interesting. The store they have opened in Manhattan beneath the exclusive “Per Se” restaurant is one of the most modern visions of retail electronics ever imagined. Paumanok believes SEC has a more than probable chance of growing 20%
in revenues each year over the next five years. The collection of three prime digital electronics sectors (wireless, display and large home appliance) puts the company in prime position to experience large-scale digital convergence beginning in residential environments from Shanghai, China to Cary, North Carolina. On a more personal note, my visit to SEC in Suwon was fascinating. Mr. James Lee, a senior member of the passive component commodity council, was a most excellent host; his description of the massive campus, its history and historical relationship with Samsung Electro-Mechanics (their passive components division–see visit below) was excellent. I commented that their security was serious. I still have the security tapes and plastic bags placed upon the devices I carried with me undergoing the digital convergence. I thought perhaps my new camera phone might make a different sound, as if returning to the home nest. Our conversation with respect to passive components dealt primarily with vendors, new technology, pricing and component availability.

LG Electronics, Seoul, Korea
LG Electronics (LGE) has a global business in electronics and telecommunications, with forecasted 2004
revenues of 25 trillion won ($24.1 billion USD), up about 25% over 2003, when sales were approximately 20 trillion won ($19.2 billion USD). Key product lines include digital appliances (25% of sales), display & media (37% of revenue), wireless handsets (34% of revenue) and telecommunications equipment (4% of revenue). Paumanok predicts that 1H05 earnings will continue to increase, especially in light of increased handset shipments, which were up for the eleventh consecutive month. For calendar year 2004, total handset production by LGE was an estimated 47 million units, up 72% year-over-year from 2003, when handset sales were approximately 28 million units. The company reported a sharp increase in export sales of both CDMA and GSM phones for 2004. The company’s handsets are MLCC, tantalum, chip resistor, chip inductor and chip varistor intensive, requiring a total of about 14 to 17 billion passive components for the handset division alone, up from 8 to 10 billion passive components required in 2003 for CDMA and GSM handsets. Other products produced by the company that are passive component intensive, include flat panel displays (where LGE has major global market share), large home appliances (where digital convergence is boosting passive component requirements in refrigerators, washing machines and HVAC systems produced by the company), and telecommunications infrastructure equipment.

The interesting aspect about LGE is the fact that its products and technologies are quite similar to that of SEC, and they too will benefit from the coming digital convergence. However, it is just beginning to benefit from its global branding efforts (as we discussed the transition from brand in Lucky Goldstar to LG Electronics), and are already growing at a rapid rate in revenues. Paumanok estimates that revenue growth at LG Electronics may exceed 20% per year over the next five years, as they benefit from the duel concept of digital convergence and the benefit of spectacular branding similar (and sometimes better) to that of SEC. During my meeting with Mr. Ken Ahn, senior member of LGE’s Commodity Council for Passive Components in the grand LGE Twin Towers in Seoul, I discussed passive component vendors, technology trends, pricing and availability and the potential affects of digital convergence upon LGE’s requirements for capacitors and resistors by dielectric and resistive element.

Samsung Electro-Mechanics (SEMCO),
Suwon City, Korea
SEMCO has been a major customer of Paumanok Publications Inc. since 1993, and it was a very positive experience for me to have so many of the senior staff of SEMCO to engage in extremely detailed discussions about the global MLCC industry faceto- face, which is by far the best way to do business on the Peninsula. The company’s product lines are divided into four segments; mobile and passives (which includes the MLCC segment), with 17% of total sales, or 640 billion won, with MLCC sales at approximately 300 billion won for 2004, up 15% from approximately 260 billion won in 2003; HDI and BGA packaging, which accounted for approximately 880 billion won in 2004; displays, which accounted for 540 billion won in 2004; and the precision technology group, which accounted for the largest product
group, at 1.6 trillion won. Camera modules produced by the precision technology segment grew from 53 billion won in 2003, to an estimated 300 billion won in 2004, or similar in size to the MLCC group. Overall, MLCCs account for about 8.2% of consolidated sales in 2004, up from about 7.5% of total SEMCO revenues in 2003. In my meeting with SEMCO, we discussed its 28 billion won loss in MLCC business in 2003 and the estimated break-even margins for their 2004 ROI. Our discussions centered on strategies for increasing MLCC profitability and best practices in conjunction with the corporate “New Strategy” set in motion in the later half of 2004.

Ceratech Corporation, Seoul, Korea
Ceratech is a major component supplier to the Korean supply chain for chip, bead and bead array inductors, common mode filters, multi-layered varistors and polymer PTC thermistors. The company includes both LGE and SEC as customers. In 2004, the overall yearly performance growth rating in sales was 29%. In 2004, the company hired a new Chief Executive Officer, Mr. Sang Hur, to begin to expand production of core product lines in their new state-of-theart seven-story factory in Seoul. Ceratech’s major shareholder is JP Morgan Partners Asia Limited. new state-of-the-art seven-story factory in Seoul. Ceratech’s major shareholder is JP Morgan Partners Asia Limited. During my visit with Mr. Sang Hur, we discussed global market trends and technology developments, the continued movement to smaller case size chip inductors, arrays and ferrite beads, the rapidly growing market for 0402 chip varistors in Korea, Taiwan and Japan and opportunities for their high voltage polymer PTC line in telecommunication subscriber line interface cards in the United States and Europe.

Amotech, Seoul, Korea
Amotech remains the talk of Seoul and the global ESD protection industry, with their rapid rise to the number one global unit producer for multi-layered varistors. At each meeting I had– SEC, LGE, SEMCO, and Paumanok’s respective financial customers in Seoul– the subject of Amotech’s success and good fortune were discussed. The general consensus is that Amotech emerged with the correct product offering in conjunction with increased requirements for ESD protection in clamshell phones, and the rapid development and acceptance of camera modules. Discussions about Amotech’s rapid growth also centered on their market execution in Korea, Taiwan, China and Japan, which is being considered a model by other passive component suppliers as the proper way to penetrate the rapidly growing Asian market.

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Filed Under: Plant Tours Tagged With: Ceramic Capacitors, Discrete Inductors, Korea ROK, Metal Oxide Varistors

AVX Plant Tour: Lanskroun, Czech Republic; Paignton Uk Tantalum Factories: July 2004

July 13, 2004 By Dennis Leave a Comment

PASSIVE COMPONENT INDUSTRY MAGAZINE JUNE 2004 EDITION

AVX Tantalum Capacitor Factory In Lanskroun, Czech Republic

In June 2004, Dennis M. Zogbi, President of Paumanok Publications, Inc. was a guest at AVX Corporation’s Solid Electrolytic Capacitor Operations in Europe. This included detailed reviews of the tantalum and niobium- oxide capacitor operations in Lanskroun, Czech Republic and Paignton in the United Kingdom. The purpose of the visit was to share data, and so AVX could verify for Paumanok Publications, Inc. and Passive Component Industry Magazine that AVX Corporation was by far the largest tantalum capacitor producer in the world in 2003, and to introduce the niobium-oxide capacitor product line to Paumanok Publications, Inc. and Passive Component Industry Magazine and to explain their success in both markets.

AVX’s Number One Position in The Global Tantalum Capacitor Market
Traditionally, AVX’s global market share in tantalum capacitors, based upon revenues, has been reported in their annual report as approximately 28% of global revenues. The related number has been used by Paumanok Publications, Inc. and global equity research analysts to substantiate their global share as being a close number two to Tokin/NEC Corporation in 2003. However, estimates today place AVX closer to $360 million worldwide, placing them a full $80 million larger than NEC/Tokin and by far the largest tantalum capacitor producer in the world. Tantalum capacitors sold by the company used in defense, medical and other specialty markets are recorded as revenues in their Advanced Products Group.

AVX Advanced Tantalum Capacitor Factory; Paignton UK

AVX Tantalum Capacitor Production Capabilities
According to AVX Corporation, the company can make either 6 billion pieces or 4 billion pieces at 100% capacity utilization. AVX can make more of the small case sizes (EIA “A,” “B,” and “P”) and less of the larger case sizes (EIA “C,” “D” and “X”) or an even mix depending upon market demand. Small case size molded tantalum chip capacitors accounted for the majority of unit shipments at AVX in 2003. AVX is also the world’s largest supplier of niobium-oxide capacitors (OxiCapTM)with monthly output of between 25 and 30 million pieces; they are now planning a multi-fold increase in niobium-oxide capacitor production at their Lanskroun, Czech Republic facility to meet rapidly growing market demand.

AVX Capacity Utilization
AVX is now above 80% capacity utilization in tantalum chip capacitors, and above 80% capacity utilization in niobium-oxide capacitors, but this is difficult to determine accurately because niobium-oxide capacitor processing and production is the same as tantalum capacitor production, so if there is greater value in producing niobium-oxide the company can switch a line from tantalum to niobium. Also if the demand by case size changes from larger to smaller case sizes, the capacity of the five main electrolytic plants (Lanskroun, Tianjin, San Salvador, Paignton and Biddeford) can be adjusted accordingly.

AVX Capacity Expansion
Capacity expansion at AVX Corporation will go from 6 billion pieces of tantalum capacitors to 6.8 billion
pieces, and from 0.3 billion pieces of niobium-oxide capacitors to 1.5 billion pieces between 2003 and the end of 2004. Current expansion plans include the new niobium processing and production facility in Lanskroun, a new building in El Salvador and the expansion of its Tianjin China tantalum plant.

Reasons for AVX’s Success in Tantalum
AVX’s success in tantalum is based upon their customer base. AVX got to be number one in tantalum capacitors through key customer accounts and key regional access, especially in Asia. One of AVX’s main customers is Sony Corporation. The new PSX from Sony will employ 23 tantalum capacitors as opposed to 18 tantalum capacitors used in the PS2. Tantalum is used in the PS2 and the PSX in certain critical board applications on the PlaystationTM because of tantalum’s reliability and that PlaystationTM is a Sony flagship product line which requires quality construction. Paumanok believes that part of AVX’s current success was their foresight and market positioning. AVX noted that they saw the US market splitting in half, with 50% of consumption moving to Asia, where AVX had better penetration than their competitors. Paumanok believes that AVX has a much larger percentage of their sales in Asia when compared to Kemet or Vishay Intertechnology.

Senior Staff At AVX Tantalum Corp.

Polymer Tantalum Capacitor Market Estimates
AVX estimates the tantalum polymer capacitor market at approximately 10% to 15% of the total tantalum capacitor unit market, the remainder have cathodes that are manganese based. AVX noted the greater majority of growth was in polymer tantalum with low ESR characteristics, and that this market was in direct and intense competition with polymer aluminum capacitors. The average unit price of a polymer tantalum capacitor is $0.13 to $0.14 per unit, which is a 40% to 50% premium over manganese-based tantalum chip designs. AVX noted the majority of volume of demand for tantalum chip capacitors (both molded and coated chips) was in mobile phones, portable audio, CPU’s for notebook PCs, VGA cards, digital video cameras, digital still cameras and DVD players. AVX emphasized a continuing growth for tantalum capacitors coming from the camera module market for applications in cellular phones, digital still, digital video camera and recorder markets.

AVX’s View of the Competition
AVX views Sanyo Video Components as a major competitor in the polymer tantalum capacitor markets on a global basis. AVX is also a major supplier of small case size tantalum chips (EIA “A”, “B” and “P” case sizes), where they feel they have a significant market advantage and where their only real competition comes from Tokin/NEC. AVX offers a 10μF tantalum capacitor in an 0402 case size using their patented
TAC production process which they believe is unmatched in the market.
.
AVX Lanskroun Facility- Beautiful Country
Lanskroun, Czech Republic has been the heart of the AVX tantalum capacitor production operations since 1993. The region is rich with culture and history, and the surrounding forests and rivers team with wildlife, at the center is Lanskroun with only 10,000 inhabitants. The Lanskroun factory for tantalum is located about 50 feet above the flood plain and has never been flooded, a rumor circulated by their competitors in the late 1990s. In Lanskroun, the tantalum capacitor assembly plant is 170,000 square feet and the anode plant is 200,000 square feet. The site is a massive industrial complex once owned by Tesla Corporation.

Advanced Testing of the TAC Tantalum Capacitor Product Line in Paignton, UK

Paignton, United Kingdom- The Riviera of England
The center of AVX’s European advanced tantalum capacitor operations is located in Paignton, United Kingdom, a resort town located on the English seaside, with local culture and cuisine tied to the sea.

TAC Tantalum Capacitor Line at AVX- Unique Process
The TAC tantalum line, produced in Paignton, is a high-volume, high-value business where finished products have low ESR and small case sizes (EIA “A,” “B,” and “P”). Every single TAC capacitor at AVX undergoes extensive testing. For example, the TAC tantalum capacitor product line is used extensively in the implantable defibrillator market, which is considered one of the most mission critical electronic applications in the field. The production process for AVX’s TAC product line is unique in the industry with respect to both construction method and the automation process associated with its production. In terms of processing, the tantalum capacitor anodes are manufactured by the thousands on a single wafer that is about 2.5 inches square. The automation process for this production line is also unique in the industry; the process employs advanced robotic functions to produce the finished capacitors. The company also notes that they have received the Sony Green Partner Award, which is rare for a Western company. The AVX Tantalum Division has been RoHS Compliant/lead-free for years and only uses lead in terminations when the customer demands it, such as in the defense market.

Tantalum Wafer Processing for the TAC Line in Paignton, UK

AVX Develops Niobium-Oxide Capacitors
AVX Corporation has pioneered the development of niobium-oxide capacitors with Oxi- CapTM, which is a solid electrolytic ceramic capacitor and is a creative approach to putting high capacitance in a small case size. The Oxi- CapTM niobium-oxide has effectively competed against surface mount aluminum electrolytic, tantalum polymer and high CV/g multi-layer ceramic chip capacitors since 2003. The overall demand for niobium-oxide solutions has increased quarter-to-quarter and the expectation for the future is that this trend will continue.

Historical Development of Niobium Oxide Capacitors
AVX began development of both niobium
AVX Tantalum Capacitor Production Facility, Lanskroun, Czech Republic metal and niobium-oxide capacitors back in multiple core competencies at their research and development facility in Myrtle Beach, South Carolina, USA. This is where AVX employs technical experts in multiple dielectrics to provide solution-oriented approaches to new product development. In fact, it was AVX’s experience in ceramic capacitors that ultimately proved critical in the development of niobium-oxide capacitors which demonstrate material characteristics that are more in line with titanate ceramics than with tantalum or niobium metal.

A Look Inside the Niobium-Oxide Supply Chain
The patent for niobium-oxide for use in capacitor anodes is owned by Cabot Corporation, and AVX licenses this patent from the company. AVX has their own inhouse capability to produce their own niobium-oxide powder under this agreement The company notes niobium-oxide costs about $100.00 per pound, compared to tantalum metal powder, which costs $250 per pound, so material costs are about 60% cheaper.

AVX noted that this does not translate into a 60% savings across the board for companies wishing to switch from tantalum to niobium-oxide because some case sizes have material costs that are 80% of the CGS, while other parts have material costs that are 15% of the CGS, so prices will vary as will cost savings based upon the case sizes purchased by the customer. In many instances, a niobium-oxide capacitor will have the same price or even a higher price when compared to a tantalum capacitor with manganese based cathode, but a lower price when compared to a tantalum polymer capacitor.

The interesting aspect about niobium when compared to tantalum with respect to capacitance value per gram is that niobium-oxide capacitors have a similar maximum CV/g value when compared to polymer tantalum (about 150,000CV/g), which means that niobium-oxide capacitors could theoretically match all capacitance values in the polymer tantalum range by case size, but in most instances-at a lower price.

Customers for Niobium Oxide Capacitors
Current markets that AVX’s niobium-oxide capacitors penetrate are USB ports, infrared ports, BluetoothTM modules, modem cards and graphics cards. Paumanok’s market analysis on niobium-oxide capaci tors
indicated the expected demand for these products by endues market segment should be as shown in the
graph above.

The company also noted they have a global approval for use of niobium-oxide capacitors from a major computer corporation, and that many of the Taiwanese motherboard manufacturers have also given mass approval to the niobium- oxide product line from AVX. The company also noted that several major cell phone handset manufacturers have incorporated both the niobium-oxide and the TAC tantalum capacitor solutions into their latest designs. Additionally, many of the latest consumer applications like DVD Comination Drives have niobium-oxide capacitors designed in at several of the global providers of such equipment. A major supplier of power supplies and DC/DC converters for the Data Networking industry, has also approved niobium-oxide capacitors for usage in their product lines.

Non-Ignition of Niobium Oxide Capacitors Drives Sales
AVX uses the non-burn/nonsmoke status of their niobium-oxide capacitors to target polymer tantalum
capacitors and surface mount aluminum electrolytic capacitors which cannot make this claim. Legislation in Japan, which is part of their lead-free initiative, also includes wording that demands that all end-use electronics sold in Japan must be guaranteed not to smoke. All capacitors made from metal seek oxygen and have the capacity to smoke or burn. Niobium-oxide capacitors already contain oxygen
and are based upon ceramic technology, therefore do not smoke or burn. This has been a major selling point of these capacitors in the Far East and at select customers in the West (i.e. commercial aviation).

Niobium-Oxide Technology Trends at AVX
AVX credits the development of a niobium-oxide capacitor as opposed to a niobium metal capacitor with the centralized research center in Myrtle Beach, SC, USA which combines dielectric expertise from multiple products to create solutions oriented product lines. Niobium-oxide was developed by employing electrostatic know-how (ceramic dielectric materials) to compete in an electrolytic environment against tantalum polymer and SMD aluminum capacitors.

The company is developing low profile versions of the niobium-oxide capacitor, and also low ESR solutions based upon multiple anodes, polymer niobium and the combination of multi-anodes and polymer in a niobium-oxide capacitor product. Also, a MIL-Spec version is under development. Areas of current development include the niobiumoxide polymer capacitor which will be called the PolyOxiCapTM, which will have lower ESR characteristics than current models. A high reliability professional grade NbO capacitor will also be developed that will have lower leakage characteristics, and will be able to operate at 150°C environments.

Typical Sample Target Market Analysis for Niobium-Oxide Capacitors

• Game Console Maker
“A”: 16 Polymer Tantalum
and 2 MnO2 Tantalum
Capacitors
• Game Console Maker
“B”: 2 Polymer Tantalum
and 25 MnO2 Tantalum
Capacitors
• Game Console Maker
“C”: 5 Tantalum MnO2
Capacitors, This Product
Will Use NbO Capacitors
• Notebook Computer
Maker “A”: 6 Polymer
Tantalum and 21 MnO2
Tantalum Capacitors
• Notebook Computer
Maker “B”: 22 Tantalum
Capacitors- All Polymer
• Hard Disc Drive Maker: 6
Tantalum Capacitors
• SMPS: 2 Tantalum Capacitors
• LCD Monitor: 35 SMD
Aluminum Electrolytics,
of which 21 were 5VDC
max
• Set Top Box: 47 Aluminum
SMD parts

Computers are a product line where components get particularly hot because of tight volumetric efficiency and no room for micro-cooling fans. One method of cooling the notebook is by distributing power supplies throughout the architecture to limit the hot spot areas. Another method is to ensure that components on the board will not fail catastrophically if overheated. AVX has developed the niobium- oxide capacitor solution and the softtermination solution for their ceramic chip capacitor program. AVX predicts that compliance with lead-free and no-smoke legislation should create a forward demand in the electronics industry which is moving rapidly toward safety and affordability in passive component solutions.

Those companies not prepared for this change will lose market share. Another solution is the fused tantalum capacitor, but after a major computer company began to discontinue its use of fused tantalum capacitors because of cost issues, many vendors discontinued its production.

Niobium-Oxide and Tantalum Interchangeability
Some key elements of production for NbO versus Ta Capacitors:
• NbO capacitor and Ta capacitor production processes are
similar.
• Production equipment are of the same design, so little
capital equipment costs are required for production of
NbO capacitors.
• However, there can be no cross-contamination of tantalum
and niobium-oxide materals in the manufacturing
process.
Paumanok believes that niobium-oxide capacitor sales will continue to grow because of their non-ignition nature. High layer count multilayered ceramic chip capacitors will also fail if they crack during the PCB flex test due to improper handling during processing. Thus Paumanok believes that niobium-oxide capacitors can be used to replace high capacitance BME ceramic parts in selected applications as well. AVX also notes that niobium-oxide capacitors compete effectively against polymer aluminum capacitors because even though these designs are less likely to burn when compared to tantalum capacitors using manganese cathodes, they still have the capacity to smoke. As legislative requirements begin to kick in over
the next few years, demand will continue to increase for these types of safety and environmental compliant products. AVX is expanding their production capabilities in niobium-oxide capacitors to meet the forecasted demand for these products. It looks like AVX has a winner on their hands.

AVX's New Tantalum Plant in Tianjin 2004

Companies Who Viewed This Page Also Went Here: (1) Tantalum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 1-893211-11-8 (© April 2010) (2) TANTALUM: Global Market Outlook: 2008-2013 ISBN # 0-929717-81-3 (2008)

Filed Under: Feature Story, Plant Tours Tagged With: AVX Corporation, AVX Lanskroun, AVX Paignton, AVX Tantalum

NIC Components, Long Island, New York – July 2000

July 30, 2000 By Dennis Leave a Comment

by Dennis M. Zogbi, Publisher, Passive Component Industry Magazine LLC
PASSIVE COMPONENT INDUSTRY JULY/AUGUST 2000
In 1982, NIC Components Corp. was licensed by Nippon Industries Co., Ltd. of Japan for the North American sales of its passive components. Nippon Industries was founded in 1975 by Yoshiharu Dangi and Gichu Sato with an initial investment into a small manufacturer of aluminum electrolytic capacitors. In the ensuing years, they continued to invest in small and mediumsized Asian makers of passive components. Nippon’s philosophy was to provide an export market to those independent factories in return for a long term allocation. To further enhance this unique fabless model, Nippon provided its suppliers with financing, engineering and access to high quality raw material suppliers. All of Nippon’s products were for export, and many of its customers initially were importers and distributors in both Europe and North America.

Rich Schuster; President; NIC Components

In 1982, Richard Schuster and several associates founded NIC Components Corp. NIC, headquartered in Farmingdale, New York, set up sales and marketing in the United States and Canada and procured most of its product from Nippon Industries. Some of its early distributors included Future Electronics, PUI, Belford, Capsco, Bell (now Arrow) and Brevan. In 1989, NIC opened its second sales and warehouse facility in San Jose, California. While the core business remained in aluminum electrolytics, new fabs manufacturing tantalum, film and ceramic capacitors were recruited to round out the package of passive components. NIC also ventured into the resistive and magnetic component markets with Nippon’s new fab liaisons. In 1997, NIC Eurotech Ltd. was established in the United Kingdom as a wholly-owned subsidiary, and in 1999, NIC Asia PTE Ltd. was established in association with Nippon Industries and local management in Singapore. Today, NIC Components is approaching 200 million dollars in sales and has several thousand active customers worldwide, including top tier CEMs and OEMs. NIC’s major distributors are Arrow, Future, Kent, Jaco, PUI, Capsco, Chris, Belford, Brevan, First Phase, Shannon, Priebe, U-Tech and Hammond.

Aluminum Electrolytic Capacitors
NIC’s original product line encompassed through-hole construction in axial, radial and snap mount configurations. Most of the product was produced in Japan, but due to labor costs and exchange rate considerations, some production was moved to Taiwan and China in the late 80s. Raw material and engineering were still predominantly Japanese in order to assure quality and uniformity. In the mid-80s, NIC introduced surface mount cylindrical can aluminum electrolytics to the U.S. market. At first the going was slow, with designs coming primarily from the larger, more progressive OEMs. Surface mount was still relatively new and the larger size aluminums presented some challenges for the pick-and-place equipment. Sizes were not yet standardized, and both CV and characteristics were somewhat limited. Still, NIC had resolved that this was the technology of the future, as was evident from the rapid evolution of through-hole to surface mount in other passive components such as ceramic and tantalum capacitors and discrete resistors. Using both through-hole and surface mount components on the same PCB must utilize two soldering processes, which is very costly. Aluminum electrolytics in surface mount packages have only taken off in the last few years, and now they are truly coming into popularity. Expansive ranges of size, capacitance, voltage and special characteristics such as low ESR, extended temperature and low leakage current offer a multitude of design options. Due to NIC’s early entry into this technology and the
fact that they have the most extensive line of surface mount types, they have established a very strong market position. They are now shipping over 40 million pieces per month, and this number is growing at a frenetic pace.
NIC Aluminum Electrolytic Capacitor
Technology and Trends
NIC’s Aluminum Electrolytic Capacitor offering currently covers:
15-series: Types of surface mount (SMT) parts
25-series: Types of radial leaded parts
5-series: Types of axial leaded parts
4-series: Types of large can (snap-in) parts
Temperature Ratings
-40 to +85°C: General purpose (lowest cost)
-55 to +105°C:Wide temperature (with 4X longer life
than +85°C rated)
-55 to +125°C: Extended temperature (with 4X longer
life than +105°C rated)
Capacitance Value and Voltage Ranges
Surface mount (SMT): 0.1 to 6,800 μF;
2.0 to 450 VDC
Radial leaded: 0.1 to 15,000 μF; 6.3 to 450 VDC
Axial leaded: 0.47 to 22,000 μF; 6.3 to 500 VDC
Large can (snap-in) leaded: 56 to 68,000 μF;
10 to 450 VDC
Specialty Types
Low impedance-low ESR styles: 3-series surface mount
(SMT) and 5-series radial leaded for
high frequency and high current
switching power supplies; DC-DC
converters and voltage regulator
module applications. NIC has recently
expanded the range of its
NSP series specialty polymer electrolyte
(solid aluminum) type in
SMT package.
Low Leakage Current Styles
1-series surface mount (SMT) and
3-series radial leaded for leakage
current sensitive applications (sensors
and battery powered circuits).
Bi-Polar Styles
1-series surface mount (SMT), 3-series
radial leaded and 1-series axial
leaded for applications where circuit
voltage bias is unknown or may
reverse.

Technology Trends
Alternates to Chip Tantalum
In today’s market, alternatives to tantalum chip technology, such as
NIC SMT aluminum electrolytic capacitors, are becoming increasingly attractive to circuit designers and PCB manufacturers. Those users adopting easier-to-obtain SMT aluminum electrolytic capacitors, in place of long lead time tantalum chips, have also found a number of performance and cost-related advantages. Aluminum electrolytic styles have featured improved immunity to unforeseen reserve voltage and over voltage transient conditions, as compared to tantalum electrolytic styles. Another nice advantage of aluminum electrolytic capacitors (SMT and leaded) is their relative lower cost, when compared to tantalum solutions.

Aluminum Electrolytic
Capacitor Road Map
Majority of development efforts have continued to focus on:
• SMT format development.
• Expanded range of values (introduction
of larger case sizes and improved
foils).
• Lower impedance-lower ESR styles
for next generation lower voltagehigher
current circuit designs.
• Improvement in longer life styles.
• Environmental impact issues (alternatives
to PVC insulation sleeves
of leaded styles).

Expectations
• SMT style usage should exceed
leaded styles within the next two
years.
• Further reduced pricing of SMT
styles is expected as other producers
(outside Japan) enter market.
• Axial leaded styles will continue to fall from usage, being replaced by SMT and radial leaded styles. NIC Components is well positioned in the North American market for passive electronic components. By maintaining a knowledgeable engineering group, an aggressive sales team, and a dedicated source for passive components, NIC Components will continue to grow rapidly in tier one accounts in telecom, computer and automotive end-use market segments.

Companies Who Viewed This Article Also Went Here: (1) Aluminum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 0-929717-47-3 (8/2010)

Filed Under: Feature Story, Plant Tours Tagged With: aluminum capacitors, Distributors

EPCOS: Tantalum Plant Tour in Évora, Portugal- January 2000

January 30, 2000 By Dennis Leave a Comment

PASSIVE COMPONENT INDUSTRY JANUARY/FEBRUARY 2000
Author’s Note: This factory was sold to Kemet Electronics, seven years later.

EPCOS Tantalum Factory HQ in Evora Portugal, January 2000

In August 1998, EPCOS (formerly Siemens + Matsushita Components GmbH & Co. KG), of
Munich, Germany, began tantalum capacitor production at its new 175,272-square-foot facility in Évora, Portugal. The plant was built with an initial investment of $87 million and employs approximately 400. The new facility complements existing tantalum capacitor production at EPCOS’ plant in Heidenheim, Germany, which began production in 1989. At the end of 1999, the combined tantalum capacitor production of Heidenheim and Évora was 1.1 billion pieces, up from 500 million pieces at the end of 1998.

In August 1998, EPCOS initiated production of the smaller A- and Bcase- size tantalum chip capacitors for its cellular phone customers; and in January 1999 the company began production of the larger C-, D- and E-case-size tantalum chip capacitors for its automotive electronic subassembly customers. At the end of 1999, production of the smaller A- and B-case-size products (55%) exceeded production of the larger C-, D- and E-case-size products (45%) by only a small amount. By the summer of 2001, it is estimated that EPCOS will increase production of tantalum capacitors at both Heidenheim and Évora to between 1.5 billion and 2.0 billion pieces to satisfy rising demand from its core customers in cellular telephones, subscriber line interface cards, automotive electronic subassemblies and personal computers. At the end of 2002, EPCOS forecasts that 70% of its unit output of tantalum capacitors will be in Évora, with the remaining 30% in Heidenheim.

Tantalum Capacitor Sculpture Outside EPCOS Tantalum Factory: 2000

Building a New Plant at an Interesting Time
In the fourth quarter of 1998, in Prague, Czech Republic, I had the opportunity to interview Josef
Gerblinger of EPCOS’ tantalum plant in Heidenheim. I voiced the collective thoughts of EPCOS’ major competitors as to why the company would add capacity in Évora, creating additional supply at a time when demand was only 80% of worldwide capacity. After all, the economic climate for passive components was depressed—pricing for tantalum capacitors was being pushed so low as to equal the cost of the raw materials, and base-metal ceramic capacitors were rapidly encroaching on the lower-capacitance-value molded and coated chip tantalum capacitors. So why add production capacity? Dr. Gerblinger responded by saying that EPCOS would do nothing of the kind unless it had sufficient reason to believe that demand for tantalum capacitors would increase so much in the coming years that the investment in Évora would be justified. With due praise of Dr. Gerblinger and the powers that be at EPCOS, it is apparent now that the investment in Évora has paid off brilliantly. The plant is operating a tfull capacity, and the company knows that if it could produce more tantalum capacitors, it could sell them too.

The EPCOS Gamble in Évora Pays Off
EPCOS’ gamble was simple. The company believed that consumer demand for tantalum-capacitor intensive cellular telephones from such telecom giants as Nokia, Ericsson and Motorola would increase dramatically in 1999 and 2000. Forecasts also showed rising demand from Europe’s major automotive electronic sub- assembly producers—Robert Bosch, Delphi Europe, Hella, AutoLiv Svenska, Siemens, Valeo, VDO and Temic. (Tantalum capacitors are used in air bag circuits, ABS cards, engine-control units, keyless entry circuits and GPS receivers.) The predicted surge in total demand would justify a major expansion in tantalum capacitor production in Évora. Ironically, EPCOS was the only major producer of tantalum capacitors in the
world that believed the demand would actually materialize. When the production of tantalum capacitors in Évora came on line, demand for tantalum chip capacitors exceeded supply by almost 20%. EPCOS truly reaped the rewards of its foresight, nearly tripling tantalum sales from $35 million in 1998 to $90 million in 1999. Revenues in 2000 are projected to reach $140 million, an increase of 55%.

Why Portugal and Not Eastern Europe?
EPCOS’ Évora tantalum plant is located about 60 miles southwest of Lisbon, Portugal. The ride from Lisbon, past the stripped cork trees (Portugal is the world’s largest producer of wine bottle corks), is splendidly scenic and uneventful. Évora is an industrialized town with many modern production sites. The new Évora plant is located a short distance from Siemens’ electromechanical component plant, which was recently sold to Tyco, Inc. The existing distribution infrastructure established by Siemens’ electromechanical plant was a key point in the choice of Évora as the site of the new plant. However, Alfred Karlstetter of EPCOS also points out that significant concessions from the Portuguese government, with respect to employee taxes and power prices, were the final factors in the decisionmaking process. Dr. Karlstetter points out that Eastern Europe was also a consideration for the site of the new tantalum plant. However, the distribution infrastructure established by Siemens Electromechanical was in place in Portugal (one of the poorest nations in the European Community) and would have had to be developed from the beginning if the plant was built in Hungary or the Czech Republic (where AVX maintains the majority of its tantalum capacitor production).

A Tour of the Plant
The Évora tantalum plant is a case study in modern production of tantalum chip capacitors. The operation contains the latest manufacturing equipment, including computer-controlled, fully automatic systems with self supervisory process control for prefabrication, assembly and testing of tantalum chip capacitors. At Évora, there are four production lines for tantalum capacitors. The initial production line began operation in August 1998, the second in January 1999, the third in April 1999 and the fourth in January 2000.

Pellet Formulation and Sintering
As with any of the major tantalum capacitor production plants in the world (Kemet in Greenville, S.C.; AVX in Lanskrovn, Czech Republic; NEC Toyoma in Japan and Thailand; Vishay-Sprague in Sanford, Maine, and Dimona, Israel, etc.), EPCOS in Évora begins tantalum capacitor production with capacitor-grade tantalum metal powder is purchased in its purest form from one of three global vendors—Cabot Performance Materials of Boyertown, Pa.; H.C. Starck of Goslar, Germany; and Ningxia Non-Ferrous Metals of the Ningxia Province in the People’s Republic of China. Capacitor-grade tantalum metal powder is mixed with a binder/lubricant and poured into a die that has a centrally positioned contact wire, also made from tantalum (the wire forms the positive connection). The wire is pressed into an anode of prescribed weight and dimensions to accommodate the planned case size (A, B, C, D, E or some unusual variation thereof), and then baked in an inert gas to completely remove the binder. The next stage is
sintering of the pellet, which is carried out in a precision-controlled atmosphere in the range of 1,700º. Precise temperature and time control is absolutely critical in the tantalum pellet sintering process, because the lower the sintering temperature, the higher the retained surface area and therefore the higher the available capacitance. At higher sintering temperatures the pellet sinters into a more dense body, yielding less surface area but possessing a greater degree of purity and thus a lower instance of potential failure.

Dielectric Formation
The formation of the tantalum pentoxide dielectric layer is accomplished through electrolysis. This process involves the immersion of the pellets in an acid solution, wherein a constant current is applied. The acid solution completely penetrates the porous pellet body, and the film of tantalum pentoxide grows on every available surface within the porous structure. Since capacitance is equal to surface area, a very high capacitance can be obtained in a very small, surface mount package. This makes tantalum capacitors somewhat unique, and they are the product of choice when high capacitance is required in a printed-circuit board that has real estate constraints. The results of the dielectric formulation process depend upon the anodization voltage that is applied to the acid solution. The anodization voltage is typically three to four times the rated voltage of the capacitor and determines the thickness of the oxide film. In turn, the thickness of the oxide film also determines the capacitance value of the finished capacitor.

Cathode Development
Cathode development is the most time-intensive portion of tantalum capacitor production. The anodized pellets are immersed in a solution of manganese nitrate, which fully penetrates the porous body of the tantalum pellet. The impregnated anodes are then passed through an oven and baked at temperatures between 200º C and 300º C where pyroysis takes place. In this process the manganese nitrate breaks down into a layer of manganese dioxide, which in turn forms the cathode, or negative contact of the polar tantalum capacitor. This process is repeated between six and 12 times to ensure complete coverage and connection of the manganese dioxide throughout the porous pellet. After this process is complete, a layer of fine, highly conductive carbon is applied to to the surface of the anode, and then the pellet is cured. A layer of silver paint is applied and the pellet is cured again at elevated temperatures.

Encapsulation of the Silvered Anode
The silvered anodes are encapsulated with an epoxy resin that serves as a protective layer against mechanical shock and provides a barrier against penetration of chemicals, water vapor, solvents and acids. The epoxy moulding process requires that the silvered anode be attached to a formed metal lead frame with silver glue. The tantalum wire is welded to the positive termination of the lead frame, the epoxy resin is applied and the terminations are formed around the resin molded capacitor body.

Tantalum Capacitor Development at Évora
At Évora, EPCOS has developed innovative tantalum capacitor products to meet the demand of customers in the telecommunications, automotive electronic and computer industries. These developments center around high capacitance value in smaller case sizes; lower equivalent series resistance (ESR); lower profiles; and higher operating temperatures. Note that production at Évora’s sister
plant in Heidenheim was developed as a support for Siemens Automotive Group back in 1989. Product offering also developed throughout the 1990s to support Siemens’ cellular phone business. These two core product markets enabled the Heindenheim plant to venture into the merchant market to sell tantalum capacitors to major OEMs in the telecom and automotive industries. Évora is the logical extension of the success of Heidenheim in the merchant market.

Telecommunications
Through innovation and mass production, EPCOS has developed high-capacitance tantalum capacitors in 10 μF and 47 μF in 25 Vdc and 16 Vdc respectively, for applications in ADSL modems and line cards. They have also developed high-capacitance, low-voltage products that demonstrate very low ESR, which include 100 μF at 16 Vdc and 220 μF at 10 Vdc for applications in telecommunications voice and data switching (subscriber line interface cards). EPCOS has also developed extremely high capacitance 680-μF tantalum capacitors at 6.3 Vdc in an E case size for battery load leveling in cellular phones. Other inno- vations for the cellular telephone market include lowprofile C- and D-case chips with capacitance values of 47 μF in 6.3 VDC, and 10 VDC, and 220 μF at 6.3 Vdc. EPCOS describes the growth in demand from the telecommunications industry for 1999 as astronomical.

Automotive Electronic Subassemblies
For customers in automotive electronic subassemblies, EPCOS has developed tantalum capacitors that can operate at 150º C to accommodate engine-control units in increasingly hotter under-the-hood automotive environments. The company also offers 33-μF tantalum chip capacitors at 35 Vdc in an E case size for use in air bag ignition circuits. EPCOS produces low-ESR tantalum capacitors in 220-μF and 330-μF D-case-size chips for multimedia automotive applications in GPS receivers. EPCOS estimates that it controlled almost 40% of the 1999 European automotive electronic subassembly market for tantalum capacitors, with Kemet and AVX as major competitors.

Personal Computers
For personal computers, EPCOS has developed a 1000-μF 4-volt tantalum chip for notebook computers (battery load leveling); a 47-μF at 10 Vdc, also for notebook computers; and an extremely low profile 220 μF part at 6.3 volts, for PCMCIA card applications. EPCOS offers a 470-μF, 6.3-volt part for the output filter on computer switchmode power supplies.

Shipments From Évora
A full 75% of Évora’s tantalum capacitor production is destined for European customers; the remaining 25% is split evenly between North America and the Asia-pacific region. Because of the heavily weighted sales into the European market, EPCOS’ customer base in tantalum matches the historical strengths of the European Community, with substantial shipments to the telecommunications infrastructure, wireless communications and automotive electronic subassembly industries. Shipments by EPCOS into the computer industry are as limited as the company’s sales to the NAFTA and Asian regions and represent an area that EPCOS wishes to expand. Moreover, on a regional basis, it is EPCOS’ intention to increase its tantalum capacitor sales into the United States and the major industrialized Asian countries— South Korea, Singapore, Taiwan, Malaysia and the People’s Republic of China.

Future Plans at EPCOS
In addition to expanding market share in the NAFTA and Asian regions and increasing sales to the computer industry, EPCOS will continue to develop innovative products for customers in the telecommunications and automotive electronic subassembly industries. These developments will include higher capacitance products in increasingly smaller case sizes as well as ultra- low-ESR tantalum chips. One future direction for EPCOS will be the implementation of organic electrolytes to displace manganese dioxide cathodes. Organic electrolyte tantalum capacitors have already been developed by NEC Toyoma and Kemet Electronics. Organic electrolytes based on such polymers as polypyrole and polythiolene have been shown to reduce ESR in tantalum capacitors to an extremely low level. Even though sales of such products represented less than 5% of all unit shipments of tantalum capacitors in 1999, it is forecast that in 10 years, that the percentage could be higher than 50%.

Readers Who Came Here, Also Ventured Here: Additional Resources: (1) Tantalum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 1-893211-11-8 (© April 2010) (2) TANTALUM: Global Market Outlook: 2008-2013 ISBN # 0-929717-81-3 (2008)

Filed Under: Feature Story, Plant Tours Tagged With: EPCOS, Kemet, Tantalum Capacitors

Vishay-Israel: Plant Tours: 1999- High Tech In The Promised Land

August 30, 1999 By Dennis Leave a Comment

“We’re not going to have a country here unless we have industry.”- Shimon Peres
August 1999, Edition Passive Component Industry Magazine
By Dennis Zogbi

Dr. Felix Zandman, Founder of Vishay (L) and Dennis Zogbi, Founder of Paumanok Publications, Inc. and Owner of Passive Component Industry Magazine (R)

Introduction:
The contrast in the middle of the Negev desert is surreal. There are camels, donkeys and sheep tended by Bedoins; Galils and M-16s tended by soldiers; a constant sun, whose heat can only be described by the pages of The Old Testament; and then, between all this, there is one of the largest tantalum capacitor production plants in the world.

The contrast is not lost of the Vishay Intertechnology management, owners and operators of the Dimona plant; that in this ancient corner of the world, which has largely remained unchanged for 2000 years; electronic components are made that are an integral part of personal computers and cellular telephones.

And while Vishay has four primary production facilities here in Israel, the Dimona plant stands out for its singularity in the worldwide capacitor industry. There are in fact so few tantalum capacitor production plants in the world compared to other types of capacitors, because of the tremendous difficulty in making these high capacitance, low voltage, surface mount devices (some 52 steps, compared to MLCC production, which takes about 25 steps).

There are other facilities on par with Dimona. Kemet’s Greenville, North Carolina Tantalum plant; AVX’s Lanskrovn, Czech Republic plant, and NEC Tantalum Corp’s Thailand facility, each with 1 billion+ tantalum capacitor production capability and each of course in its own distinct and interesting part of the world; but of course, in no other part of the world will you pass signs pointing toward Bethlehem and Nazareth as you travel toward a tantalum capacitor plant.

About Vishay:
The facts are that Vishay Intertechnology, Inc., is one of the world’s largest manufacturers of passive electronic components (1999 calandar revenues are forecasted by Paumanok to be between $1.6 and $1.7 billion, with about $1 billion in passive component revenues; comprising all capacitor dielectrics; resistor products; and magnetic components, with major competitive positions in tantalum, film and ceramic capacitors; nichrome, wirewound, flat chip and network resistors and wirewound inductors); and there is no doubt that even though the direction of the operation are located in Malvern, Pennsylvania, the heart of the company is located in Israel.

In the first half of 1999, Vishay operated four production facilities in various parts of Israel, employed 3,000 there, and generated approximatley $330 million U.S. dollars in revenues from their Israeli operations, of which about 90% is derived from exports to European, Asian and American customers.

This is of course, ironic, given the difficulty Dr. Felix Zandman, president and chairman of Vishay Intertechnology, Inc. had in setting up production operations in Israel back in the 1960’s, and again in the 1980’s when he wanted to buy Dale Electronics and relocate production to Israel to take advantage of the low-cost labor and high work ethic evident in the region.

Back in 1966, when Vishay (named after the Lithuanian village where Dr. Zandman’s great-grandparents, Chaya and Sender Solnicki lived) was doing about $6 million in sales of the surface mount resistor (metal foil on glass substrate) , which was conceived by Dr. Zandman through his work on stress measurement at Budd Industries in 1960; the company decided to gamble on opening a factory in a suburb of Tel Aviv, to emulate the production process for the flat chip resistor Vishay had perfected in their Malvern, Pennsylvania operations. For the first year it was dificult for his new Israeli employees to produce the flat chip resistor, because it was their nature to attempt to improve upon its design; and not simply mass produce the product. After one year however, production became much smoother and Vishay had a foothold in Israel.

In 1985, Israel began to play a major role in the future of Vishay Intertechnology, Inc. when the company attempted to buy Dale Electronics from The Lionel Train Company (and yes, that is the producer of the model trains). It was, and has consistenly been the basic Vishay acquiistion strategy to purchase companies and move a part of their production to Israel to increase margins through low wages and tax incentives offered by the Israeli government.

But getting special treatment from the Israeli government back in 1985 was a difficult matter. In fact, Vishay representatives could not even get a meeting withYigael Cohen-Orgad, the Minister of Finance, who seemed to constantly avoid them. Instead, it was the Prime Minister, Shimon Peres, who finally agreed to a meeting with Dr. Zandman, and got the ball rolling; but the catch was that Israel would be willing to support Vishay’s growth in the region, but there would have to be certain compromises. First, and most important, was that the government wanted the plant to be located in the middle of the Negev desert at Dimona, in a region where unemployment was extremely high. This seemed untenable at first to Vishay, but Vishay also wanted Israel to change its policy regarding taxation on foreign corporations. Vishay wanted the Bank of Israel to view money taken out of the Vishay-Isreal operations as an expense of the company instead of a dividend. Vishay would use the revenues derived in Israel to pay back the debt realized in the purchase of Dale Electronics. If the Bank of Israel viewed the money that Vishay relaized in Israel as going toward a debt payment it should theoretically be viewed as an outside purchase of capital equipment, which would be subjected to a much lower tax rate than if it was viewed as a dividend. The Bank of Israel resisted this plan however; so in order to secure an amiable resolution, Vishay agreed to use only after-tax profits generated from export sales from Israel to pay down the debt from the purchase of Dale Electronics. They also agreed to make Dale a subsidiary of Vishay-Isreal. This would give the Israeli government access to information regarding Vishay employment and the flow of money into and out of the country. Thus, in effect, the government of Isreal became a partner in Vishay Intertechnology, Inc. And thus, Vishay’s second plant in Israel, the Dimona plant was born in a 350,000 square foot, former automobile brake manufacturing plant.

Dimona, eventually became the second, prime manufacturing location for Dale Electronics (in addition to their primary plant in Norfolk, Nebraska); and over the past ten years has produced a large portion of the world’s nickel chromium and wirewound resistors under the Dale brandname. Thus after 1985, Vishay operated two production plants in israel, both for resistors; the Holon plant in the suburbs of Tel Aviv and the Dimona plant in the middle of the Negev desert.

By 1990, Vishay’s Dimona plant employed 500 people and generated $30 million U.S. dollars in revenues. But it was time for plant expansion. Vishay had acquired the world reknowned Sprague Electric from Carl Lindner, a financier from Cincinnati, who in turn had bought it from General Cable, a Penn Central subsidiary. Sprague had been in financial difficulty after the company invested heavily in the semiconductor business and faced stiff competition from larger American and Japanese semiconductor manufacturers. Sprague controlled a considerable portion of the worldwide tantalum capacitor business in 1990, and could be profitable if a portion of production was moved to the Dimona plant in Israel. Having established a track record with the Israeli government and meeting their five year goal with respect to Isreali employment and revenues with their transplanted Dale operations, Vishay found it much easier transplanting the Sprague tantalum capacitor operations to Dimona, not only obtaining their usual 38% grant for equipment, but also an additional 10% reduction in Israeli income taxes. Thus the Dimona Plant #2 was born to house the production of tantalum capacitors; the entire process emulated from Sprague’s Sanford, Maine USA operations, including tantalum pellet pressing, anode firing, cathode formation, wire attach and de-attach, molding and coating, termination, test, tape and reel. Dimona supplies tantalum capacitors to the worldwide cellular telephone, portable and desktop computer and automotive engine control unit markets worldwide.

The next, and one of the largest aquisitions by Vishay that also had an Israeli connection was the purchase of Vitramon from Thomas & Betts Corporation in 1994. It had become apparent in the worldwide ceramic capacitor industry that Thomas & Betts wished to sell their Vitramon operations after they themselves purchased American Electric Products and assumed almost $500 million in debt in the process. The management of Thomas & Betts, led by CHB and CEO Kevin Dunnigan, made it clear to the industry that there would be a premium for their Vitramon subsidiary since it was one of the last large MLCC houses in the world that could be purchased and one that had a good market share in terms of dollar revenues (Thomas & Betts was asking $225 million for Vitramon at the beginning of negotiations with Vishay). Vishay needed the MLCC technology to compliment their tantalum capacitor (Sprague), and DC film capacitor businesses (DC film capacitors are embodied by Vishay’s Roederstein division, a purchase which was negotiated at the same time the Sprague operations were acquired in 1990). At the time it was apparent to Vishay that Vitramon needed a $100 million investment to expand production capacity. Vitramon’s MLCC had an excellent reputation for quality and the company was working three shifts, seven days a week to keep up with demand and they desperately needed additional production capacity. Thomas & Betts needed capital to buy down debt from their purchase of American Electrical Products and did not have the money for further investment in Vitramon. Thus, in July of 1994, Vishay paid Thomas & Betts $184 million U.S. dollars for the division (a nice compromise between what Thomas & Betts wanted for the company and what Vishay was willing to pay).

Vishay relocated about one half of Vitramon’s unit production to Migdel haEmek in northern Israel, once again emulating the entire production process of Vitramon in Monroe, including titanate milling and formulation; wet stacking on computerized doctor blades, electrode formulation; body firing, termination dipping, test, tape and reel. Migdal haEmek was the only Vishay-Israel plant constructed from the ground up and is therefore the nicest, most modern plant Vishay has in Israel. Migdal haEmek supplies MLCC to the worldwide automotive electronic subassembly industry, which is its prime customer base (high reliability MLCC).

Holon Plant:
The oldest continual operation owned by Vishay-Israel is in Holon, a suburb of Tel Aviv. This plant also serves as the Vishay-Israel corporate headquarters. Holon is a specialty resistor plant, and is the transplanted Vishay Resistive Products operation from Malvern, Pennsylvania. The Holon plant has been in continuous operation since the early 1960’s; and the building has been expanded both laterally and vertically over the past 33 years to achieve its current 80,000 square foot mass today. Vishay’s Holon plant specializes in the production of bulk metal foil (nickel-chromium) resistors in chip, leaded and network configurations. The majority of resistors produced in Holon are manufactured by hand. The factory employs 530 people in six floors; it is an extremely busy plant, producing specialty products for demanding customers in the military, medical, downhole pump and instrumentation business, where volume is low, but average unit prices are extremely high (Dr. Zandman describes the profits from the Holon operations as what enabled them to purchase Dale Electronics in 1985). The Holon plant is labor intensive, with a large portion of production, testing, packing and shipping accomplished by hand. The employees are predominantly Russian women who work extremely diligently. The labor force in Holon is trully one of Vishay’s unseen assets. A small automated nickel-chromium resistor line is included on the first floor of this plant, but it may be moved to Beersheba in the near term.

Dimona Plant:
The Vishay capacitor and resistor plant located in Dimona, a desert community about 30 miles from Beersheba is dedicated to the production of tantalum capacitors and flat chip resistors. The tantalum capacitor operations have been transplanted from Vishay’s Sprague facilities in Sanford, Maine and Tours Cedex, France. The flat chip resistor operations, while employing patented technology from the company’s Roederstein purchase, is basically a new product line for the company. The flat chip resistor operations are highly automated, with resistor body development, termination, test, tape and reel a computerized, modern process.

The tantalum operations are quite impressive and self-contained. The company recieves processed capacitor grade tantalum powder from one of three noted worldwide vendors (i.e. H.C. Starck, Cabot Corporation and Nigxia Non-Ferrous Metals), which they then press into anodes, fire, and then grow layers of manganese dioxide and carbon. The tantalum capacitors are then packaged either into leaded, molded or coated chips, and sold to various industries, including the cellular phone, computer subassembly (motherboards and disc drives) and automotive electronic subassembly (primarily engine control units) markets worldwide.

Migdal haEmek:
This is the location of the Vitramon division’s multilayered ceramic chip capacitor manufacturing plant in Israel. Certainly the most modern of the Vishay plant’s in Israel, this operation was constructed from the ground up at a cost of about $100 million U.S. dollars. An enourmous facility, the operation still has considerable room for expansion (as do all the Vishay operations in Isreal, except for Holon, which is at capacity). The Migdal haEmek plant includes ceramic titanate material production from precursors. Titanates are also milled to submicron levels after they are received from the merchant market before they are screened into dielectric layers through computerized doctor blade machines.

All electrode and termination materials are purchased from the merchant market as paste and applied to the dielectric layers using sophisticated computer controlled equipment.

The MLCC production process at Migdal haEmek is unique and proprietary and part of the intelectual property received in the purchased of Vitramon by Vishay from Thomas & Betts in 1994.

The most impressive portion of the Migdel Hamek facility is the quality control and testing operations, which are in-depth; and a combination of automated and labor intensive test and inspection of finished MLCC.

Beersheba:
The Beersheba operations are located about 30 miles from Dimona. In fact, some partial production of dipped tantalum capacitors has actually been moved from Dimona to Beersheba. In fact, not only are the dipped tantalum capacitors produced at Beersheba automated, they are mobile as well; and the process can be moved to various production locations quite easily.

Beersheba is the result of the transference of a large portion of the Dale resistor operations (Vishay’s first major purchase in 1985). The resistor operations at Beer Sheva are nickel chromium film and wirewound; and compliment the operations in Holon. Beersheba is also home to a portion of Dale’s inductor operations. Dale’s primary research & development and partial production of inductors occurs at the Dale facility in South Dakota.

Summary:
Thus, between 1966 and 1999, Vishay Intertechnology has built a remarkable presence in Israel; in fact, growing production of passive electronic com ponents from less than $1 million USD to $330 million USD, which represents an average annual growth rate of about 17% per year over the last 33 years.

At press time it was announced that Vishay has set in motion plans to use the available square footage in the Dimona plant to begin finishing operations for the Power Mosfets built by Siliconex, a new acquisition by Vishay in 1997.

Readers Who Read This Page; Also Went Here: (1) Linear Resistors: World Markets, Technologies & Opportunities: 2009-2014 ISBN # 1-893211-24-X (7/2009) (2) Tantalum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 1-893211-11-8 (© April 2010) (3) (1) Ceramic Capacitors: World Markets, Technologies & Opportunities: 2009-2014 ISBN # 1-893211-25-8 (December 2009)

Filed Under: Feature Story, Plant Tours Tagged With: Ceramic Capacitors, Specialty Resistors, Tantalum Capacitors

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