• The increasing popularity of electric vehicles (EVs) has led to a significant increase in demand for automotive-grade passive components. 
• As EV technology advances and incorporates more sophisticated electronic systems, the need for these high-reliability passive components continues to escalate. This surge in demand is expected to persist well into the foreseeable future, especially as more countries promote the adoption of electric vehicles.
• Demand for general/consumer grade Passive components has seen softness and we will likely continue to see this trend throughout the rest of the year, as overall consumer demand remains lackluster.
• Most demand in the industrial sector appears to be flat, with the notable exceptions being electric vehicle charging stations, energy storage, and renewable energy where demand remains robust. 
• Anticipated demand is expected to increase in the storage and infrastructure market, with some manufacturers projecting that this growth will primarily materialize in the latter part of 2023.

• Automotive-grade passive component manufacturers, including both established players and new entrants, are making significant investments to enhance their production capacity and meet the growing demand in the electric vehicle (EV) market. 
• Many of these manufacturers are actively embracing the "China Plus 1“ (China+1) trend by strategically making greenfield investments across countries like Mexico, India, and various ASEAN nations.
• Taiwan stands out as another nation attracting substantial capital investments, particularly from Taiwanese HQ manufacturers.
• While these capacity increases will undoubtedly yield long-term benefits, we anticipate the occurrence of some shortages in the short to mid-term. This is attributed to the time required for the investments to fully take effect in order to address the growing demand.

• Factory utilization across the majority of the supply base is averaging 60%, given the low utilization rate and suppliers' efforts to address idle workforce, it is important to recognize that abrupt increases in demand could lead to another wave of shortages unless we effectively handle the potential growth
• The automotive backlog indicates a slight easing, although Japanese manufacturers maintain a utilization rate ranging from 80% to 90%. US manufacturers continue to operate at nearly full capacity, close to 100%. In contrast, Taiwanese suppliers' utilization hovers just above 50%.
• Specialty automotive-grade MLCCs with large case sizes, high voltage ratings, and uncommon capacitance values continue to face severe constraints in the supply chain, resulting in limited availability. 
• Currently, general-grade MLCCs are readily accessible and widely available in the market due to the softening of consumer products.
• Suppliers are reporting a consistent decline in the backlog. 
• The distribution inventory continues to decline; however, due to the unstable forecast from customers, they maintain a conservative approach by maintaining a safe inventory level. 
• Lead times have experienced a further reduction of approximately 1-2 weeks.

• Aligning with the China+1 strategy, several suppliers are increasing their production capabilities by expanding into Asian countries such as Malaysia, Thailand, the Philippines, and Japan, and certain parts of Europe.
• In response to the market's shifting direction, suppliers are broadening their product mix to meet the demands of specific applications, such as automotive, industrial, and 5G infrastructure.
• The automotive market has exhibited sustained growth, although there have been some corrections observed in the UK and US markets, primarily due to inventory issues. However, suppliers are anticipating a recovery at the end of the year.
• The mobile phone market is currently experiencing relatively sluggish demand, but suppliers have noticed a slight increase in orders. They anticipate a rise in orders towards the end of the year as a few major mobile makers launch new models. However, the impact of these new releases is not expected to be significant.
• The capacity expansion plans of most major suppliers are projected to grow by approximately 10% on an annual basis. However, when it comes to automotive MLCCs, the majority of manufacturers are specifically emphasizing expansion efforts, which may range from 15% up to 30% annually. On the other hand, general capacitors tend to witness a more moderate growth rate of around 5% annually.
• Given the varying product development and capacity expansion plans adopted by suppliers based on their specific business strategies, it becomes crucial to align technology requirements and carefully select suppliers to ensure a sustainable and consistent supply in the long term.

• There is intense competition among Taiwanese suppliers in the general-purpose MLCC market. However, in the automotive MLCC segment, Korean and Taiwanese suppliers are presenting strong competition to established Japanese and US suppliers. They are achieving this by improving lead times, enhancing supply flexibility, and competitive pricing.
• The pricing for high-reliability, niche products, particularly those containing palladium, remains at a high level and shows an upward trend.
• Due to low factory utilization, manufacturers are aiming to gain market share by offering more competitive pricing.
• The demand for large case sizes, such as 1206 and 1210, remains steady, resulting in generally stable to slightly higher pricing for these legacy items. However, some manufacturers have shifted their production towards larger case sizes due to lower utilization rates. Additionally, certain common values have provided slight cost-reduction opportunities.

• Tantalum Mn02 demand across all case sizes has significantly reduced with average capacity utilization of 60%.
• Tantalum  Mn02 large case sizes, mainly used on industrial, automotive and renewable energy are similarly seeing soft demand with significant lead time reductions, currently quoted at 14-16 weeks.  
• Small case sizes for consumer and ICT,  lead times are currently quoted at 12 weeks and suppliers are willing to support short lead-time or upside in demand.
• Tantalum polymer products used in telecom, server/storage and automotive have also seen significant lead time reductions, from 26 weeks down to 12-16 weeks. 
• Commodity book-to-bill levels are healthier with Mn02 at 0.7 and Polymer 0.6 : 1. Suppliers are providing more flexibility in supporting demand upsides.

• Mn02 is classified as legacy and we will see no further investment in this product. Manufacturers are converting the Mn02 capacity to focus on expanding tantalum polymer capacity to cope with market demand.
• AVX is expanding a new facility for tantalum polymer and ceramic in Thailand. Vishay increasing the output of polymer by 30% in their Danshui facility and potentially looking at an additional site in Mexico. Kemet continues to convert its Mn02 facility in Suzhou to increase its polymer capacity.
• A technology transition to multilayer box-type aluminum polymer and hybrid cap has been eroding tantalum polymer market share.

• Tantalum Mn02 costs remain a challenge with the macro environment. Suppliers continue to defocus this product and raw material costs remain on the high side. Pricing is expected to remain flat across 2023.
• Suppliers may have more flexibility to provide cost reductions on tantalum polymer due to capacity expansion plans  across all manufacturers.
• Prices for legacy products, such as wet tantalum and military series will continue to increase due to a lack of economic scale.

• Demand for aluminum capacitors for automotive, industrial, and renewable energy has softened but continues to provide an optimistic outlook, mainly from the automotive segment due to the technology conversion to EVs. Japanese makers continue to dominate in this segment with average capacity utilization close to 80%. 
• Lead times have significantly improved and are now quoted between 24 and 36 weeks for Japanese and 14 to 24 weeks for Taiwan and China-based manufacturers.
• The supply situation for hybrid capacitors used in automotive and telecom has been greatly improved with the new LT 22- 36 weeks and the removal of allocation.

• We continue to advocate a multi-source strategy, which may have a negative impact on the blended component cost. However, it is extremely important to secure supply and minimize risks to production. 
• Manufacturers are all eyeing hybrid capacitor technology by building new facilities to expand capacity. Panasonic (the market leader) will invest in Malaysia, Chemicon in Taiwan, Nichicon in Japan and Malaysia, and ELNA will be heavily investing in the Philippines.
• CHINSAN & Nantong Jianghai are tier 2 manufacturers with a significant focus on the high voltage/capacitance markets, so have the greatest potential for growth in the high voltage snap-in technology space. 
• Aihua continues to expand. The China-based supplier is now ranked #4 globally with a particular focus on standard parts.

• Aluminum capacitor pricing is expected to remain flat due to inflated raw materials prices including, aluminum foil and copper, as well as higher costs for electricity, logistics and operations. 
• Film and super capacitor prices are facing similar cost pressures due to strong demand and operational costs.

• Suppliers’ capacity utilization rates are on average 70%-80%. Finished goods inventory is high due to falling customer demand and orders being pushed out.
• As customer demand weakens and the inventory of finished goods remains high, suppliers are witnessing a decline in their capacity utilization rates, averaging around 70%.
• Lead times are decreasing as a result of enhanced available capacity and reduced lead times for raw materials.
• Specialty parts for automotive applications continue to be scarce among a few suppliers, but the number of problematic parts is decreasing.

Inductor

• Multilayer chip inductor lead times continue to improve and are now quoted at 14 weeks. TDK’s MLF2012 series lead times remain at 36 weeks and could potentially move into allocation.
• Lead times for multilayer chip inductors are showing consistent improvement and are currently quoted at 10-12 weeks. Notably, TDK's MLF/MLZ 1005/1608/2012 series has experienced a significant reduction in lead times, now standing at 32 weeks lower than before.
• Molded inductor lead times have reduced slightly. 
• Vishay’s IHLP series lead times:
  • IHLP2020 - 18 weeks
  • IHLP2525 – 12-18 weeks
  • IHLP4040 – 12-18 weeks
  • IHLP5050 – 12 weeks
  • HLP8787 – 12 weeks.

TDK’s SPM series lead times remain at 28 weeks.

Filter

• In general, lead times for ferrite beads range from 8 to 12 weeks. However, larger sizes and specialty parts have longer lead times, typically spanning 18 to 20 weeks.
• The lead times for common mode chokes are typically between 10 and 14 weeks. The lead time for TDK common mode chokes has also been reduced to 28 weeks

Transformer

• The availability of the crucial raw material, ferrite core, has improved and the market has returned to ordering based on lead time. However, the lead times are still significantly higher compared to those in 2020.

• The merger of Pulse Electronics brands, including Chilisin, Mag Layers, Magic, and Bothhand, is actively 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 is taking place in both new and existing facilities and is primarily driven by the ongoing trade conflict between the United States and China.
• 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.

• Despite the market's sluggishness, prices have managed to remain relatively stable due to logistical challenges and decreased demand. Suppliers are also grappling with high inventory levels, so are making efforts to deplete their stock at the original cost level instead of resorting to selling at a loss.
• Suppliers of SMD inductors and filters remain conservative and are making minor adjustments in their offerings, specifically focusing on reductions in the small size SMD inductor and ferrite bead segments.
• Larger size legacy SMD inductors and filters, as well as customized inductors and transformers, have stabilized after previous increases. Although logistics and transportation costs remain elevated, there has been a slight easing in these expenses.
• Raw material costs have pulled back from their recent peaks but remain at levels higher than those observed in 2020. EU-based suppliers are maintaining price stability due to the impact of elevated energy costs.

• Market remains soft for most market segments other than automotive. The supply base is still seeing order push-outs and cancellations as OEMs continue to make adjustments to their demand. The majority of the suppliers are not seeing any recovery in Q3’23 and most are projecting the market to rebound by the end of 2023 or Q1’24.  
• Book-to-bill ratios are now less than 1. Capacity utilization averages 60% to 80%, depending on products. Higher utilization for smaller size and automotive-grade products. Lower capacity utilization may force suppliers to implement factory shutdowns or shorten working hours where necessary, resulting in limited flexibility for responding to sudden demand upsides. 
• Global market demand for crystals is expected to double by 2030, mostly on the smaller size packages and automotive-grade products. Many suppliers had expanded their capacity in the last 2 years and are holding back any expansion plans as the current supply exceeds demand.  
• Raw material ceramic package supply has stabilized and is no longer a constraint.
• Raw material IC supply has improved in general but longer lead times continue for certain products. Some IC suppliers had announced that some of their mature products were going end-of-life (EOL) which has further impacted the production of certain oscillators. 
• The supply situation for both KHz and MHz Crystals has improved with a lead time of 8 to 12 weeks. Most tier 1 and 2 suppliers have (or are planning to EOL) larger size packages; downsizing is essential for better pricing and supply risk mitigation. 
• Lead time for oscillators has improved, ranging from 10 to 14 weeks. Extended lead times, up to 40 weeks, remain for certain oscillators using legacy IC technology.
• Ceramic resonator’s lead time remains at 8 to 10 weeks. 
• TCXO lead time remains at 10 to 12 weeks.
• In general, there are no products on supply allocation.

• Suppliers are exploring manufacturing locations outside of China (China+1) due to geopolitical tension between the US and China. Vietnam and the Philippines are the 2 primary countries being considered. 
• Suppliers are increasing their focus on oscillator products which commands higher margins and less intensive market competition. 
• Kyocera will set up a new manufacturing line for crystal production in Hanoi, Vietnam, with mass production expected by the end of 2023.
• TXC continues to expand its automotive-grade products, with plans to increase capacity to 100Mpcs/month in 2024.
• With an increasing number of products going obsolete due to maturity or unavailability of raw materials, OEMs need to design their products and align with suppliers’ latest technology roadmaps. 
• Downsizing is essential. We propose the use of 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 is on the downtrend. Cost reductions are more prevalent on the smaller size crystal products. Suppliers are more aggressive in offering cost reductions in order to maintain or gain market share. 
• Prices remain flat with some increases for the larger size crystal products.
• Oscillator pricing has stabilized following the increases across the last 2 years. Marginal cost reductions are available on the CMOS oscillators. Pricing remains flat with some increases for the differential output.
• Labor costs continue to increase.

• Lead times remain stable for most circuit protection products.
• Lead times for fuses are quoted at 16-24 weeks, depending on the product. SMT fuses around 24 weeks, and Resettable fuses around 22 weeks. 
• Lead times for Varistors, both leaded and SMT-type are approximately 24 weeks.   
• Lead times for gas discharge tube (GDT) have stretched to 24 weeks. Neon gas is used in GDT production and its supply is impacted by the Russian-Ukraine war.
• Littelfuse, the largest fuse manufacturer, is continuously working on a capacity expansion to meet the high demand for their products.
• Lead times for circuit breakers range from 8 weeks to up to a year.  Longer lead times from suppliers like Fuji, Altech, Siemens, and Eaton.

• Littelfuse acquired Carling Technologies, a manufacturer of switches and circuit breakers.
• Littelfuse acquired Hartland Controls, a manufacturer of circuit breakers for the HVAC market. 
• Bourns acquired Keko-Varicon, a manufacturer of overvoltage protection components that include varistors and EMI suppression products. The Bourns sales team will manage the quotes for Keko-Varion products.

• Pricing is stable across most product families: fuses, varistors, and fuse holders. However, we will continue to see increases for circuit breakers & GDTs.  These increases are driven by the elevated level of raw materials and logistics costs.  Neon gas pricing has increased drastically since Russia invaded Ukraine in Feb’22. Ukraine supplies >50% of the global supply of Neon gas. 
• We anticipate further price increases in neon gas if the current Russian-Ukraine war continues to intensify. This will in turn impact pricing for GDT products.
• This will impact the pricing for GDT products.

• Capacity constraints, supply allocation and extended lead times are expected to continue through 2023 for automotive-grade parts.  Vishay, Panasonic, and Susumu continue seeing increased demand, with book-to-bill ratios as high as 1 to 1.5, particularly on thin film resistors.
• KOA thin film resistors will remain on allocation. Allocation has been removed for thick film resistors, with lead times of 15 weeks, except for specialty products manufactured in Japan. 
• Vishay's supply of current sense, MELF, and leaded resistors has improved significantly due to capacity expansion.
• Much of the upside in demand is driven by major markets, such as the automotive and industrial markets. The surge in demand has further exacerbated the already highly constrained supply situation. 
• General grade resistor supply has improved significantly as the consumer and mobile markets remain soft with B2B ratios now below 1. Inventory pressure is increasing among manufacturers and distributors, with a risk of inventory dumping. The inventory dumping trend is expected to slow in the second half of 2023, with the market returning to normal in the first half of 2024.

• Vishay continues to be the technology leader in resistors but is increasingly facing competition from the lower technology players.
• Japanese suppliers have de-emphasized mature or standard products like standard thick film resistors and array due to low profitability, thus impacting the suppliers left to support the overall demand.
• Taiwanese resistor manufacturers have been approved on more automotive AMLs recently due to the severe undersupply situation from the 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 laptop computers, and tablets is driving the miniaturization of electronic components such as resistors.
• Capacity Expansion Plan
• The key electronic component manufacturers have been making major investments and have planned capacity expansion into 2030, however, increased output from production is not expected to begin until 2024. Major investments are being made in thin film, thick film, and current sense with a focus on thin film.
• Major investments are driven mainly by the automotive/EV market.
• Manufacturers are investing in locations like Mexico, Germany, Malaysia, and Japan as part of their China+1 Strategy.

• Price increases are being seen for automotive-grade parts, while flat to decreasing on general-grade parts.
• Price adjustments have been occurring since Q2 2021. We continue seeing this upward trend in pricing for automotive-grade parts. Primary factors for the cost increases are capacity constraints, rising costs of raw materials, such as ceramic substrate,  copper, palladium, silver, nickel, and ruthenium, as well as logistic and labor costs.
• Chinese and Japanese substrate makers have already increased pricing by 30% and in some cases up to 50%.
• Increased pricing levels across most case sizes, with the mature and legacy products being more pronounced.
• General thick film pricing remains stable, and suppliers have reduced their costs in order to gain more new business. However, some suppliers are not adjusting their prices due to the reduction of output, which will result in an increase in manufacturing costs.
• Distributors’ inventory dumping tendency continues; we are seeing downward price trends for general-grade resistors from distribution.