Introduction:

Passive component sales in the Americas increased in fiscal year 2007 (ending March) by 10%, effectively slowing the rapid decline in United States, Mexico, and Canada consumption of capacitors, resistors, and inductors that has been apparent for the past seven years as shown in the table below

Source: Paumanok Publications, Inc. Based Upon Top 18 Passive Component Manufacturer’s Shipment Data by Region: FY 2000 – FY 2007 Ending March; IM145 and EM 545 Trade Data; Mexico and Canada Trade Data; Paumanok Database of Known Passive Component Manufacturers (NAFTA) 2007.

Consumption Trends in the Americas:

Capacitor, resistor, and inductor sales in the NAFTA region (United States, Mexico, and Canada) totaled approximately $3.6 billion USD in 2007, up by approximately 10% in revenue from the $3.2 billion USD of FY 2006 (ending March).

The value of consumption for passive components in the NAFTA region has been trending downward since FY 2003, and in fact never recovered from the peak revenues of FY 2001 (the historical hallmark for value in the region), when revenues in NAFTA for passive components exceeded $8 billion USD.

Among the primary sources interviewed, the general consensus is that the value of shipments did not vanish but moved to China. There is also a consistency of thought that a part of the loss in value in the NAFTA market for passive components since 2001 in the region is also due to price erosion in the mass markets.

Regardless, the market size and its 2007 upturn have many major passive vendors reconsidering their position on how to approach the diverse and fragmented market that remains.

Country Analysis:

Passive component sales in NAFTA by country are proportional to the industries within each respective country.

The United States is still the primary consumer of multilayered ceramic chip capacitors, tantalum chip capacitors, chip resistors, chip inductors and V- Chip aluminum capacitors. These components are primarily used for applications in the computer, power supply, telecommunications infrastructure, automotive, defense, and specialty segments.

Mexico consumes more AC and DC film capacitors and through-hole power resistors for applications in industrial and lighting markets than in the United States (this has been true since 2003) because this is where a substantial number of manufacturers in the “line voltage equipment” segment have moved their production. Thus, there is ample demand for industrial grade aluminum and power film capacitors for use in power supplies, DC motor assemblies, lighting ballasts, and smoke detectors manufactured in Mexico.

Primary sources also note that Mexican passive component consumption has declined by 38% since FY 2001 and assembly houses in that country have also moved manufacturing to China.

Canada has always been a small market for passive components; however, there are significant accounts with production facilities in that country. Many of these accounts are with companies in the automotive sector. There is also an attractive demand for power transmission and distribution capacitors used in power utilities in Canada.

Losses in Regional Sales Value by Product Type:

Overall capacitor demand in NAFTA decreased by 57% in dollar value between FY 2001 and FY 2007 with value declines in tantalum and aluminum electrolytic the most pronounced.

Ceramic capacitors still account for the largest value of demand for passive components in North America by type in FY 2007; however, it is a shadow of its former self. One of the best indicators of this is Murata Manufacturing, the largest ceramic capacitor manufacturer in the world, whose sales in NAFTA decreased by 56% between FY 2001 and FY 2007. Once again, this value did not vanish, but moved to Asia, which is also apparent in Murata’s financial figures for the time period.

Tantalum capacitors also experienced a substantial decrease in North American sales receipts between FY 2001 and FY 2007, declining by approximately 67% in value during this time period. Tantalum capacitor lines experienced a more pronounced downturn due to the movement of end markets to China, but also because it has been encroached upon by alternative technology, most notably the high capacitance MLCC.

Commercial aluminum electrolytic capacitor markets also experienced a decline of 65% in NAFTA revenues between FY 2001 and FY 2007 (similar to tantalum) as consumer, computer and telecommunications end use markets moved to China.

DC film capacitor consumption declined by approximately 37% in revenues between FY 2001 and FY 2007 as a result of the decline in NAFTA production of television sets, and key accounts in lighting and power supplies moving to Asia.

AC film capacitors were down by 11% in revenue between FY 2001 and FY 2007. This represents the lowest decline in value compared to all the other capacitor products included here. The AC film capacitor business in NAFTA is closely tied to power transmission and distribution class capacitors consumed by public utilities and industrial class manufacturing, and this market has grown continually between 2001 and 2007 to serve the housing markets (lead by Nevada, California, New York, Florida, and the Carolinas).

Inductor shipments (wirewound and EMC chip) in NAFTA lost 54% in regional market value between FY 2001 and FY 2007; and the inductor markets were equally impacted by the decline in the telecommunications segment in NAFTA (too much capacity) as well as the movement of key segments of the computer business and power supply business to China.

Resistor shipments (surface mount and through-hole) lost 59% in regional value in NAFTA between FY 2001 and FY 2007, and this was primarily the result of the movement of customers to China. Like MLCC, the thick film chip resistor sales in NAFTA were hit hard and declined at a more pronounced rate than other types of passive components consumed in the United States and Mexico.

Decline in the Value of Passive Component Consumption in NAFTA: FY 2001-FY 2007 (Based upon Manufacturer’s Shipments)
Capacitors= -57%
Resistors= -59%
Inductors= -54$

What the Future Holds: 2008-2012

Over the next five years demand for passive components in NAFTA will continue to be more specialized. Capacitors, resistors and inductors that are consumed for power applications, especially for tractor, truck and bus hybrid power trains will do well as will power applications for renewable energy (variable speed drives). Other markets that will continue to do well in the Americas will be in medical, especially for implants (heart, ear, and eye), pain management, and in defense electronics. Oil well services industries are also domestic U.S, growth markets. These markets are best served by small capacitor, resistor and inductor vendors who can produce highly specialized components in small quantities and with very fast turnaround times .

For more information on the market opportunities for passive electronic components in the NAFTA region contact Dennis M. Zogbi at dennis@paumanokgroup.com.