November Passive Component Market Index Reveals Downward Trend In Digital Electronics Segment; Upward Trend in Power

Shifts in lead times for specific sub-components in the capacitor, resistor and inductor product groupings for November 2010 suggest a downward market trend for mass produced components consumed in digital electronics such as computers, handsets and TV sets; but an upward market trend in components consumed in power electronics.

During the month of NOVEMBER 2010, lead times for passive electronic components, otherwise known as the time it takes in weeks for a component to leave the factory and reach the customer, decreased for the second straight month- dropping by a modest 0.92% to 16.1 weeks, but certainly moving in the opposite direction that the lead-time index has demonstrated all year. In fact, lead times for capacitors and resistors decreased in November, while the time it takes for discrete inductors to reach the customer remained unchanged.

Graph 1.1 Lead-Times For Passive Electronic Components By Core Product Group (CRL): 2010

Lead-times for capacitors decreased by 1.54% month-to-month in November; while lead-times for resistors decreased by a 1.76% decrease during the same 30 day time period. However, lead-times for discrete inductors remained unchanged in November.

Graph 1.2 and Support Table: 30-Day Average Lead-Time in Weeks For Passive Electronic Components, Including Capacitors, Resistors and Inductors Combined

Capacitor Lead Time Trends By Dielectric: 2010

Tantalum Capacitors: November Lead Times: 2010
Lead times for tantalum capacitors, DECREASED for a second straight month as net new demand for the hard to find component slackened. Lead times for tantalum capacitors dropped by 10.44% marking the largest month-to-month decline in lead times for tantalum capacitors all year. Lead times for all types of tantalum capacitors regardless of type and configuration (or cathode type) declined. Lead times for molded case A chip and molded case C chip showed the largest drop in lead times for November. The primary end-markets for tantalum capacitors are computers, wireless handsets, video camcorders, digital cameras, automotive subassemblies and specialty electronics.

DC Film Capacitors: November Lead Times: 2010
Lead times for DC Film capacitors, INCREASED for a second straight month as materials shortages and increased unit demand continued the stretch in lead times. Lead times for DC film capacitors increased by 7.9% in November, after a 3.5% increase in October. The fact that DC film capacitors are moving counterintuitive to market conditions are indicative of unusual factors influencing the supply chain. In this instance according to primary sources- it is a materials shortage related to ultra-thin metallized plastic film. In November we noted an increase in lead times for SMD film chip capacitors; as well as a sharp increase in lead times for specialty film capacitors used in value-added and application specific markets. The primary end-markets for DC film capacitors are power supplies, lighting ballasts and other line voltage related and specialty electronic equipment.

Aluminum Capacitors: November Lead Times: 2010
Lead times for aluminum electrolytic capacitors, INCREASED in November, after a substantial decline in October. In fact, lead times for aluminum electrolytic capacitors increased by 2.5% in November, after a 5.4% decrease in October. Upon close inspection however, we also note that aluminum capacitors used for digital electronics applications, including radial leaded, vertical chip and conductive polymer chip remained unchanged in November, but the lead times for the larger screw terminal aluminum capacitors and the snap in type both increased. This points to increased demand from the power electronics side of the market. Aluminum capacitor applications in electronics include TV sets, stereos, computers, power supplies, line voltage equipment and a variety of specialty end-use markets. In the power electronic side of the equation, aluminum capacitors are critical parts of power transmission and distribution equation and are critical components for use in power inverters. They are also critical components for motor start applications.

Ceramic Capacitors: November Lead Times 2010
Lead times for ceramic capacitors DECREASED again in November, and the chart below reveals that ceramic capacitor lead-times have eased up steadily since June 2010 (since added capacity came on line in Korea and Japan at that very same time). Lead times for ceramic capacitors as a whole product group dropped by 0.94% in November. We note that MLCC of all case sizes and electrode types eased up again in November, but interestingly enough, the one product line- disc ceramic capacitors, which are used in high voltage power applications reveals activity in the power markets that is moving counterintuitive to the general mass markets in consumer electronics (computers, handsets, and TV sets all declining market demand in November, continuing the general downward trend in digital electronics that we now expect to last through March 2011).

Graph 1.3: Capacitor Lead Times In Weeks By Dielectric: 2010

Trends In Linear Resistor Lead Times: November 2010
The following table reveals the shift in lead times by resistor sub-type, with the most important change in November lead-time data for wirewound resistors, which shows a 4.5% increase month over month. This resistor product line is used primarily in power electronics applications and once again, taken in context with movement in the capacitor markets, we see a tactical upward movement in activity in the power segment, while all other primary segments, including applications in mass digital electronics, showed downward trending in November. In resistors, all other product lines other than wirewound resistors showed easing in lead times, or stability month to month. Thick film chip and thin film chip resistors each demonstrated a decrease in lead times, while nichrome, networks and metal oxide resistors (which each straddle the consumer and power markets) showed no change in lead times in November.

Graph 1.4: Linear Resistor Lead Times In Weeks By Type: 2010

Trends in Discrete Inductor Lead Times: November 2010
Lead times for all discrete inductor products remained unchanged in November. Both surface mount and throughole inductor configurations remained stable. However, viewed over time, we see that lead-times for all magnetic type components have remained at elevated levels all year. The majority of discrete inductors are consumed in digital electronic applications, including handsets, computers and TV sets, but a large percentage of wirewound and core inductors are also consumed in power applications.

Graph 1.5: Discrete Inductor Lead Times In Weeks By Dielectric: 2010

Passive Component Raw Material Price Index: Base Metals Go South, Precious Metals Go North In November 2010

The raw material index for passive electronic components showed a remarkable 12% decrease in November 2010, dragged down by price erosion for critical base metals, including nickel, copper, aluminum and zinc. Moving in the opposite direction in November was the precious metals, including palladium and silver, which showed month-to-month increases in price of 17% and 19% respectively. Ruthenium prices remained unchanged during the entire month of November at $175 per Toz.

Graph 1.6: Passive Component Raw Material Price Index

Tantalite, the ore manufactured in tantalum powder and wire consumed in tantalum capacitors is now confirmed at $122.00 per pound based upon the results of the auction by the Ethiopian Government during November 2010. The tantalite price now established at $122 per pound will cause another ripple affect up the tantalum capacitor supply chain, so we expect higher prices for tantalum chip capacitors in 2011.

Higher palladium and silver prices directly impact NPO type MLCC, which are largely still made with palladium bearing electrode and silver termination materials. This is a large ($1.5 billion) segment of the capacitor market and is important.

Lower prices for nickel, aluminum, copper and zinc have a larger impact on the capacitor, resistor and inductor segments, and this decline in feedstocks before new January 2011 materials contracts are signed, may increase profitability for some component vendors.

Summary and Conclusions:

Shifts in lead times for specific sub-components in the capacitor, resistor and inductor product groupings for November 2010 suggest a downward market trend for mass produced components consumed in digital electronics such as computers, handsets and TV sets; but an upward market trend in components consumed in power electronics.

A sharp decline in base metal prices in November should increase profitability in the aluminum electrolytic and high capacitance ceramics segment; but sharp price increases for precious metals- palladium and silver, should negatively impact profitability in the NPO type MLCC markets. Tantalite, now at an estimated $122 per pound, will impact tantalum capacitor pricing in 2011.