Introduction

Murata Manufacturing Company Limited, the largest passive component manufacturer in the world, recently embarked on a series of acquisitions in which they purchased two of their customers. This trend, which we have noted at two other major passive component houses* has sped up the process of design innovation, especially in the area of volumetric efficiency, and may be only the beginning of a new trend in vertical integration of component vendor and customer.
*TDK purchased Lambda (a power supply manufacturer); and Vishay purchased multiple vendors in strain gauges and measuring devices.

Meaningful Acquisitions

Murata made three important acquisitions that were critical in making a meaningful transition from individual discrete component manufacturing into more complex sub-assembly markets. The first acquisition was Ogaki Ceramics, a manufacturer of low temperature co-fired ceramic substrates (LTCC) in Japan. This acquisition solidified captive control of LTCC raw materials (ceramic tapes). This was followed by the acquisition of SyChip, a manufacturer of communication modules for the wireless handset industry. This acquisition solidified Murata’s position in modular solutions for high component content markets (i.e. handsets, which have about 400 passive components and laptop computers, which have about 1,800 passive components per box).

The movement from discrete components to modules is considered the largest market segment for passive component integration in the world right now. The third acquisition was Murata’s purchase of C&D’s Power Electronics Division. This acquisition was a clear vertical integration of a key customer segment, power supplies, with emphasis upon DC/DC converters, where Murata now has the number one share of the global market. Switchmode and linear power supplies, and especially DC/DC converter “bricks” can be considered another level of sub-assembly modularization for the passive component industry (power supplies have a high concentration of ceramic, aluminum and film capacitors; wirewound resistors and wirewound inductors). The similarities among the two customer purchases by Murata should not be lost on the reader. The end-markets that these acquired companies serve are (1) passive component intensive, (2) have modular designs as their end-product, and (3) are prone to passive component integration for dramatic improvements in volumetric efficiency over time.

How Vertical Integration can be Successful

The greatest impact on product development was in the areas of increased volumetric efficiency of the end-products being produced by the companies that were acquired. At SyChip this resulted in the development of much smaller modules and greater overall profitability due to supply chain control (because of the initial purchase of Ogaki Ceramics). In the time period following the acquisition, SyChip was able to employ Murata’s LTCC technology to produce a smaller chipset while increasing the performance of the finished product. At C&D PED, the same trend is occurring, whereby volumetric efficiency of power supplies is undergoing a remarkable improvement through the displacement of aluminum electrolytic capacitors with Murata’s high capacitance ceramic chip capacitors. The size difference of a power supply that uses ceramics for input/output filtering compared to one that employs aluminum electrolytics for the same application is sigbnificant, and will lead to a whole new breed of smaller, more powerful designs.

Changes at SyChip

SyChip develops and markets Radio Frequency Chip Scale Modules (RFCSM), for the wireless mobile market. The company prides itself on reduced component counts and extremely small footprint on the board. The company cites new ownership by Murata as an enabling factor in achieving the goal of providing the smallest RFCSM solution. The company notes that the industry trend is to offer more functionality to the wireless customer. With respect to the communications chip this translates into the need for a single module to offer FM TV, Bluetooth, WiFi, GPS, Wimax, and other specialty functions in an increasingly smaller module.

The company notes that the use of two enabling technologies, LTCC modules and thin film integrated passive devices, enabled them to reduce component count while decreasing their component footprint from 18.0mm x 15.5mm to 7.35mm x 6.55mm in a period of about 36 months (through Oct. 2007). The company expects another 30% improvement in module volumetric efficiency by 2010. The company notes their acquisition by Murata gave them access to advanced and proprietary LTCC module technology that helped them achieve their efficiency goals.

Changes at C&D PED

In 2007, Murata announced the acquisition of C&D’s Power Electronics Division, which when combined with Murata’s existing power supply business makes them the fifth largest power supply manufacturer in the world.

Global Power Supply Manufacturers: 2007 Estimated Sales & Market Shares

Murata notes that one of the primary reasons why it acquired C&D’s Power Electronics Division was to bring to market a more complete portfolio of power supply solutions.

One example of this is shown in the graphic illustration below, whereby the input and output filtering capacitors (a 13,000 microfarad collection of aluminum electrolytic and MLCC) are replaced with a single Murata 100 microfarad. The subsequent (MPDRX series) high-speed transient rsponse power supply solution is 72% smaller and much thinner, which makes it more suited for the flat panel display market and similar product markets that require innovative power supply solutions because of space constraints.

Graphic Illustration

Winners and Losers

Murata has been in the business of developing innovative power supply solutions for more than 25 years. The ability of Murata to vertically integrate advancements in it’s core materials competencies (ceramics & ferrites) into new power supply modules remains a key enabler of value-added solutions. This same vertical integration capability is now available to MPS (formerly C&D PED) via the recent acquisition. Likewise MPS brings to the Murata family an impressive array of power supply solutions and capabilities in areas where Murata lacks strength. Furthermore, Murata has always been from the school of thought that ceramic capacitors would eventually be used for all capacitor applications, displacing all other large value parts, including tantalum, aluminum and film dielectric capacitors. The development of their high capacitance MLCC program, which has effectively extended the capacitance value of MLCC from 2.2 microfarad in 1993 to 220 microfarad in 2007, has enabled the company to displace other capacitors with ceramics. The acquisition of C&D PED will only accelerate this process as the new entity is encouraged to use ceramics instead of aluminum and tantalum capacitors for filtering, bypass and decoupling; and to use ceramic safety capacitors for X and Y filtering of EMI and RFI signals instead of film capacitors, which have been standard in that role for many generations. The resulting product lines will be smaller and more compact, and most importantly, thinner than competitive products from other vendors who do not have such captive capabilities.

What the Future Holds

The potential for making smaller RF modules and power supplies is only the beginning of what I see as a trend in vertical integration of component manufacturers into sub-assemblies. This trend will have its greatest impact in like industries where there is a proximity of highly concentrated passive components and when either the physical size of the passive components (in diameter and height) limits the volumetric efficiency of the finished product (such as in power amplifier modules for wireless handsets, or in lighting ballasts for example). This trend in vertical integration will speed up the design process and make future products more volumetrically efficient. Expect smaller AC/DC converters, DC/DC converters and modules for handsets to be available by 2010.