The current book-to-bill ratios, quoted at approximately 1:1 to 1.1, indicate modestly positive demand trends in the market. Despite these encouraging signs, manufacturers maintain a conservative stance regarding the sustainability of this demand. Consequently, they have opted to preserve existing capacity utilization levels, underlining a cautious approach in their operational strategies.

• Most manufacturers have experienced a positive book-to-bill ratio in recent months, which has provided some optimism for a recovery in the market. 
• Despite this, manufacturers are exercising caution, maintaining capacity utilization at lower-than-usual levels, with inventory ideally positioned between 2-3 months.
• Most manufacturers have reported between 60% and 80% capacity utilization rates, with lead times remaining stable.
• China has launched incentive programs to encourage the replacement of home appliances and traditional ICE vehicles with newer electric vehicles as they look to boost domestic demand. This has led to a recent increase in orders.

Earthquake in Miyazaki Prefecture, Kyushu, Japan

• With Murata factories recovering from the Noto earthquake in January, a 7.1 magnitude quake struck Japan southeast of Miyazaki Prefecture on Kyushu Island in August.
• Kyocera’s Kagoshima Kukubu MLCC factory has reported damage to its facilities and equipment. Consequently, several production lines have been halted as the impact is evaluated.
• A Megaquake alert was issued following the 7.1 magnitude quake in Miyazaki Prefecture but was lifted a week later, on August 15.

 

SUPPLY

• Most suppliers are reporting Book-to-Bill ratios marginally above 1:1.
• Utilization rates for most Japanese and Korean operations are above 80%, while Taiwanese and Chinese operations are operating between 60-70%. Meanwhile, U.S. manufacturers are hovering around 70%.
• Lead times for most parts range from 12-16 weeks. Certain suppliers, who previously had longer lead times, have gradually reduced them by 2-4 weeks. Chinese manufacturers are quoting lead times of 8 weeks, with some as short as six weeks.
• High-capacitance and high-temperature capacitors, critical for AI applications, are currently in tight supply. Manufacturers are strictly adhering to lead times, offering limited flexibility for accelerated delivery requests.
• Capacitors with large case sizes, high voltage, and unique capacitance values, commonly used in automotive applications, continue to face supply chain challenges.
• Distributor inventory levels were low in the previous quarter; however, distributors have increased their buffer levels to 2-3 months. Consequently, the Book-to-Bill ratio from manufacturers is anticipated to decline slightly in the upcoming period.
• Mobile orders are increasing slightly, but this is not impacting supply.
• China has released an action plan to promote large-scale equipment renewal and trade-ins of consumer goods, leading to a slight increase in the use of commercial-grade capacitors.

MARKET DYNAMICS

• Global smartphone sales are projected to modestly recover in the second half of 2024, with a significant potential for growth in 5G handset sales. This upsurge is expected to be mainly driven by the introduction of new smartphone models from US and Chinese manufacturers.
• The automotive industry is experiencing a slowdown, particularly in the EV space. Many stakeholders are now focusing on developing charging infrastructure to address user concerns and increase EV adoption.
• Concerns about the uncertain market outlook prevent manufacturers from fully committing to higher utilization or output levels and planned capacity expansions.
• Global supply chain dynamics and trade policies are poised to influence the global MLCC market significantly. Manufacturers must strategically manage and utilize multiple production locations to capitalize on tariff exemptions and optimize their operations.
• Given suppliers’ diverse product development and future capacity expansion strategies according to their specific business requirements, it is essential to align technology needs and select suppliers judiciously. This strategy will help establish a competitive, sustainable, and reliable supply chain for the foreseeable future.

 

PRICE

• Most manufacturers defend their market share to sustain current factory output levels. However, there is a noticeable slowdown in cost reductions.
• The prices of specialized, high-reliability products, particularly those used in aerospace, military, and medical sectors, remain elevated and continue to rise due to the cost of raw materials.
• Manufacturers are experiencing a drop in operating margins as factories run less-than-optimal levels.

SUPPLY

• Demand for Mn02 Tantalum Capacitors softened in Q4. Overall capacity utilization is around 70%, and Book to Bill ratios are quoted at an average of 0.9:1
• The demand for Tantalum capacitors in smaller case sizes, typically used in consumer electronics, remains stable or flat. This suggests that the consumer electronics market is not experiencing significant growth, but we do expect a seasonal adjustment in Q4.
• The demand for larger case sizes, often used in industrial applications and building infrastructure, is softening. This decline is primarily attributed to a weakening property market in China. The downturn in China's real estate sector is impacting the demand for industrial and building-related components.
• Tantalum polymer products used in Telecom, AI & networking are showing growth in demand, with AI products being the leading driver of demand. The average quoted lead time is 16-18 weeks, capacity utilization at 80%, and book-to-bill ratios at 1:1.

 

MARKET DYNAMICS

• MnO2 capacitors are classified as legacy products, and no further investment in their production or development is planned. The shift away from this technology is due to technological advancements in both MLCC and polymer capacitors.
• Manufacturers are redirecting their resources towards expanding the production of tantalum polymer capacitors. This decision is driven by the growing market demand for AI, data centers, EVs, networking, and server storage due to their superior performance and cost compared to MnO2. 
• Several manufacturers are taking steps to expand their tantalum polymer capacity: 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 and Japanese facilities. Kemet is expanding its polymer capacitor production in Suzhou, China.
• Vishay has been dominating the smaller case size market, and KEMET is more competitive in larger case sizes with single-digit ESR levels.

 

PRICE

• Tantalum MnO2 costs continue to present challenges as suppliers gradually shift their focus away from this product as persistently high costs of raw materials make it a less-than-competitive technology. It is projected that pricing for this material will remain relatively flat (but elevated) throughout the year. 
• Prices for legacy products such as wet tantalum and military series are expected to keep increasing due to the absence of significant volume in their production. This lack of scale leads to higher production costs, translating into increased prices for the product.
• Tantalum polymer pricing should have more flexibility and will see improvements in the longer term with the capacity expansion plans in place from major manufacturers to support increased demand in AI, Networking, and Automotive.

 

SUPPLY

• Demand for automotive-grade aluminum capacitors has remained stable. However, a notable uptick is expected as the shift from Internal Combustion Engine (ICE) vehicles to Electric Vehicles (EVs) progresses due to the higher content of capacitors per EV. Meanwhile, the Industrial, Renewable Energy, and Consumer sectors have begun to show modest signs of recovery in demand.
• Japanese Electrolytic manufacturers’ average capacity utilization is approximately 80%. Lead times for aluminum capacitors have improved significantly. Japanese manufacturers are currently quoting 16-24 weeks lead times, while Taiwanese and Chinese manufacturers are quoting improved lead times of 8-12 weeks.
• The supply situation for hybrid capacitors used in automotive and telecommunications has dramatically improved. Lead times for these hybrid capacitors are now quoted between 16-24 weeks. Capacity utilization has increased to 80%.

 

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 & Aihua are all 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 positioning themselves as niche leaders in high-voltage snap-in capacitor technology in both Industrial and Automotive segments.
• Aihua has made impressive strides in the global rankings, now in third. Their emphasis on providing a full range of products, including film capacitors, indicates a commitment to providing reliable and widely applicable capacitor solutions.
• Japanese suppliers have a dominant market share in the automotive and industrial segments, with approximately 70% of the market share. At the same time, Taiwanese and Chinese manufacturers lead in the ICT and consumer segments.
• ELNA has announced to NRND (Not Recommended for New Design) all series of Supercap with a plan to EOL (End of Life) the product soon.  NECTOKIN (KEMET) will quickly become the sole, key supplier in the market.

 

PRICE

• Aluminum and film capacitor pricing is expected to remain stable, influenced by high costs of critical raw materials, including aluminum foil and copper, and elevated electricity and operational expenses.
• We anticipate a softening in prices for electrolytic/film capacitors in the consumer segment, driven by intense competition from Taiwanese and Chinese manufacturers. However, automotive-grade capacitor pricing remains robust, primarily due to the dominance of Japanese manufacturers in this sector.
• Supercapacitor prices are gradually increasing due to a limited supply base and the recent announcement of ELNA’s withdrawal from the market.

 

SUPPLY

• Capacity utilization among most suppliers is reported to be between 70% and 85%.
• Lead times remain stable across the majority of suppliers.
• Supply for Inductors and Filters produced at Murata Japan’s Anamizu factory has resumed, with total production for the large case size DLW series expected by early 2025.
• Inventory levels have normalized, with the Book-to-Bill ratio generally quoted around 1:1.

Inductor

• The current lead time for multilayer chip inductors is between 10-14 weeks. For TDK's MLF/MLZ series models 1005, 1608, and 2012, lead times have improved to 28 weeks.
• Molded inductor lead times are stable. Vishay's IHLP series lead times are as follows: 
   
  • IHLP2020 – 10-12 weeks
  • IHLP2525  – 12-20 weeks
  • IHLP4040 – 10-12 weeks
  • IHLP5050 – 12 weeks
  • IHLP6767 – 10-20 weeks
  • IHLP8787 – 12 weeks
• TDK’s SPM series has lead times of 28 weeks for large and 12 weeks for small case sizes.
• Murata’s LQH series inductors have lead times ranging from 12-20 weeks following the recent resumption of production.

Filter

• Lead times are generally maintained at 10-14 weeks. TDK’s MMZ/MPZ and ACM/ACT series typically have lead times of 20 weeks.
• Murata’s DLW44S/DLW5AH filters will progressively resume production at the Anamizu factory starting November 2024, after equipment restoration, aiming for total operational capacity by early 2025.

Transformer

• The availability of a crucial raw material, ferrite core, has returned to normal levels, with lead times improving but still limited flexibility.

 

MARKET DYNAMICS

• Capacity expansion trends:
   
  • Active capacity expansion is observed in Southeast Asia, particularly in countries like Vietnam, Thailand, Malaysia, and the Philippines.
  • These expansions encompass both new and existing facilities.
• Cost increases in southern China regions:
   
  • There is a rise in new start-ups and expansion activities in western and central China.
  • This shift is primarily driven by increasing costs related to labor, facilities, and other associated expenses.
• Taiyo Yuden has been implementing a New Part Numbering System since 2022, gradually replacing old part numbers. This new system is increasingly visible on Approved Vendor Lists (AVLs). It includes a letter or code representing specific end markets such as automotive, industrial, healthcare, and consumer sectors, providing customers with a clearer understanding of each part's intended application.

 

PRICE

• The pricing trend remains stable, in line with the last quarter.
   
  • 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 products.
  • Pricing for specialty and legacy SMD inductors and filters has remained stable.
• Customized inductors/transformers manufactured in the US and North Mexico are experiencing rising labor costs. We have also seen more production ramps in this region in recent quarters.
• Increased costs for critical raw materials used in the production of inductors and filters in recent years have impacted suppliers’ costs.
   
  • Copper – for wire-wound type
  • Silver – for multi-layer type

 

SUPPLY

• The market remains soft for most significant segments, except those related to EV, AI, and 5G/6G related applications. Most suppliers anticipate that the market will begin to recover no earlier than Q2 2025.
• Book-to-bill ratios are currently around 0.8 to 1:1. Capacity utilization averages between 70% and 90%, depending on the product, with higher utilization for smaller case sizes and automotive-grade products. The lower capacity utilization may compel suppliers to implement factory shutdowns or reduce working hours, which could limit their ability to respond to sudden increases in demand.
• Global market demand for crystals is expected to double by 2030, with a significant focus on smaller package sizes and automotive-grade products. Although many suppliers have expanded their capacity over the past two years, they are now pausing further expansion plans as supply continues to outpace demand.
• Raw material ceramic package supply has stabilized and is no longer a constraint.
• The supply of raw material ICs has generally improved, but longer lead times persist for specific products. Additionally, some IC suppliers have announced the End of Life for some of their mature products, which has further impacted the production of particular oscillators.
• Lead times for most products have returned to normal levels. KHz and MHz Crystals are quoted at 8-10 weeks; Oscillators range from 10-14 weeks. Automotive-grade products are extended by another two weeks. Extended lead times of up to 40 weeks persist for certain oscillators that utilize legacy IC technology.
• Most Tier 1 and Tier 2 suppliers have either already phased out or are planning to phase out larger-size packages. Downsizing is becoming essential to achieve better pricing and mitigate supply risks.
• Ceramic resonators’ lead time remains at 8-10 weeks. 
• TCXO lead time remains at 10-12 weeks.
• In general, no products are currently under supply allocation.

MARKET DYNAMICS

• Suppliers are exploring manufacturing locations outside China due to ongoing geopolitical tensions between the US and China. TXC is investing in two new facilities in Aomori, Japan, and Surabaya, Indonesia, with production expected to commence in Q4 2024. Additionally, Raltron and Taitien are considering new production sites in Vietnam, with factories anticipated to be operational by 2025. Hosonic has invested in a new site in Kyushu, Japan, aiming for mass production to begin in early 2025.
• Kyocera has established a new manufacturing line for crystal production in Hanoi, Vietnam, with mass production starting in July 2024.
• Murata is consolidating ceramic resonator production at their Himi factory in Japan.
• Suppliers increasingly focus on oscillator products due to higher margins and less competitive market conditions.
• TXC continues to expand its automotive-grade product line, planning to increase capacity to 100 million pieces per month by Q4 2024.
• Abracon announced the acquisition of NEL Frequency Controls, Inc. in July 2023, though NEL will continue to operate independently until further notice.
• Kyocera has completed the acquisition of Bliley Technologies. The manufacturing operations from Bliley Technologies’ Erie, PA, facility will be transferred to the new Kyocera AVX (KAVX) facility in Erie, PA. This transition begins in December 2024, with completion scheduled for April 2025.
• With an increasing number of products becoming 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 the use of the following packages:
   
  • 1610 size for KHz Crystals
  • 1612 or 2016 size for MHz Crystals
  • 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 trends are currently downward, with cost reductions more pronounced in smaller-sized crystal products. Suppliers are becoming increasingly aggressive in offering cost reductions to maintain or capture market share. To leverage competitive tension, it is advisable to approve multiple manufacturers wherever possible.
• Prices for larger-sized crystal products remain flat, with some experiencing slight increases.
• Marginal cost reductions are available for CMOS oscillators, while pricing for differential output remains flat.
• Rising labor costs continue to impact supplier margins.

SUPPLY

• There are currently no significant supply constraints for most circuit protection devices.
• The majority of suppliers have reported marginal improvements in market sentiment.
• Market demand in the automotive sector has slowed but continues on a growth trajectory. Circuit protection devices are widely utilized in the Electric Vehicle (EV) market, particularly in applications such as Advanced Driver Assistance Systems (ADAS), Energy Management Systems, Traction Motor Drive Systems, and charging stations.
• Most suppliers have forecasted growth in AI-related applications such as Server & Cloud Storage, AI-powered laptops & mobile phones, as well as the peripherals supporting these applications (e.g., Power supply units)
• Book-to-bill ratios are currently ranging from 1.0 to 1.1.  Most manufacturers reported capacity utilization rates of 80%. 
• Inventory levels at manufacturers range from 6-8 weeks, and manufacturers are expected to continue to build stocks to a healthy level of 3 months. Distribution inventory is around 2-3 months.
• Lead times for Fuses have stabilized at an average of 8-18 weeks, depending on the products.
   
  • Cartridge fuses around 14-18 weeks
  • Resettable fuses around 17 weeks
  • Some manufacturers extended lead times to 16-18 weeks for SMD Chip fuses
• Lead times for Varistors, both Leaded and SMT type are approximately 12-18 weeks, except for Littelfuse, who have reported increased bookings since early Q3’24, resulting in a lead time extension of 4 weeks to 16 weeks. Disc varistors have the longest lead time at 30 weeks.
• Lead times for Gas Discharge Tube (GDT) fuses have improved to 12-16 weeks. The production of GDTs, which utilizes neon gas, has been impacted by supply disruptions due to the Russian invasion of Ukraine, as Ukraine is a crucial supplier of neon gas, holding about 70% of the market share.
• Supply for Circuit-Breakers has stabilized, with lead times now ranging from 6-12 weeks. 
• Most manufacturers are observing some improved demand signals and plan to increase capacity utilization accordingly.

MARKET DYNAMICS

• Littelfuse remains the dominant technology leader in circuit protection devices, although lower technology manufacturers increasingly capture market share with competitive costs.
• Artificial-Intelligence (AI) driven applications, such as AI servers, AI-powered laptops, and mobile phones, are expected to fuel growth in the upcoming quarters.
• Automotive electronics continue to be a focal point for major CPD manufacturers, with products increasingly designed to meet stringent vehicle system reliability and safety standards.
• The current geopolitical situation drives projected growth in the Defense & Aerospace sectors.
• Major manufacturers are diversifying their production locations to include Mexico, Malaysia, and Vietnam as part of their China+1 strategy.  

 

PRICE

• Pricing remains stable across most product families, with reductions observed in Varistors and SMD Chip fuses.
• Circuit-breaker pricing has also maintained stability.
• Despite significant increases in precious metals like copper, silver, and gold over the past 12 months, manufacturers are willing to hold prices steady and offer more flexibility to capture business in these softer market conditions.

Copper vs Silver vs Gold Prices (Annual)

SUPPLY

• The supply of resistors has improved significantly due to the market downturn. The market is projected to gradually recover by Q2 2025, with growth expected in the second half of 2025.
• The predicted growth is driven by the automotive industry, EV infrastructure, AI-related applications, and a modest increase in PC and notebook demand. 
• Capacity utilization among the prominent manufacturers from the United States, Taiwan, and Japan is now at approximately 70% -80%, with book-to-bill ratios between 0.8 and 1.1.
• The supply of automotive-grade parts has also improved significantly. However, some pockets of the product remain constrained, particularly for specialist resistors like thin film.
• Consumer markets in China are showing signs of improvement, but the supply of general grade resistors remains stable, with book-to-bill ratios around 1.0 to 1.1. 
• Vishay Dale’s overall book-to-bill ratio is currently at 1.03, primarily driven by robust demand for military-grade products. Specifically, the book-to-bill ratio for military-grade products alone stands at an impressive 3.0.
• Increasing geopolitical tensions have significantly escalated the demand for military-grade resistors, which are critical for building defense systems essential to national security in the United States and other nations with advanced defense and aerospace capabilities. As a result, lead times for military-grade leaded film and wire-wound resistors have extended up to 100 weeks.
• The capacity expansion at Vishay has significantly improved the supply of current sense, MELF, leaded resistors, and thin film products (excluding military-grade products).
• Taiwanese suppliers’ inventory levels are approximately two months, which is low compared to their regular or healthy inventory levels. Suppliers plan to increase inventory levels up to 3 months.
• Taiwanese suppliers are adopting varied strategies regarding their capacity utilization rates due to market uncertainties. Some suppliers choose not to increase their capacity utilization, while others plan to raise their rates in anticipation of a surge in demand.
• Distributors have started placing new orders with the manufacturers because their inventory levels are running low.

 

MARKET DYNAMICS

ACCELERATED TECHNOLOGICAL SHIFTS ARE DEFINING THE COMPETITIVE LANDSCAPE

• Vishay continues to be the technology leader in resistors but increasingly faces competition from the lower technology players.
• Japanese suppliers have deemphasized mature or standard products like standard thick film resistors & arrays due to low profitability. This shift has impacted the remaining suppliers who 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.
• The demand for smaller resistors continues to grow, driven by consumer interest in compact electronic products like smartphones, lightweight laptops, and tablets. This trend necessitates smaller electronic components, including resistors, despite the technical challenges of miniaturization.
• Significant growth in the market for specialty resistors is expected in the near future to support sectors such as automotive, artificial intelligence, 5G, IoT, and cloud management. In response, manufacturers are focusing on initiating or expanding production lines specifically for specialty resistors like the current sense, catering to these increasing demands.
   

CAPACITY EXPANSION PLAN

• Key electronic component manufacturers are making significant investments and planning capacity expansions, particularly in thin film, thick film, and current sense products, focusing notably on thin film.
• Production output has already started increasing, with substantial expansions anticipated to begin in 2025. Major investment drivers include the Automotive, EV Infrastructure, Artificial Intelligence, and Industrial markets.
• Some manufacturers are boosting capacity by outsourcing production.
• Investments are targeted in Mexico, Germany, Malaysia, and Japan, implementing a “China+1” strategy to diversify manufacturing footprints. Meanwhile, China is optimizing its domestic market with a "China for China" strategy.
• Companies like Vishay are significantly investing in military-grade resistors (led, wire-wound, and thin film), spurred by increased demand due to rising geopolitical tensions.

 

PRICE

Pricing for both General and automotive-grade products is expected to remain flat or see a marginal decrease.

• Prices for automotive grade parts are projected to remain flat / marginally decrease for standard case sizes, with slight increases for more significant cases and legacy products.
• General thick film pricing is stable, though some suppliers reduce prices to attract more business and utilize existing or new capacity.
• Despite reduced factory output leading to higher manufacturing costs, some suppliers continue to offer modest cost reductions to keep production lines active and secure or increase business.