Rock Bottom: A Turnaround in Demand Weakness

• As the book-to-bill ratio begins to level off, there are indications that demand may have reached its lowest point.
• Passive manufacturers believe demand is poised to improve, yet the timing is uncertain.
• The consensus is that demand is expected to rise in late 2024.
• Once demand grows, the primary drivers will be automotive products and AI servers.
• Additionally, there is optimism regarding the potential improvement in demand for smartphones, notebooks, and the Industrial market in the latter half of 2024.
• Lead times for standard passive components have returned to a level reflecting balanced market conditions. Custom or semi-custom passive components have also seen widespread improvements, except for certain product series, particularly those used in military and aerospace applications.

Earthquake in Japan, Industry Aftershocks

• Certain magnetic products continue to be impacted by the recent earthquake in Japan, which damaged factories, disrupted transportation networks, and interrupted the supply of raw materials.
• The January earthquake in Japan significantly impacted the delivery of certain series within Murata's LQH and DLW product lines.
• An under-supply situation is inevitable as the existing inventory in Murata’s Anamizu factory is depleted, and there is no new factory output.
• Despite extensive efforts from Murata to recover their factories, they are encountering numerous challenges as the primary focus of the local government is on humanitarian support and recovery efforts.
• While Murata strives to meet demand from their other facilities where possible, a full recovery is not anticipated until mid-May 2024.
• It is expected that a substantial order backlog will have accumulated over the past couple of months.

SUPPLY

• The supply base is witnessing a gradual market recovery, with orders stabilizing.
• Nearly all suppliers report that their utilization rate is improving this quarter, with Japanese suppliers at over 80%, U.S. manufacturers close to 100%, and Taiwanese suppliers at approximately 60 to 70%.
• Lead times for most manufacturers are stabilizing to between 12 and 16 weeks, with some suppliers who previously experienced long lead times gradually working to reduce them by between two to four weeks every quarter.
• Inventory levels at distribution centers appear to have reached their lowest point, and suppliers notice an uptick in orders as they begin restocking.
• Specialty automotive-grade Multi-Layer Ceramic Capacitors (MLCCs), characterized by their large case sizes, high voltage ratings, and uncommon capacitance values, continue encountering persistent supply chain challenges.
• The significant decline in consumer demand is the main reason for the abundant availability of small case-sized commercial-grade MLCCs in the market.
• Orders from Chinese mobile manufacturers and AI applications are increasing, although demand is not overwhelming.

MARKET DYNAMICS

• Murata has reinstated over 400 items from NRND (Not Recommended for New Designs) status to production.
• The PC and Laptop industry might witness a boost from the replacement cycle, and Windows 12 could be released sooner than expected, most likely in the second half of 2024.
• Although the EV market was previously seen as a high-growth sector, there are indications of a slowdown in demand.
• Numerous industry players are currently engaged in inventory adjustments.
• Aligned with the China+1 strategy, numerous suppliers bolstered their production capacities by expanding their operations into countries such as Malaysia, Thailand, the Philippines, and Japan, as well as into Eastern Europe.
• Suppliers focus on developing products characterized by high voltage and exceptional reliability in response to market shifts.
• Considering the diverse product development and capacity expansion strategies suppliers adopt according to their business models, it becomes essential to synchronize technology requirements and carefully select suppliers.
• This methodology guarantees the creation of a sustainable and dependable supply chain for the foreseeable future.

PRICE

• All major suppliers have been applying competitive pricing strategies to sustain and improve the utilization of their factories, whether for commercial or automotive products.
• The pricing of specialized, high-reliability products, especially those incorporating palladium and utilized in aerospace, military, or medical sectors, remains elevated and displays an upward trajectory.
• Manufacturers' operating margins are declining, which will slow the pace of cost reductions in the foreseeable quarters.

SUPPLY

• Tantalum Mn02 demand across all case sizes has significantly reduced, with average capacity utilization of 50% to 60%.
• The book-to-Bill ratio is at an average of 0.7:1.
• Tantalum  Mn02 large case sizes, mainly used on Industrial, Automotive, and Renewable energy products, are similarly seeing soft demand, leading to improved lead times, currently quoted at between 12 and 16 weeks.
• Suppliers should have more flexibility to support short lead-time orders for any substantial opportunity.
• Lead times for smaller case sizes for Consumer and Information and Communications Technology (ICT) are currently quoted at 12 weeks.
• Some signs are pointing to a slight recovery in demand for ICT products.
• Tantalum polymer products used in Telecom, Server/storage Automotive, and AI have also seen significant lead time reductions – now quoted at 18 weeks.
• AI-related products remain the only market segment that reflects strong demand.
• Capacity utilization at 75% and book-to-bill ratios at 0.9: 1.

MARKET DYNAMICS

• MnO2 capacitors are classified as legacy products without further investment in their production or development. The shift from this technology is due to market demand and technological advancements.
• Manufacturers are redirecting their resources towards expanding the production of tantalum polymer capacitors. This decision is driven by the growing market demand for AI, EV, and Networking for their superior performance characteristics compared to MnO2.
• Several manufacturers are taking steps to meet the demand for tantalum polymer capacitors: AVX is building a new facility in Thailand dedicated to producing tantalum polymer and MLCC. Vishay is increasing its polymer capacitor output by 30% at its Danshui Facility. Kemet is expanding its polymer capacitor production in Suzhou.

 

PRICE

• Tantalum MnO2 costs continue to present challenges within the larger economic context. Suppliers are gradually shifting their focus away from this product, while the persistently high costs of raw materials further compound the pricing difficulties. It is projected that pricing for this material will remain relatively flat throughout the year.
• However, prices for legacy products such as wet tantalum and military series are anticipated to rise due to the absence of economies of scale in their production. This lack of scale leads to higher production costs, translating into increased prices for the product.
• Tantalum polymer pricing should be more flexible and will improve in the long term with the major manufacturers' capacity expansion plans in place.

SUPPLY

• Demand for aluminum capacitors has softened in automotive, industrial, and renewable energy sectors. The automotive sector is a key driver of demand for aluminum capacitors, particularly due to the ongoing technology conversion to electric vehicles (EVs).
• Japanese Electrolytic manufacturers dominate this segment, with an average capacity utilization of around 75%. Lead times for aluminum capacitors have improved significantly. Japanese manufacturers are currently quoting 16 to 24 weeks lead times, while Taiwan and China are quoting 12 to 16 weeks.
•  The supply situation for hybrid capacitors used in automotive and telecommunications has greatly improved. Lead times for these hybrid capacitors are now between 16 and 24 weeks. Capacity utilization is about 70%.

MARKET DYNAMICS

• Several manufacturers are strategically expanding their facilities to meet the growing demand for hybrid capacitors. Panasonic, Chemicon, Nichicon, ELNA, SUNCON, CHINSAN, Nantong Jianghai, LELON, and Aihua are all making significant investments to capture market share and drive innovation in the capacitor industry. Panasonic remains the market and technology leader in the hybrid cap.
• CHINSAN and Nantong Jianghai are positioning themselves as niche leaders in the high-voltage, snap-in capacitor technology.
• Aihua has made impressive strides in the global rankings, advancing to fourth place. Its emphasis on the full range of products, including film caps, indicates a commitment to providing reliable and widely applicable capacitor solutions.
• ELNA has announced that it will NRND all Supercap series and plans to EOL the product soon. NEC TOKIN (KEMET) will quickly become the sole key supplier.

 

PRICE

• Aluminum and film capacitor pricing is expected to remain flat due to inflated raw materials prices, including aluminum foil and copper, electricity, and operational costs.
• Supercapacitor prices are gradually increasing due to a limited supply base and the recent announcement of ELNA’s withdrawal from the market.

SUPPLY

• The utilization rate of suppliers' capacity stands between 70% and 90%, similar to the previous quarter’s level.
• Lead times have stabilized, halting the previous decline trend observed in the preceding quarters.
• Supply for Inductors and Filters produced in Murata Japan’s Anamizu factory has been impacted due to the earthquake on 1 January 2024 - Murata announced Force Majeure on 17 January 2024.

Inductor

• The lead times for multilayer chip inductors now stand at 10 to 12 weeks. TDK's MLF/MLZ 1005/1608/2012 remains at 32 weeks – as has been the case over the last few quarters.
• Molded inductor lead times are stable. Vishay’s IHLP series lead times are as follows: IHLP2020 - 12 weeks, IHLP2525 – 12-20 weeks, IHLP4040 – 12 weeks, IHLP5050 – 12 weeks, IHLP6767 – 12-20 weeks, and IHLP8787 – 12 weeks. TDK’s SPM series lead times are 28 weeks.
• Supply for Murata’s LQH series Inductors produced in their Anamizu factory remains difficult. Murata has not yet released a business continuity plan, and we strongly urge all customers to secure available inventory from distribution.

Filter

• Lead time is stable at eight to 12 weeks. The exception is TDK’s ferrite beads and common mode filters, quoted at 28 and 32 weeks.
• Murata common mode choke coils produced in the Anamizu factory are mostly bigger case sizes of their DLW series, such as 4040, 5050, etc.

Transformer

• The availability of crucial raw materials, such as ferrite core, has improved, and the market has returned to ordering based on lead time.

MARKET DYNAMICS

• The merger of Pulse Electronics brands, including Chilisin, Mag.Layers, Magic, and Bothhand are progressing under their respective sub-brands.
• There is a noticeable trend of capacity expansion in Southeast Asian countries like Vietnam, Thailand, Malaysia, and the Philippines. This expansion occurs in new and existing facilities, and the ongoing trade conflict between the United States and China primarily drives it.
• Driven by the persistent cost escalation in southern China regions, there is a significant rise in new start-ups and an expansion of existing facilities in western and central China. This shift is primarily motivated by factors such as increased costs in labor, facilities, and other related expenses.

 

PRICE

• The pricing trend remains stable, consistent with the previous quarters.
• Prices are relatively stable due to minimal logistical challenges and decreased demand.
• Suppliers remain conservative while focusing on small-size SMD inductors and ferrite bead segments.
• Specialty and legacy SMD inductors and filter pricing have also remained stable.
• Customized inductors/transformers manufactured in the United States are increasing labor costs, and in recent quarters, this region has seen more production ramps.
• Capacity expansion trend:
• Active expansion in Southeast Asia, including Vietnam, Thailand, Malaysia, and the Philippines.
• These capacity expansions cover both new and existing facilities
• Cost escalation in southern China regions.
• Rise in new start-ups and expansion in western and central China.
• This shift is primarily motivated by factors such as increased costs in labor, facilities, and other related expenses

SUPPLY

• The market remains soft for major segments other than EV, Renewable Energy, AI, and 5G/6 G-related applications. Most suppliers project that the market will pick up early in Q1 2025. 
• Book-to-bill ratios are around 0.8–0.9. Capacity utilization averages 70% to 90%, depending on products. Higher utilization is needed for smaller sizes and automotive-grade products. Lower capacity utilization may force suppliers to implement factory shutdowns or shorten working hours where necessary, resulting in limited flexibility in responding to sudden demand upsides.
• The global demand for crystals will double by 2030, mostly for smaller packages and automotive-grade products. Many suppliers have expanded their capacity in the last two years and are pausing any further expansion plans as the current supply exceeds demand. 
• Raw material ceramic package supply has stabilized and is no longer constrained.
• Raw material IC supply has generally improved, but longer lead times continue for certain products. Some IC suppliers announced that some of their mature products would end their lives, further impacting the production of certain Oscillators.
• Lead time for most products has returned to normal levels. KHz and MHz Crystals are quoted at eight to 10 weeks; Oscillators range from 10 to 14 weeks. Automotive-grade products are extended by another two weeks. Extended lead times, up to 40 weeks, remain for certain Oscillators using legacy IC technology.
• Most Tier 1 and 2 suppliers plan to EOL larger packages, so downsizing is essential for better pricing and supply risk mitigation.
• Ceramic resonators’ lead time remains at eight to 10 weeks.
• TCXO lead time remains at 10 to 12 weeks.
• In general, there are no products on supply allocation.

MARKET DYNAMICS

• Suppliers are considering alternative manufacturing sites beyond China amid geopolitical tensions.
  • Kyocera has established a new manufacturing line for Crystal production in Hanoi, Vietnam. Mass production is expected in Q2 2024.
  • TXC is investing in a new factory in Surabaya, Indonesia, with output expected in the second half of 2024.
  • Raltron and Taitien are also exploring new production sites in Vietnam.
  • Hosonic has preliminary plans to invest in Japan.
• Suppliers increasingly focus on Oscillator products, which command higher margins and less intense market competition.
• TXC continues to expand its Automotive grade products, planning to increase capacity to 100Mpcs/month in 2024.
• Abracon announced the acquisition of NEL Frequency Controls, Inc. in July 2023.
• Kyocera announced the acquisition of Bliley Technologies in September 2023.
• Both NEL and Bliley will continue to operate independently until further notice.
• As an increasing number of products become obsolete due to the maturity or unavailability of raw materials, OEMs need to design their products and align with suppliers’ latest technology roadmaps.
• Downsizing is essential. We propose using the following packages: 1610 size for KHz Crystals, 1612 or 2016 size for MHz Crystals, and 2520 or 3225 size for SPXO.
• If there is a need to use HC49 Metal-can Crystals, we suggest the approval of Taiwanese/Chinese suppliers.

 

PRICE

• Price is on a downward trend.
• Cost reductions are more prevalent for smaller Crystal products.
• Suppliers aggressively offer cost reductions to maintain or gain market share.
• Prices remain flat, with some increases for larger Crystal products.
• Marginal cost reductions are available on the CMOS Oscillators. Pricing remains for the differential output.
• Labor costs continue to increase.

SUPPLY

Supply improving for most circuit protection devices.

• Market demand for Automotive has slowed but is still growing. Other growth areas are renewable energy and AI-related applications such as servers and cloud storage. Overall, market demand is expected to increase in 2025.
• Book-to-bill ratios are now below 1. Factories are running at 60 to 80% utilization rates.
• Lead times for Fuses have improved to an average of eight to 18 weeks, depending on the product. SMT Fuses around 18 weeks, and Resettable Fuses around 14 weeks.
• Lead times for Varistors, both Leaded and SMT type, are approximately 12 to 18 weeks.  
• Gas Discharge Tube (GDT) lead times have improved to 18 to 22 weeks. Neon gas is used in GDT production, and the Russian-Ukraine war has impacted its supply.
• Supply for circuit breakers has improved significantly, with lead times now ranging from six to 12 weeks.

MARKET DYNAMICS

• With the drive towards miniaturization, circuit protection components are shrinking in size while maintaining high performance. 
• This trend enables the integration of circuit protection into smaller form factors, allowing for more compact and portable electronic devices.
• Rapid technological advancements and the growing complexity of electronic devices in the electronics industry drive the need for more advanced and efficient circuit protection devices to ensure the reliability and safety of these systems.
• Surge protection technology has advanced significantly to handle higher voltages and faster transients associated with modern electronics.
• These advancements ensure enhanced protection against power surges, safeguarding devices from voltage spikes that can cause irreparable damage.
• The rise in renewable energy sources, such as solar and wind power, creates new challenges for circuit protection, as these sources have unique characteristics that must be addressed.
• Major manufacturers are investing in locations like Mexico and Malaysia as part of their China+1 strategy.
• Littelfuse is a global leader in circuit protection devices. Leveraging this global position, they have expanded into power control and sensing markets mainly through acquisition. 
• Some of the acquisitions include C&K, RCD Technology, and Carling Technologies.

 

PRICE

• Pricing is stable across most product families, with some reductions on standard fuses and varistors. Raw materials costs remain high, but suppliers are willing to review and provide more flexibility to gain more share.
• Circuit breaker pricing is expected to increase by 3-5% in 2024 due to increased energy, utilities, raw materials, and labor costs.

SUPPLY

• The market downturn has significantly improved resistor supply. Overall market demand is projected to improve towards the end of 2024 and the beginning of 2025.
• Capacity utilization from the major manufacturers in the United States, Taiwan, and Japan is now about 60 to 80%, with book-to-bill ratios below 1.0.
• Supply for automotive grade parts has also improved significantly, with only some series remaining tight, particularly for specialty resistors like thin film.
• General-grade resistor supply has improved significantly while the consumer and mobile markets have declined, with book-to-bill ratios below 1.0.
• Vishay Dale's book-to-bill ratio is 1.1: 1 due to military-grade products. The ratio for military-grade products is 3 1.
• Due to capacity expansion, Vishay's supply of current sense, MELF, leaded resistors, and Thin Film (except military-grade products) has improved significantly.
• KOA has removed allocation from thin-film resistors, with lead times quoted at 20 weeks, except for the specialty product from Japan.
• The inventory dumping trend in early 2023 was reduced in the second half of 2023, and the market returned to normal in the first half of 2024. We expect some normality through the end of the year.

MARKET DYNAMICS

Accelerated shift in technology in the competitive landscape

• Vishay continues to be the technology leader in resistors but increasingly faces competition from players offering less advanced or sophisticated capabilities.
• Due to low profitability, Japanese suppliers have deemphasized mature or standard products like standard thick film resistors and arrays, thus impacting the suppliers left to support the overall demand.
• Taiwanese resistor manufacturers have recently been approved for more automotive AMLs due to the severe undersupply situation from traditional automotive resistor manufacturers.

• Demand for smaller resistors continues to accelerate despite the technical problems associated with the miniaturization of electronic devices.  Consumer demand for small, easily portable electronic products like compact smartphones, lightweight laptops, and tablets drives the miniaturization of electronic components such as resistors.
• Significant growth is expected for specialty resistors in the coming years, particularly to accommodate the development of automotive, 5G, IoT, and cloud management sectors, which will increase the demand and usage of specialty resistors. Resistor manufacturers are focusing on starting or increasing production lines for specialty resistors like Current Sense Resistors.

Capacity Expansion Plan

• The key electronic component manufacturers have been making major investments and have planned capacity expansion into 2030; however, output production is not expected to begin until 2024. Major investments are being made in thin film, thick film, and current sense, focusing on thin film.
• Major investments are driven mainly by Automotive/EV and Industrial markets.
• Manufacturers are investing in locations like Mexico, Germany, Malaysia, and Japan as part of their China+1 strategy.

PRICE

• Flat to marginal reductions for both general and automotive-grade products.
• Automotive-grade parts prices are projected to remain flat or decrease slightly for the common case sizes, with slight increases for larger case sizes and legacy products.
• General thick film pricing remains stable, but modest discounts are provided to win additional shares. However, some suppliers will push through increases due to reduced output and weakening demand, increasing manufacturing costs.