- The global passive component market continues to remain depressed in December 2012. The month is historically a down month due to the holiday season, and the 2012 year is no different, but punctuated by the looming "fiscal cliff" in the U.S. which refers to the economic effects that could result from tax increases, spending cuts and the resulting reduction in the budget deficit of the United States beginning in 2013 if existing laws remain unchanged.
- 92% of the 58 components tracked by Paumanok Publications, Inc., showed no signs of change with respect to lead-times in December 2012 on a month-to-month comparative basis.
- For the 2013 fiscal year ending March 31, 2013, we expect passive component revenues to be $17,796 million USD, down 11.3% from FY 2012 revenues of $20,059 million USD. Unit shipments for capacitors, resistors and inductors combined are expected to decline by 2.9% to 2,670 million pieces, and price erosion will be an estimated 8.4% for the year.
- We expect a cumulative 6% decline in December 2012 quarterly revenues of passive component manufacturers, and an additional 4% decline in quarterly revenues for the March 2013 quarter.
- The Passive Component Raw Material Index (which covers feedstock pricing for many of the primary raw materials consumed in the production of passive electronic components) showed a 2.4% increase in December on a month-to-month basis, following a 2.7% increase in November.
- The global passive components market was depressed in November 2012. Lead times for all products continued to be weak. However, it should be noted that tantalum capacitor lead times all moved upward for the first time in many months. We speculate that this is the result of a reported five-year contract that was reported in November regarding tantalite, the primary feedstock used to produce tantalum capacitors. Tantalum processors noted in primary interviews that they expected tantalite to rise to $200 per pound by April 2013 and that companies may be hedging and beginning to buy tantalum capacitors, although Paumanok believed that it was too soon to make that determination given the uncertainty of recovery in Europe and because of the looming "fiscal cliff" in the United States.
- All other 58 individual passive component products covered by Paumanok, including other capacitor dielectrics, resistors and inductors, for the most part, showed no changes in lead times for the month of November.
- In November, Paumanok revised its quarterly revenue forecast for the passive component market downward for the preceding September 2012 quarter, and also revised its forecasts downward for the upcoming December 2012 quarter as well as for the March 2013 quarter. Paumanok also shows that the September quarter grew by 1.85% on a quarter-to-quarter basis, buoyed largely by sales of MLCC from Japanese vendors to Apple Computer. The guidance provided by major vendors for the December quarter suggests a 6% decline; and guidance provided by the Japanese companies for the full year further suggests that the March 2013 quarter will be down by 4% on a quarter-to-quarter basis.
- Prices for key raw materials consumed in the passive component industry increased in November on a month-to-month basis, lead by price increases for nickel, zinc and aluminum; as well as for palladium, which the metals trading industry believes will be in short supply in 2013. Ruthenium prices took an unexpected plunge in price, dropping 18% in one month down to $90.00 per Troy ounce. Tantalite prices remained at approximately $145 per pound on average for the month.
- AVX announced the acquisition of the tantalum capacitor operations of Nichicon (Japan). This is a sizeable operation composing the former Panasonic tantalum factory in Tianjin and a headquarter factory in Japan. The Nichicon acquisition will add 5 percentage points to AVX's total market share in tantalum.
- Primary sources report tantalum ore prices rising to $145 per pound in October, from $130.00 per pound in September as a direct result of the off-take agreement in Brazil. All other raw material prices for both base and precious metals showed an almost 10% decline in value in October on a month-to-month basis.
- Lead times for all passive components showed continued weakness in the market for October on a month-to-month basis. Some increases in lead times were markedly offset by decreases for other components, further suggesting a weakness in the market for October.
- Overall the market remains "stuck" with little upside prospect and little downward momentum, a steady state of anemic growth and mild declines punctuated by equally unusual raw material prices impacting margins.
- Passive Component Lead times relaxed again in September 2012 indicating an overall continual softness in demand. Raw material prices on the other hand, showed a significant spike in September. The combination of lackluster component demand and higher materials prices will erode the profit margins of the major passive component vendors.
- The primary reasons for the slowdown in passive component consumption continued to be the European economic crisis, which caused a slowdown in the purchase of electronic goods, and this in turn impacted Asian production volumes.
- Also, we noted a clear impact that the rapid increase in proliferation of the smartphone is having on other consumer electronic devices. Smartphones are eroding the markets for MP3 players, handheld game consoles, GPS devices, still cameras and video cameras; and there is a loss of passive component sales to these end markets as a result.
- The June 2012 quarter showed worldwide passive electronic component market growth at 6.4% in value on a quarter-to-quarter basis.
- In August the lead-times were stagnant as we expected, however the resistor markets slowed down to new lower lead time levels.
- Raw material prices however, increased for both base and precious metals, with nickel, copper, palladium and silver showing substantial month-to-month increases in price. However, tantalite pricing remained unchanged and ruthenium price declined for the month.
- Capacitor lead times showed mixed results, with some increases in lead times for some of the ceramic capacitor and aluminum electrolytic capacitor product lines, while tantalum capacitors and plastic film capacitor lead times remained unchanged. Resistor lead times however, showed an unusual and unexpected relaxation in lead times, especially for axial and radial leaded products and thin film chip resistors. Inductor lead times remained unchanged as they have been all year.
- The raw material index continued to decline in price in July 2012, lead by sharp downturns in nickel and palladium pricing. However an increase of 20% in price for tantalum ore was noted in July (up to $120 per pound now) as described by primary vendors in the supply chain, with a new short term target price of $140 per pound expected. Tightness in the supply of tantalum ore due to the closing of Wodgina mine, the idling of Kenticha mine, the uncertainty of Noventa mine, and the difficulties in obtaining legal ore from the Congo were cited as the cause of the price increase.
- On a positive note in the June quarter we expected the market to grow slowly and to support the smartphone business and therefore impact only the MLCC and thick film chip resistor businesses more so than any other segment. Automotive markets remained healthy, as did the medical and oil and gas related electronics (specialty markets). The computer markets and the TV set markets continued to underperform with tablets cannibalizing demand from notebooks and desktops, and the lower component content hobbling the industry.
- Primary vendors interviewed during this time period continued to blame the economic crisis in Europe as the primary cause of a global market slowdown.
- The damage to the Panasonic film capacitor factory in China due to a tornado had no impact on the supply chain, as the damage from the tornado was limited to roof damage.
- Some major customers in the computer market commented that they believed the situation was right for a shortage of passive components in 2013.
- The global passive component lead times increased slightly in April 2012 on a month-to-month basis, marking the first major change in direction for passive component demand to positive in many months.
- Lead times for aluminum capacitors, ceramic capacitors, and plastic film capacitors increased collectively for the month of April on a month-to-month basis. Tantalum capacitor lead times however, remained unchanged in April, with one major vendor noting that tantalum inventories at the distributor levels were higher than that of other components, and that a turnaround in tantalum would take longer. Resistors also showed signs of positive turnaround for the month, but discrete inductors, like tantalum capacitors, failed to perform in kind and remained in its ongoing slump.
- Raw material prices declined by a collective 2.55% for the month of April. All prices for all materials, including both base and precious metals were down for the month. This excluded tantalite, which remained unchanged on a month-to-month basis.
- KEMET Corporation (NYSE: KEM), a leading manufacturer of tantalum, ceramic, aluminum, film, paper and electrolytic capacitors, announced in March that it has signed an agreement to acquire a 34% economic interest with a 51% voting interest in NEC TOKIN Corporation ("NT"), a manufacturer of tantalum capacitors, electro-magnetic, electro-mechanical, access devices and piezoelectric ceramics from NEC Corporation of Japan. Revenue of NT for the twelve-month period ended March 31, 2011 was ¥64,770 million or approximately $755 million USD. KEMET will pay an initial purchase price of $50 million at the closing of this first transaction for a 34% economic interest and a 51% voting interest in NT. KEMET will make a second $50M payment around August 31, 2014 in exchange for an additional economic interest of 15% resulting in an economic ownership of 49% while maintaining 51% of the voting common stock. The value of the third and final payment will depend upon the operating results of NT at the time based on a multiple of six times twelve months trailing EBITDA less the previous payments.
- Paumanok estimates that after the acquisition of the NEC Tokin operations that Kemet will control approximately 35% of the world market for tantalum capacitors.
- The global passive component lead times remained largely unchanged in March 2012, and continued to underperform.
- As expected, inventories in the supply chain remained high amidst a slowdown in demand from major end-users, especially in the computer markets and TV set markets. Demand from the handset business was seasonally low in the March quarter and this was contributed to the overall downturn in worldwide component demand.
- Inventories remained high in the supply chain, although they are gradually working their way down. Inventories are unusually high because of panic buying events following the Tohoku quake in Japan in May 2011. The spikes in demand following this unusual event back-filled the supply chain with parts, creating an excess of supply that was aggravated by the economic crisis in Europe.
- The reports that the Wodgina tantalum mine was to close sent shock waves through the tantalum supply chain in February 2012, causing the price for tantalum ore to increase almost $20 per pound to about $90 USD per pound. One vendor noted that companies may struggle for tantalum materials that can be considered "conflict-free."
- Paumanok believes that competition between components and hard metals for tantalum will increase in 2013 and get progressively worse with improving global economies into 2014.
- We now forecast that March 2012 quarterly revenues for passive components of all types will be down by 2% overall.
- The global passive component lead times remained largely unchanged in February 2012, and continued to underperform.
- As expected, inventories in the supply chain remain high amidst a slowdown in demand from major end-users, especially in the computer markets and TV set markets. Demand from the handset business is seasonally low in the March quarter and this is contributing to the overall downturn in component demand.
- Inventories remain high in the supply chain, although they are gradually working their way down.
- The global passive component lead times continued their overall decline in January 2012 indicating lackluster demand from end-use markets across the board, especially for tantalum and plastic film capacitors and discrete inductors.
- According to the major customers of the Wodgina mine, tantalum ore prices have dropped by 40% in January 2012 to $72 USD per pound based upon the Ethiopian auction in late December. This prompted the closing of Wodgina whose tantalum ore contracts are believed to be 65% higher than what the Ethiopians are selling their tantalite for, thus prompting the closing of the Wodgina mine.
- Tantalum lead times dropped drastically in the month of January by 14%, regardless that NEC Thailand is producing on a limited basis due to Thailand flooding. Primary vendors have noted that tantalum run rates are now 50% of what they were 15 months ago- and no one needs supply from NEC or from Wodgina for that matter.
- AVX reported poor sales numbers for the December quarter, much lower than expected, and Kemet offered new guidance, also showing a sharp decline in sales, as did the Chinese manufacturers, Yageo and Walsin.
- We expect keen competition among dielectrics going forward, especially between tantalum and high cap MLCC and polymer aluminum capacitors. Customers are having a backlash against tantalum because of its conflict mineral status and because of the price increases and shortages over the past 15 months. Therefore design wins are the key rallying point for vendors going forward, and will become a battle of price!