Demand is believed to have reached its lowest point, but there is no clear indication of a near-term rebound.

• Most manufacturers agree that demand has reached its lowest point. While some observe a moderate increase in the book-to-bill ratio surpassing 1, others predict a stagnant market trend for the remainder of 2024.
• Numerous manufacturers have revised their projections for market recovery to 2025, anticipating a slow-to-gradual pace.
• The main drivers of increasing demand include automotive, smartphones, and AI servers. Despite subdued automotive demand, which still accounts for a substantial portion of revenue, there has been some observed growth in smartphone demand. However, demand for AI servers, which primarily use passive components, has not shown significant increases; although the complexity and content of these servers are rising, their production volume remains low compared to high-volume consumer products like smartphones.
• Lead times for standard passive components have returned to normal market conditions, and inventory levels have stabilized at around two months. Many suppliers are content to maintain this inventory level or make minor adjustments for up to three months. 
• Military-grade products continue to experience constraints.

Recovery is Progressing for Components Affected by the Earthquake in Japan

• The supply recovery for Murata’s LQH and DLW magnetic products is underway. 
• Murata's efforts to redistribute capacity among other factories to produce affected parts have gradually improved the supply situation.
• Constraints on some series can still be expected until the latter part of July when both factories in Anamizu, Japan, are fully back in operation.

SUPPLY

• Suppliers are witnessing a promising recovery in orders, a trend that is particularly pronounced in the Chinese market, instilling a sense of optimism for the future of the industry.
• Most suppliers have reported a slight improvement in factory capacity utilization compared to the previous quarter. Japanese suppliers are operating at above 80%, while U.S. manufacturers are close to full capacity at nearly 100%. Taiwanese and Chinese manufacturers are operating at about 60 to 70% capacity.
• Lead times for most manufacturers remain stable, typically ranging from 12 to 16 weeks. However, some suppliers with initially longer lead times consistently reduce them by two to four weeks each quarter, with Chinese manufacturers achieving lead times as short as eight weeks.
• Plans to expand supplier capacity are ongoing, with targets for an average annual increase of around 10%.
• High-end capacitance capacitors, crucial for the AI server market and known for superior temperature characteristics, are facing tight delivery schedules due to a sudden increase in demand. This issue is expected to be short-term.
• Capacitors with large case sizes, high voltage, and unique capacitance values, primarily used in automotive applications, continue encountering supply chain challenges.
• Distribution inventory levels have been declining and have reached their lowest point since their peak at the end of 2022. Distributors are actively replenishing their stock levels.
• Orders from Chinese smartphone manufacturers are increasing, albeit without overwhelming demand.

MARKET DYNAMICS

• The PC/laptop industry is managing its inventory in anticipation of launching AI PCs and other new products, expecting demand to increase in the second half of 2024.
• With a major US smartphone maker set to launch their new product in September, most Chinese smartphone manufacturers are accelerating their launches and forecasts to capture market share.
• Although the EV market is poised for growth, there is a noticeable shift in focus towards the infrastructure of charging stations.
• The overall market’s supply and demand, global inflation, geo-political concerns, and other macro-environmental uncertainties remain significant. Client inventory adjustments are expected to conclude in the second quarter, leading to a continued trend toward healthier supply chain inventory levels in the second half of 2024.
• Besides the China+1 strategy and the tariffs imposed on products from China for US production, many manufacturers are focusing on expanding their operations into countries such as Malaysia, Thailand, the Philippines, Japan, and Eastern Europe.
• Given suppliers' varied product development and capacity expansion strategies based on their unique business models, it becomes crucial to synchronize technology requirements and choose suppliers carefully. This approach ensures a sustainable and reliable supply chain for the foreseeable future.

PRICE

• Most manufacturers prioritize the defense of their market shares to maintain factory capacity utilization rates. They also focus on securing new business opportunities to utilize their expanded factory capacities.
• Prices for specialized, high-reliability products used in the aerospace, military, and medical sectors remain high and continue to rise.
• Manufacturers are experiencing a decline in operating margins, which is expected to slow the pace of cost reductions in the upcoming quarters.

SUPPLY

• Tantalum MnO2 demand has shown signs of recovery, with average capacity utilization increasing from 60% to 70% to 80%.
• The book-to-bill ratio has risen to an average of 0.8:1.
• Tantalum MnO2, in small case sizes, mainly used in ICT, white goods, and consumer products, is experiencing gradual increases in demand. Similarly, larger case sizes intended for the industrial and building markets are also seeing an increase in demand, although lead times remain stable at an average of 12 to 16 weeks. Suppliers are prepared to offer flexibility to support short lead-time orders for significant opportunities.
• Demand for tantalum polymer products used in telecom, AI, and networking is growing, with AI leading the way. The average quoted lead time is 18 weeks, capacity utilization is 80%, and the book-to-bill ratio is 0.9:1.

MARKET DYNAMICS

• MnO2 capacitors are now classified as legacy products, and no further investment is made in their production or development. This shift away from MnO2 technology is due to evolving market demands and advancements in MLCC technology.
• Manufacturers are reallocating their resources to expand the production of tantalum polymer capacitors, driven by increasing demand from sectors such as AI, EV, networking, and server storage, which require superior performance characteristics. In response to this demand:
• AVX is constructing a new facility in Thailand dedicated to producing tantalum polymer and MLCC.
• Vishay is boosting its polymer capacitor output by 30% at its facilities in Danshui and Japan.
• Kemet is expanding its polymer capacitor production in Suzhou, China.

 

PRICE

• Tantalum MnO2 costs continue to pose challenges within the broader economic context. Suppliers are gradually shifting their focus away from this product as the persistently high costs of raw materials exacerbate pricing difficulties. It is projected that prices for this material will remain relatively flat throughout the year.
• However, prices for legacy products such as wet tantalum and military series capacitors are expected to continue rising due to low production volume. This limited scale increases production costs, which translates into increased product prices.
• Tantalum polymer pricing should become more flexible and is expected to improve in the longer term, with the expansion of manufacturing capacity by major producers to meet the growing demand in sectors like AI, networking, and automotive.

SUPPLY

• Demand for aluminum capacitors has softened in sectors such as automotive and renewable energy, despite the automotive industry being a key driver of demand due to the shift to electric vehicles (EVs). However, the industrial and consumer sectors have shown signs of a gradual recovery in demand.
• Japanese Electrolytic manufacturers report an average capacity utilization of approximately 80%. The lead times for aluminum capacitors have improved significantly, with Japanese manufacturers currently quoting 16 to 24 weeks and Taiwanese and Chinese manufacturers quoting improved lead times of eight to 12 weeks.
• The supply situation for hybrid capacitors, used in automotive and telecommunications, has greatly improved. Lead times for these capacitors are now quoted between 16 and 24 weeks, and capacity utilization has increased from 60% to 80%.

MARKET DYNAMICS

• Several manufacturers are strategically expanding their facilities to meet the growing demand for hybrid capacitors. Companies such as Panasonic, Chemicon, Nichicon, ELNA, SUNCON, CHINSAN, Nantong Jianghai, LELON, and Aihua are making significant investments to capture market share and drive innovation in the capacitor industry. Panasonic remains the market leader in terms of technology and capacity for hybrid capacitors.
• CHINSAN (Taiwan) and Nantong Jianghai (China) are niche leaders in high-voltage snap-in capacitor technology.
• Aihua has risen to the #3 spot in global rankings, with a particular emphasis on offering a full range of products including film capacitors, indicating a commitment to providing reliable and widely applicable capacitor solutions.
• ELNA has announced plans to discontinue (NRND - Not Recommended for New Designs) all series of supercapacitors with plans to end the product line (EOL - End of Life) shortly. NEC TOKIN (KEMET) will soon become the sole key supplier.

 

PRICE

• Pricing for aluminum and film capacitors is expected to remain stable despite rising costs for raw materials such as aluminum foil and copper and increased electricity and operational expenses.
• Supercapacitor prices are gradually increasing, driven by a limited supply base and compounded by ELNA's recent withdrawal announcement from the market.

SUPPLY

• Capacity utilization ranges between 70% and 85% across most suppliers, slightly lower than the previous quarter.
• Lead times have stabilized, halting the declining trend observed in earlier quarters.
• The January 1, 2024, earthquake impacted the supply of inductors and filters from Murata Japan's Anamizu factory. Murata declared force majeure on January 17, 2024.
• Inventory levels have normalized to a healthy level.

Inductor

• The lead time for multilayer chip inductors is now 10 to 12 weeks.
• Molded inductor lead times are stable across various Vishay’s IHLP series:

○ IHLP2020 – 10-12 weeks.	○ IHLP4040 – 10-12 weeks.	○ IHLP6767 – 10-20 weeks.
○ IHLP2525 – 12-20 weeks.	○ IHLP5050 – 12 weeks.	○ IHLP8787 – 12 weeks.

• The supply of Murata’s LQH series inductors produced in their Anamizu factory is still recovering. Production resumed in three phases from early May through the end of July. It is recommended that customers secure available inventory from distribution or source alternately as appropriate.

Filter

• The lead time for filters is stable at eight to 12 weeks. TDK’s ferrite beads and common mode filter lead times have been reduced to approximately 20 weeks.
• Murata common mode choke coils produced in their Anamizu factory, particularly larger case sizes of their DLW series, such as 4040 and 5050, are resuming production in phases from May through late July.

Transformer

• The availability of crucial raw materials, such as ferrite cores, has returned to normal levels with improved lead times, albeit with limited flexibility.

MARKET DYNAMICS

• Capacity expansion trend:
   
  • There is active expansion in Southeast Asia, particularly in countries such as Vietnam, Thailand, Malaysia, and the Philippines.
  • These expansions are occurring in both new and existing facilities.
• Cost increases in southern China regions:
   
  • There is a rise in new startups and expansion activities moving into western and central China.
  • This shift is primarily motivated by increased labor costs, facility expenses, and other related costs.

 

PRICE

• The pricing trend remains stable, consistent with the last quarter.
   
  • Prices are relatively stable due to minimal logistical challenges and decreased demand.
  • Suppliers maintain a conservative approach while focusing on small SMD inductors and ferrite bead segments.
  • Pricing for specialty and legacy SMD inductors and filters has remained stable.
• Customized inductors and transformers manufactured in the US and northern Mexico are experiencing increased labor costs, with a noticeable ramp-up in production in this region in recent quarters.

PRICE

• The pricing trend remains stable, consistent with the last quarter.
   
  • Prices are relatively stable due to minimal logistical challenges and decreased demand.
  • Suppliers maintain a conservative approach while focusing on small SMD inductors and ferrite bead segments.
  • Pricing for specialty and legacy SMD inductors and filters has remained stable.
• Customized inductors and transformers manufactured in the US and northern Mexico are experiencing increased labor costs, with a noticeable ramp-up in production in this region in recent quarters.

SUPPLY

• The market remains soft for most major segments, except for EV, AI, and 5G/6G-related applications. Most suppliers project that the market may begin to pick up by the earliest in Q1 2025.
• Book-to-bill ratios are currently between 0.8 and 1.0. Capacity utilization averages between 70% and 90%, depending on the product type, with higher utilization noted for smaller size and automotive-grade products. The lower capacity utilization may necessitate factory shutdowns or shortened working hours as needed, resulting in limited flexibility to respond to sudden increases in demand.
• The global market demand for crystals will double by 2030, primarily for smaller-size packages and automotive-grade products. Many suppliers have expanded their capacity in the last two years but are pausing any further expansion plans as supply continues to exceed demand.
• Supply of raw material ceramic packages has stabilized and is no longer a constraint.
• The supply of raw material ICs has generally improved, but longer lead times persist for certain products. IC suppliers' announcements of end-of-Life for some mature products have further impacted the production of specific oscillators.
• Lead times for most products have returned to normal levels:
   
  • KHz and MHz Crystals: eight to 10 weeks
  • Oscillators: 10 to 14 weeks, with automotive-grade products requiring an additional two weeks
  • Ceramic resonators: eight to 10 weeks
  • TCXO: 10 to 12 weeks
• Extended lead times, up to 40 weeks, remain for certain oscillators using legacy IC technology.
• Most Tier 1 and 2 suppliers plan to end-of-life larger packages, emphasizing downsizing as essential for better pricing and supply risk mitigation.
• Currently, there are no products on supply allocation.

MARKET DYNAMICS

• Due to geopolitical tensions between the US and China, suppliers are exploring manufacturing locations outside China.
   
  • TXC is investing in two new locations: Aomori, Japan, and Surabaya, Indonesia. Production is expected to start in the second half of 2024.
  • Raltron and Taitien are also setting up new production sites in Vietnam, with factories expected to be operational in 2025.
  • Hosonic is investing in Kyushu, Japan, with mass production commencing in early 2025.
  • Kyocera has established a new manufacturing line for crystal production in Hanoi, Vietnam, with mass production anticipated in the second half of 2024.
  • Murata is consolidating its ceramic resonator production at their Himi factory in Japan.
• Suppliers increasingly focus on oscillator products, which offer higher margins and face less intense market competition.
• TXC continues to expand its automotive-grade products, planning to increase capacity to 100 million pieces per month in 2024.
• Abracon announced the acquisition of NEL Frequency Controls, Inc. in July 2023; however, NEL will continue to operate independently until further notice.
• Kyocera has completed the acquisition of Bliley Technologies.
• With an increasing number of products becoming obsolete due to maturity or unavailability of raw materials, OEMs need to align their product designs with suppliers’ latest technology roadmaps.
• Downsizing is essential. We recommend 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 approving Taiwanese or Chinese suppliers.

PRICE

• Prices for smaller-size crystal products are on a downward trend, with suppliers offering more aggressive cost reductions to maintain or gain market share. Competitive tension is crucial; where possible, consider approving multiple manufacturers.
• Prices remain stable, with some increases observed for larger crystal products.
• Marginal cost reductions are available on CMOS oscillators, while pricing remains stable for differential output models.
• Labor costs continue to rise, impacting overall pricing structures.

SUPPLY

• There are currently no supply constraints for most circuit protection devices.
• While the automotive market demand has slowed, it remains on a growth trend, particularly for circuit protection devices in electric vehicles. This demand is driven by the need for safety, reliability, regulatory compliance, and EVs' global growth and infrastructure growth. As the adoption of electric vehicles continues to accelerate, the demand for high-quality circuit protection solutions is expected to rise.
• Other growth areas include AI-related applications, such as server and cloud storage, with overall market demand expected to increase in 2025.
• Book-to-bill ratios are below 1, with factories operating at capacity utilization rates ranging from 60% to 80%.
• Lead times for fuses have improved, averaging eight to 18 weeks, depending on the product:
   
  • SMT Fuses: Approximately 18 weeks
  • Resettable Fuses: Approximately 14 weeks
• Lead times for Varistors, both leaded and SMT types, are approximately 12 to 18 weeks.
• Lead times for Gas Discharge Tubes (GDT) have improved to 18 to 22 weeks. The Russian-Ukraine war has impacted the supply of neon gas in GDT production.
• Supply for circuit breakers has significantly improved, with lead times now ranging from six to 12 weeks.

MARKET DYNAMICS

• With the ongoing drive toward miniaturization, circuit protection components are being designed smaller while maintaining high performance.
• This trend facilitates the integration of circuit protection into smaller form factors, enabling more compact and portable electronic devices.
• Rapid technological advancements and the increasing complexity of electronic devices in the electronics industry necessitate more advanced and efficient circuit protection devices to ensure the reliability and safety of these systems.
• As automotive electronics become more sophisticated, there is a heightened need for robust circuit protection solutions to ensure the reliability and safety of vehicle systems. This includes automotive-grade fuses and overcurrent protection devices for applications ranging from powertrain control to infotainment systems.
• Surge protection technology has advanced significantly to handle higher voltages and faster transients associated with modern electronics. These advancements provide 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, presents new challenges for circuit protection. These energy sources have unique characteristics that require specialized protection solutions.
• Major manufacturers are diversifying their manufacturing locations to countries like Mexico and Malaysia as part of their China+1 strategy, aiming to mitigate geopolitical risks and optimize supply chain resilience.
• Littelfuse, a global leader in circuit protection devices, has expanded into power control and sensing markets, primarily through acquisitions. Recent acquisitions include C&K, RCD Technology, and Carling Technologies, enhancing their product range and market reach.

 

PRICE

• Pricing remains stable across most product families, with some reductions observed in standard fuses and varistors. Despite high raw material costs, suppliers are willing to offer greater flexibility in pricing to increase their market share.
• Circuit breaker pricing increased by an average of 3 to 5% in Q1/Q2 2024, driven by rising energy, utilities, raw materials, and labor costs.

SUPPLY

• The recent market downturn has significantly improved the supply of resistors. The market is anticipated to experience growth towards the end of 2024 and into early 2025.
• This projected growth is largely driven by sectors such as automotive, EV infrastructure, AI-related applications, and a slight increase in PC and notebook demand.
• Capacity utilization for major manufacturers in the United States, Taiwan, and Japan is currently between 60% and 80%. Book-to-bill ratios average between 0.8 and 1.2:1.
• The supply of automotive-grade parts has also improved significantly, although the availability of specialty resistors like thin film remains limited.
• Consumer markets in China and Europe are showing signs of improvement. However, the supply of general grade resistors remains stable, with book-to-bill ratios around 1.1 to 1.2:1.
• Vishay Dale’s book-to-bill ratio is at 1.03, influenced primarily by its military-grade products, which have a book-to-bill ratio 3:1.
• Demand for military-grade resistors has increased significantly due to rising geopolitical tensions. These components are crucial for building defense systems essential to maintaining national security, particularly in the United States and other countries with advanced defense and aerospace programs. Sometimes, lead times for military-grade leaded film and wire-wound resistors have extended up to 100 weeks.
• Vishay’s supply of current sense, MELF, leaded resistor, and thin film (excluding military-grade products) has improved significantly due to capacity expansion.
• Taiwanese suppliers maintain inventory levels at approximately two months, which is low compared to typical healthy levels. In response, suppliers plan to increase both capacity utilization and inventory levels in anticipation of rising demand.
• Distributors have begun placing new orders with manufacturers due to low running inventory, reversing the previous trend of dumping.

MARKET DYNAMICS

• Vishay continues to lead in resistor technology but increasingly faces competition from manufacturers using less advanced technologies.
• Due to low profitability, Japanese suppliers have shifted away from mature or standard products, such as standard thick film resistors and arrays. This shift has impacted the remaining suppliers, who must now support the overall market demand.
• Taiwanese resistor manufacturers have recently been approved for more automotive Approved Manufacturer Lists (AMLs) due to a severe undersupply from traditional automotive resistor manufacturers.
• The demand for smaller resistors continues to accelerate despite the technical challenges of miniaturizing electronic devices. The consumer demand for compact, portable electronic products like smartphones, lightweight laptops, and tablets drives the miniaturization trend in electronic components such as resistors.
• Significant growth is expected for specialty resistors in the coming years, especially to support the expanding automotive, artificial intelligence, 5G, IoT, and cloud management sectors. This growth will further increase the demand and usage of specialty resistors. Manufacturers respond by starting or expanding production lines for types like current sense resistors.

Capacity Expansion Plan

• Key electronic component manufacturers are making significant investments and planning capacity expansions through 2030, primarily focusing on thin film, thick film, and current sense resistors. Production has already increased, with the next major increase projected in 2025.
• Some manufacturers have expanded their capacity by adopting contract manufacturing models.
• Major investments are largely driven by demand from the Automotive, EV Infrastructure, Artificial Intelligence, and Industrial markets.
• Manufacturers are diversifying their investment locations to include Mexico, Germany, Malaysia, and Japan as part of their China+1 strategy, aiming to mitigate risks associated with over-reliance on Chinese production facilities.
• Suppliers like Vishay heavily invest in military-grade resistors, focusing on leaded, wire-wound, and thin film technologies. This investment responds to a significant rise in demand for military-grade resistors due to escalating geopolitical tensions.

PRICE

• Flat to decreasing pricing for both General & Automotive grade products.
• Pricing for general and automotive grade products is generally flat, with some projected decreases for common case sizes in automotive grade products. However, slight increases are expected for larger case sizes and legacy products.
• Pricing for general thick film products remains stable. Some suppliers have lowered prices to attract more business and utilize their current or new production capacities. Conversely, a few suppliers have maintained or increased their prices due to reduced output, which has led to higher manufacturing costs.