MarketEye: Forecasting: A 20-Year Market Assessment of The Ceramic Capacitor Industry

11.30.2009 // Posted by: Dennis Zogbi // Posted in: Articles, Passives

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Setting the Stage for Growth and Future Outlook:

The first chart shows global unit shipments for ceramic capacitors worldwide from 1991 to 2009, with forecasts to 2011. The data presented here is for the each FISCAL year ending March 31 and comes from our latest market research analysis titled “Ceramic Capacitors; World Markets, Technologies & Opportunities: 2009-2014.”

The primary reason for the loss in volume shipments worldwide in 2009 and 2010 can be traced to a significant tightening in consumer credit which impacted about 12% of the world population and their ability to make a purchase. With respect to recovery however, it is important to note that it did not impact the consumer’s DESIRE to make a purchase. The chart below illustrates that there have been other downturns in the ceramic capacitor consumption cycle followed by extended periods of market growth. You need to see where you have been in order to know where you are going. And this chart, from Paumanok Publications, Inc. new report titled “Ceramic Capacitors: World Markets, Technologies & Opportunities: 2009-2014” is that summary ─

Global Consumption VALUE for Ceramic Capacitors: 1991-2009; 2010 & 2011 Forecasts (in Billions of Pieces)

CHART Note 1: The periods of extended growth between 2001 and 2009 differed from the extended growth rates in prior cycles. This was due to the increased number of MLCC in end products, the roll out of advanced end-products into emerging economies; and the acceptance of high capacitance MLCC to compete against tantalum capacitors. Note how we see 2010 value of consumption falling BELOW 2000 value of consumption. Also the 2009 global economic downturn has spilled over to 2010. This is unusual compared to other cycles, whose down period usually do not last longer then 14 months. In this downturn, the negative affect is lasting as much as 24 months. Still, we expect another period of extended growth beginning in 2011.

The additional primary maxim with the industry is the continued price erosion over time, which is punctuated by years of stability that translates into large dollar value because of the massive volumes associated with the market.

CHART Note 2: The ceramic capacitor market tends to create an increase of $2 billion in overall market value through the expansion of technology into other dielectrics. The reader will note that the market is on par to exceed $10 billion in value in five years. The market will now demonstrate leaps and starts to achieve that forecast.

Average Unit Pricing for Ceramic Capacitors: 1991-2009; 2010 & 2011 Forecasts (in Billions of Pieces)

Average unit prices for ceramic capacitors have declined continually since 1991, however, after 2005 we note pricing stabilizing for the market as a whole. This is the result of the increased sales volume for the higher priced MLCC between 1 and 100 microfarad with emphasis upon the 47, 68 and 100 microfarad X5R parts, which have higher prices then the comparable picofarad MLCC. We expect price erosion to continue its downward trend however, as more manufacturers enter the higher capacitance market space, creating competition, and driving prices down for even the higher capacitance products.

The impact on volumes, and as we have noted before; the volume of ceramic capacitors produced worldwide is now at about 38,000 pieces per second, or 1.2 trillion pieces for the year.

The Short Term Outlook for Recovery:

The Paumanok forecast for short term recovery in the global market is for a modest 5% growth rate for December 2009 quarter, followed by a slowdown in the March 2010 quarter of about 5%. A growth support is expected for the June 2010 quarter as the market rebounds back into profitability and begins to create a path toward rapid increases in unit demand to support trends in product convergence, roll outs in emerging economies; and new and exciting products for consumer and automotive electronics.

Trends Supporting Growth: 2009-2014

The basic formula for growth in the worldwide MLCC market is the rapid expansion in demand for high capacitance MLCC between 1 and 100 microfarad in X5R, Y5V and X7R performance types to support new technologies in consumer and automotive electronics; a substantial amount of which is related to touchscreen circuitry for customer convenience. New markets for MLCC in eReader and netbook products; as well as for video game attachments continued to drive up new demand as MLCC manufacturers struggled to address declines from the core TV set, automotive, handset and computer markets that have plagued the industry since 2008. Regionally the BRIC markets hold the greatest promise for early market revivals in high volume handset, TV set and notebook computer sales.

Impact of global stimulus packages on the ceramic capacitor industry was and will continue to be in the form of high voltage and high frequency specialty capacitors that are locally manufactured in the respective regions where the stimulus money would be spent. Therefore, we have seen a substantial amount of positive local activity for vendors selling ceramic capacitors for infrastructure related programs- especially for railroad electronics, airport electronics, marine port electronics and CCTV and security markets continue to outperform other sectors. The secondary impact is the spending on renewable energy programs, where ceramic capacitors are just beginning to find their stride after being eclipsed early on by electrostatic and electrolytic solutions in hybrid electric transport.

Long Term Growth Outlook:

Overall recovery for passive electronic components, including all capacitors, resistors and inductors, will be a slow but steady process. Ceramics are better positioned for more rapid growth because of their use in almost all electronic circuits, and the design engineers tendency to design an increasingly larger content of MLCC for bypass, decoupling and filtering in almost every “black box” built today; but also because of the ceramic technology growing at the expense of other dielectrics- namely the $1.6 tantalum industry, which is expected to indulge itself in its own supply chain drama in 2010, requiring an even greater boost in demand for X5R and X7R MLCC in 2011.

The primary problem facing the passive component market is that the boards they sell into are getting much smaller. To that end, the passive component solution must adapt to support the overall trend of miniaturization, which is a constant battle between small size and corresponding function. Ceramics, which have had the largest amount of overall technology funding in Japan, Korea and Taiwan for the past 20 years has resulted in an area of growth that exceeds other solutions to the design engineer. More research and development money has gone into the advancement of ceramic capacitor stacking technology for MLCC then any other alternative technology. The results have been revolutionary in ceramic chip capacitors, but has also had equally impressive affect on the development of low temperature co-fired ceramic antennas and piezo-electric actuators for diesel electric transport, which many of the vendors have moved into; as well as smaller moves into thermistors, varistors and chip coils that also benefited from advanced stacking technology.

The technology transfer to value equations that are present in the market at the end of fiscal year 2010 are unusual. The investment trend has moved away from Japan and now toward Korea, with Taiwan and China the next big winners in the transference of high capacitance MLCC into mass production.

Japan’s reaction to this has been to invest in alternative technologies, namely the conductive polymer portion of the electrolytic capacitor industry- aluminum electrolytic and tantalum electrolytic technologies that are similar in size and appearance to very large case size MLCC, and therefore provides for an easy technology transfer. Japan will also invest in the development of MLCC with values greater than 100 microfarad. The key value of 220 microfarad, which has always been a mainstay of the tantalum capacitor business, seems just out of reach, like a bridge too far. I am told that yield ratios are so low they do not justify a return on investment at this time. But this will change. Companies like Murata, TDK and Taiyo Yuden have not as of yet competed in the massive $5.0 billion electrolytic capacitor, but recent acquisitions by TDK and Murata have opened up new opportunities into these new markets. So the Japanese companies are moving laterally and vertically into the market to find new opportunities for growth and profitability.

The MLCC markets in China will continue their meteoric rise as long as Japan can fuel the growth at competitive prices. Japanese solutions at the end of 2009 were to move to non-yen based manufacturing; to review local production sites throughout Asia and to modify them accordingly to compete in the market. Dominance of China consumption is key to this strategy, but the same affect that has made SEMCO successful in Korea in 2009 will also affect the Chinese manufacturers as this takes hold- certainly Yageo and Walsin are well positioned for this coming change in the market; but what of the opportunity for domestic Chinese manufacturers such as eYang, Feng Hua and Dalian Dalakai, among others to begin the long challenge of competing in their own market? It is just a matter of time before the transference of a significant amount of core value in MLCC production moves away from both Japan, Korea and Taiwan and into China, where it is consumed. This change will not come about because of will, but because it is the most efficient way for the market to grow over time, to continue the 20 year history of certain price erosion.

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