2008 Unit Shipment Forecasts

The salient, or leading edge demand components in passives in 2008 will be the MLCC, thick film chip resistor, and multilayered chip inductor. These specific components will continue to grow in unit demand in 2008 for consumption in wireless handsets, notebook computers, and flat panel television sets. The smaller chip sizes (U.S. sizes) in the 0402, 0201, and 01005 will grow at a faster rate than the larger case sizes in the 0603, 0805 and, 1206 footprints. Integrated and integral passive solutions will also continue to gain ground in 2008.

Growth is also anticipated for narrow portions of the other “niche” passive component markets. These would include the surface mount versions of aluminum, tantalum, and film capacitors and the surface mount versions of thermistors and varistors. Larger growth is anticipated for the ultra-small versions of these “niche” passive components, although many of these additional component markets have yet to produce an 0201, much less an 01005, so growth in the leading edge ultra-small components, especially for ESD and thermal protection, as well as sensing will grow at a faster rate than the larger components in 2008

Legacy products, such as the through-hole capacitors and through-hole resistors, will be slow growth in 2008 but will continue to represent profitable segments of the market, especially for high voltage, high frequency and harsh environment applications found in defense, spacecraft, medical, and oil well services end-use market segments.

2008 Value Shipment Forecasts:

Paumanok expects the global value of the passive electronic component industry to increase in 2008 by approximately 5% to 7%. The growth variable will be based on price trends. Passive component pricing in 2008 will be dependent on the impact of raw material pricing, coupled with the negative impact of excess capacity expansion. Many players in the supply chain are studying the costs to produce passive components, to determine which vendors are more flexible on price.

Raw material price increases for nickel, ruthenium, and tantalum will continue to impact the passive component market in 2008. A price increase in thick film chip resistors, MLCC and tantalum chip capacitors could occur again in 2008 as a result of higher raw material prices. Price increases for larger case size MLCC and chip resistor were noted in 2007 due to higher raw material pricing.  

Paumanok expects continued capacity expansion in units in MLCC and thick film chip resistors in 2008 and some of this expansion may exceed the market demand, which would have a negative affect on pricing. But still, with raw material cost increases, capacity expansion, and demand from key segments (CATV flat panel, wireless handsets, and notebook computers) the forecast is one of overall growth. Part of this growth will come from emerging markets (in renewable energy and hybrid vehicles) and continually strong defense, medical, and oil well services industries demand for the coming year.   

Trends In New Technologies: 2008

Continued investments in technology in the passive component industry will occur in 2008. The most important trends will be in integral passive materials that enable capacitance, resistance, and inductance to be placed inside the board substrates. This trend continues to crop up in the communications and power circuitry for wireless handsets and then expand into other markets that are embracing miniaturization (e.g., subscriber line interface cards, robotics).

Additional developments are expected in nano-technology in barium titanate, nickel powder and tantalum powder that will continue to increase the available surface areas in chip capacitors. Overall in passives, by far the largest single investment amount of money earmarked is for high capacitance MLCC by the top passive component suppliers (Murata, TDK). Working prototypes of MLCC to 330 microfarad may be forthcoming in 2008. This trend continues to expand demand for ultra-small particle sizes in the respective raw material supply chains.

In tantalum, higher capacitance tantalum metal powders will continue to enable increasingly smaller tantalum chips, while tantalum capacitor performance will continue to be improved by the use of conductive polymer cathodes.

In aluminum, more emphasis will be placed upon the development of the horizontal-chip solid polymer aluminum capacitors.

Conductive polymer materials will continue to be at the forefront of technological innovation in the electrolytic capacitors in 2008.

In resistors, higher ruthenium prices may lead many to look for an alternative thick film metal solution based upon nickel or another base metal. Otherwise the continued trend is toward thin film integrated passive components and multi-chip resistor arrays. Increased thin film development in 2007 was the result of the higher ruthenium price as many looked at the unstable ruthenium price as an added reason to invest in thin film capital equipment.

In inductors, look also for increased inductance in multilayered designs due to improvements in nanotechnology for ferrite materials. Inductors remain the area of most concern with respect to availability because expansion in inductors is taking a back seat to expansion in high capacitance MLCC.

In plastic films, there is renewed interest in high heat handling specialty films, and also continued development of polypropylene for higher voltage per cell. Double layer carbon supercapacitors will also continue to move towards higher voltage per cell designs in 2008 due to the introduction of new types of electrolytes.

Also, look for new binder materials that burn-out faster and cleaner, thus creating easier access for cathode layers to develop. This will increase capacitance and continue to lower ESR, especially in the tantalum and solid polymer aluminum disciplines.

Regional Market Growth: 2008

Asia

The Asian region will show growth for passives in 2008 primarily as a result of demand from the flat panel display CATV markets. Flat panel display production is primarily centered on China, Taiwan, Korea, and Japan. Demand in these four countries will also increase for applications in notebook computers and wireless handsets in 2008.  

North America

Markets in the United States, Canada and Mexico continue to consolidate as production of any high volume electronic products has moved to China. Mexico is at greater risk of lost business in 2008 due to the trend to move industrial electronics (motors, lighting) to China as well. U.S. demand will continue to consolidate into the remainder of the computer peripheral markets, the automotive subassemblies markets, the medical, defense, and oil well/mining markets.

Europe

The European production situation is more stable than the Americas for 2008, due to continued large-scale production of wireless handsets and automotive electronic subassemblies in the region.  

Rest of the World

Additional activity is expected in 2008 with respect to consumption in India, Vietnam, Thailand, Poland, and Hungary.  

Growth in End-Use Markets in 2008:

In 2008 the number of capacitors, resistors and inductors in wireless handsets will increase (number per box) and it is also expected that the number of wireless handsets produced will also increase. At the same time there will be activity in 2008 for passive components sold for dual core processors in personal computers. In television sets, the US market will begin to convert to flat panel displays and high definition tuners, which has 12X the passive component content of traditional CRT television sets. Automotive electronic markets for gasoline-powered cars will grow slowly but with more value-added opportunities under the hood. Additional market growth is anticipated for hybrid electric vehicles that use AC film capacitors for DC link circuits and large power inductors. Oil well services electronics will also outperform the market due to more requirements for probe assemblies for exploration. Demand for defense electronics subassemblies will also grow in 2008 as global armies continue to expand and update their missile and communications capabilities.  

• Computer: In 2008 there will be new design activity in the space for decoupling the next generation of the Pentium chip, however, real dollar value will be realized by the passive component industry for the movement to a quad core processor in desktop and notebook computers. This is good for the wirewound inductor, the high cap MLCC, the tantalum chip capacitor, and the polymer aluminum capacitor markets.
• Automotive:: There will be continued activity in 2008 in the automotive sector with the most profitable and exciting area in the hybrid electric vehicle designs, especially for Class 7 and 8 trucks and other means of transport that employ heavy duty diesel engines. Traditional automotive demand will continue to grow at a slow rate, although individual passive component manufacturers who cater to the sector may see additional growth because of the increasingly limited number of global vendors who chase automotive accounts.
• Defense:: Outlook is difficult to forecast, but may be reliant on the next administration and 2008 U.S. presidential election. Otherwise, brisk demand for components in the segment continues in FY2008. Some passive component vendors expect demand from defense to last three more years to 2010. Primary demand for passive components is in missile power supplies, munitions, railgun, sonobuoy, radar, and guidance contracts. Brisk growth is underway already in UAV and UGV robotics, as consumption of passives for these applications continues to grow in support of the vision of Future Combat.
• Spacecraft:: The commercial development of space travel, and more importantly- satellites in small packages <10 kilograms will continue to grow the new, and exciting area for value-added passive components. The number of vendors moving into the space, coupled with the development of a viable commercial spaceport in New Mexico will continue to show promise as an emerging market in the “final frontier.”
• Telecom & Datacom Infrastructure:: This segment never recovered from the 2001 downturn. When it revives itself it will be mostly in the form of fiber optics that require less passive components than in twisted pair hardware. Still the market holds promise for NTC thermistors as temperature sensors used in FO repeater modules.
• Medical:: Outlook for capacitors is extremely robust due to new implants and new imaging technologies. Implants will begin to move out of the cardio arena and into unchartered territory- most notably for pain management (a capacitor pulse technology), electronic eyes and new developments in hearing aids.
• Oil well:: Extremely active segment due to oil and gas exploration worldwide. Centered in NAFTA this segment holds good growth forecasts for 2008 for those passives vendors who can meet the extremely high temperature requirements and ultra-vibration frequencies inherent in the space.
• CATV:: Global market is moving to flat panel display and demanding extremely large volumes of MLCC, chip resistor, chip inductor and V-chip aluminum capacitors. One CEO from Japan pointed out to me that this segment alone could be responsible for consuming the majority of the 2008 capacity expansion.
• Power T&D:: Capacitors used for power T&D have a growth that corresponds with new housing and demands on existing electrical systems. These capacitor markets are captive to the massive markets for turnkey power stations. New housing markets in the USA and Europe are not expected to grow due to sub-prime loan adjustments in both regions. This will have a negative affect on motor run capacitors used in HVAC and refrigerator compressor motors in 2008.
• Industrial Automation: Growth is forecasted worldwide for variable speed drives used for renewable energy systems that rely on efficient delivery of power. This has had and will continue to have a positive impact on power factor correction capacitors, commutation and snubber capacitors in the coming year.
• Motors:: Slow but steady growth is seen for DC motors for cars produced in NAFTA, Europe, Korea and Japan, and in some industrial motor segments, but expect more movement in the motor markets away from Mexico and Eastern Europe and into China.
• Welders:: Solid business that is very steady for both aluminum and AC film capacitor manufacturers.
• Traction/ Electric Transport:: Extremely specialized but has potential in mainstream for energy recoup capacitors in hybrid electric drive trains.
• Furnace/Induction Heating:: A very niche burst power application similar to microwave oven applications.

Outlook for Capacitors: 2008

Tantalum chip capacitor growth will be slower. The majority of growth will be in the ultra-small case sizes (A case, P Case, and J case). Slower growth is expected for the larger case size tantalum chips, although they will experience a transition to conductive polymer designs and away from manganese cathode designs. Tantalum capacitors will continue to be used in notebook computers, certain wireless handsets, game consoles, digital video and digital still cameras, telecommunications infrastructure equipment and automotive ABS and SRS electronics. Competition from high capacitance MLCC will be the single most detriment to tantalum capacitor growth in 2008.

Growth in aluminum electrolytic capacitors is also expected in 2008 to support demand from the flat panel display and desktop computer markets. Demand for the V-Chip and the H-chip aluminum capacitor designs will be greater than that of the older radial leaded designs. Industrial type aluminum capacitor demand, especially for motor start applications should also grow in 2008.

Growth in paper and plastic capacitors, with emphasis upon the DC film capacitor will be limited due to encroachment by MLCC on the 5mm PET film capacitors and the X and Y type capacitors used for interference suppression circuits. Also, the degaussing circuits in CRT monitors are disappearing as the flat panel displays do not need them, and this erodes a good business for the DC film capacitor business, thus we forecast no growth for film capacitors, other than in the PPS and PEN film chip designs.

AC polypropylene type film capacitors will continue to be invigorated by their new use for the DC link in hybrid electric vehicles (and class 7 and 8 trucks). Its traditional marketplace in power transmission and distribution will continue to grow slowly, as will demand for power film capacitors used for snubbing, commutation, and filtering.

Outlook for Resistors: 2008

Demand for thick film chip resistors will grow in 2008 to support converged wireless handsets, personal computers and TV sets during this time period. Other growth areas will be in resistor integration with respect to the multichip resistor array (also based upon ruthenium) and the thin film integrated passive device.

In non-linear resistors we expect continued growth for the multilayered chip varistor for ESD protection in wireless handsets and for surface mount polymer PTC and surface mount mixed metal oxide NTC thermistors for use in a variety of emerging overcurrent and temperature sensing circuits (sensor technology).

The legacy resistor products, such as wirewound, tin-oxide and metal film will grow slowly and in accordance with their use in industrial electronics.

Outlook for Inductors: 2008

2008 inductor outlook remains good because of anticipated consumption of chip inductors for high definition television set tuners and for wirewound chip coils consumed in personal computers. EMC issues are expected to become more paramount because of the proximity of functions in handsets and because of the advent of the HDTV tuner. Unit growth in inductors is expected to exceed growth rates in other passive components because of the emerging markets in communications and consumer electronics that require EMC compatibility with other devices.

The primary concern in inductors is that the major vendors are also the major vendors of MLCC and those vendors are focused on capacity expansion in high capacitance MLCC and are not fully involved in expanding their multilayered chip inductor markets. Thus, one primary concern is that there will not be enough parts to satisfy increased demand from handsets and new demand from the television industry.