Research & Development Spending As A Percentage of Total Revenues At The Top 18 Passive Component Vendors:

The following graph illustrates company spending on research and development in passive components worldwide.  These companies represent about 67% of global revenues of passive components. Companies spending above the norm are concentrating on ceramic capacitor stacking technology and the development of quality ceramic capacitor raw materials that enable increasingly thinner, high-performance dielectric layers through ceramic and metal nanotechnology. Another area of increased spending is for the adoption of new conductive polymer cathodes for aluminum and tantalum electrolytic capacitors. Large investment also continues in miniaturization and integration, which may include the development of LTCC and FR4 ultra-small modules.  Other areas of R&D spending include vertical integration of passive components into more expensive sub-assemblies (such as thermistor probe assemblies).

Source: Paumanok Publications, Inc. Compiled from Company Data.  Rubycon is estimated.  Competitive Analysis of Passive Component Manufacturers, May 2007

Table Note: When viewed based upon the actual dollars spent on research and development in passive components, the picture of the marketplace becomes slightly different, with $35 million USD as the average amount spent on R&D in fiscal year 2007.

Correlation Between Operating Profit and Spending On R&D:

It can be said that there is a correlation between higher operating profit and greater spending on research and development as a percentage of total revenues.  This is true for Murata Manufacturing Limited and Panasonic Electronic Devices who are both top revenue producers and top generators of higher operating profit when compared to the competition.  They both also spend the most on research and development in passive components.  Murata Manufacturing spends their R&D dollars on nanotechnology in ceramics and metals and advanced ceramic stacking technologies.  The company has also invested heavily in ceramic substrates and packaging (LTCC).  Panasonic R&D spending is primarily in conductive polymer technology for the molded aluminum capacitor chip and for new and exotic films for DC Film chip capacitors.

Whose Spending Above the Norm and Why:

The norm for spending among the top manufacturers of passive components for research and development is 4.1% of revenues.  Companies in addition to Murata and Panasonic Electric Devices who are currently spending above the norm on research and development include TDK, EPCOS, KEMET, SEMCO and Toko.  Each company is focusing on somewhat different areas of R&D, but there are common themes.  TDK Corporation and SEMCO, like Murata, are focusing their R&D efforts on ceramic stacking technology and nano-materials development, manipulation and dispersion.  Also, KEMET is investing in conductive polymer development for both their tantalum and aluminum product lines, in the same manner as Panasonic. EPCOS and Toko are both focused on miniaturization, especially in wirewound inductors, and (in the case of EPCOS) in non-linear resistors and (like Murata), LTCC modules.  Another fairly large spender on research and development is Taiyo Yuden, who is also focusing on ceramic stacking and nano-material development in ceramics and metals.

Summary Graph:
Global Spending On Research & Development by Application in the Passive Component Industry: CY2006

Source: Paumanok Publications, Inc.

What this Means for the Future:

High Capacitance Ceramics: Investment in the higher capacitance portion (greater than 2.2 microfarads) of the global multilayered ceramic chip capacitor industry has been constant since 1993.  This trend will continue in 2007 and is expectant to remain constant over the next five years.  Creating higher capacitance parts in X5R, X7R and NPO  ceramic dielectrics, will be the primary area of spending in R&D in 2007 globally, with emphasis upon Japan, China and Korea.  The near-term goals are to achieve production quantities of 220 microfarad X5R ceramic chip capacitors, with the anticipation of the development of 270 microfarad, 330 microfarad and 470 microfarad MLCC over the next five years.  To accomplish this, research and development must focus on the screening of thin dielectric and electrode layers and stacking an increasingly larger volume of those layers to fit into standard footprints used by the world’s set base of pick and place machines.  This requires captive research in ceramic dielectric materials, nickel electrode powders and copper termination powders; but more importantly, in the conversion of those powders into an ink or paste that can be screen printed in consecutive layers.  The leading edge of research is focused on how to achieve thinner layers in ceramics; with a substantial investment in R&D required to shift screen printing from traditional doctor blade to reverse roll or gravure die coating methods; and with future developments expected to come from the optical coating field.  Stacking techniques utilized by the top vendors are also being applied to ferrite materials for inductors and zinc oxide materials for varistors.

Conductive Polymer Cathodes: Research and development in conductive polymer cathodes involves the manipulation and waste reduction in existing conductive polymer processes in the industry, based upon polythiophene or polypyrrole technology; or the introduction of new polymers, such as polyanaline into the cathode process.  The near-term results will be an expansion of the product offering in solid polymer aluminum capacitors; and continued lowering of the ESR in conductive polymer tantalum capacitors.

Miniaturization and Modularization:  The other area of investment comes from the constant development of smaller footprint passive components.  Generally speaking, the goals are established by the massive chip resistor and MLCC industries (which now boast the ultra-small 01005 case size chips) and then applied to all the other ceramic or oxide based passive components in chip format. These components include NTC thermistors, PTC thermistors, Metal Oxide Varistors, EMC inductors, and wirewound chip inductors.  Modules and integrated passive devices are also being developed, and there are additional minor investments each year in thin film resistors (TaN, or NiCr film) and their integration into networks.  More advanced modules for antenna have been developed using ceramic LTCC technology and this is an area of growth for the major vendors, especially in handsets and in automotive sub-assemblies.