What You Should Know

• The entire Crystal and Oscillator market is severely under supply as suppliers continue to receive large new orders. For certain products, it has reached a point where global demand is much higher than global available production capacity.
• Huge growth in demand as several key market segments, which had slowed manufacturing of their products during the Covid-19 pandemic, have now increased production. Some OEMs and distributors have increased their inventories due to the uncertainty in the market.
• Book to Bill is at a high level – average 1.5 to >2 for certain products.
• Raw material suppliers struggling to meet the huge growth. Lead-times are extending, product are on allocation and prices are increasing.
• Rising costs and labor shortages in China have added to the supply constraints and price increases.
• Capacity expansion for Taiwanese suppliers has been delayed due to the global travel restrictions imposed, which makes it difficult for the machinery suppliers from Japan to conduct onsite setup.
• This is the worst supply situation seen at least in the last 2 decades. The tight supply is expected to last through 2021 and may continue into 2022 for certain products.

Shortage and Rising Cost of Raw Material

• Raw materials are the main cost drivers for both Crystals and Oscillators, contributing to approximately 60%-70% of the cost. The common raw materials used are Package, Quartz Blank and IC. IC is used only in Oscillators, whereas Package and Quartz Blank are used in both Crystals and Oscillators.
• There is limited ceramic package supply. Kyocera Ceramics Packages, which ranks #1, dominates the market with approximately 80% market share. Any strategy shift in Kyocera will cause a huge impact to the Crystal and Oscillator market.
• Kyocera continues to shrink its capacity on bigger sized packages to support expansion on the smaller sizes. This results in serious supply shortage for larger size packages. Prices for larger size packages had also increased several times since the beginning of 2020 and prices are continuing to rise.
• Quartz Blank supply is getting tighter as suppliers’ inventories are depleting at a fast pace. Prices will continue to increase.
• Serious supply constraints on IC due to Wafer shortages. Lead-time at minimum 6 months, stretching to 12 months for certain products. The devastating fire that occurred in October 2020 in AKM factory, had caused an extremely large supply gap, impacting the majority of TCXOs and some SPXOs. Oscillator suppliers are aggressively sourcing and qualifying new IC suppliers. NPC is experiencing high order bookings, had transferred some products to their sub-cons and discontinued certain legacy products.
• The supply constraints on the bigger and matured products are forcing the Crystals and Oscillators suppliers to make immediate adjustments to their product offering and production plans to align with raw material availability. Downsizing becomes extremely crucial and essential, with a focus on the smaller case packages: 1610 size for KHz Crystals, 1612 or 2016 size for MHz Crystals and 2550 or 3225 size for SPXO.

KHz Crystal Resonator

• KHz Crystals are on severe worldwide allocation, especially 3215 size which is commonly used in many product applications. Many suppliers have their capacity booked until 2022, struggling to meet existing customers' demand and are rejecting any new business.
• Steep price increases since 2020 and prices continue to rise.

MHz Crystal Resonator

• Lead-time continues to stretch, ranging from 30 to 50 weeks depending on package size. The supply situation is more serious for 2520 and 3225 sizes.
• Many suppliers are discontinuing the bigger size MHz Crystals, mainly due to a shortage of ceramic packages. Siward announced EOL on their MHz Crystals, 4025 size and above. TXC announced EOL on their 5032 MHz Crystals.

Simple Packaged Crystal Oscillator (SPXO)

• Lead-time are at 24 weeks or more and continues to stretch primarily due to shortage of IC.
• The key Japanese suppliers: Epson, NDK, Kyocera, KDS are impacted by the shortage of AKM IC. This results in a much more longer lead-time or even product obsolescence.
• Demand increase for NPC IC as Oscillator suppliers continues to qualify NPC as a replacement to AKM.

Temperature-Compensated Crystal Oscillator (TCXO)

• TCXO market gravely impacted by the devastating fire that occurred in October 2020, at AKM, a raw material IC supplier. There have been little to no deliveries since, mostly from open market stocks and some undamaged stocks recovered from the AKM factory.
• Severe allocation for the majority of the TCXO suppliers as AKM is the #1 IC supplier for TCXO with approximately 70% market share. Epson and Rakon, though impacted but the situation is not as severe as they have their own IC capability for certain products.
• Other IC suppliers are not able to offer replacements for all AKM products. Even if there is a possible replacement, it is not possible to fill the gap resulted from AKM shortage.
• AKM has announced the resumption of deliveries starting June/July 2021 with production subcontracted at a Renesas fab. Samples are progressively delivered to the TCXO suppliers for qualifications. Recovery is slow generally, with more output expected from Q4 2021 onwards.
• AKM has also discontinued several mature IC products. This leaves the TCXO suppliers with no other choice but to discontinue their affected Oscillators if they are unable to find any replacement ICs.
• Epson is reducing its MHz Crystals capacity by 10%-20% to support capacity expansion for TCXO.
• TCXO prices have increased substantially by many times and projecting more increases for the rest of 2021.

MEMS Oscillators

• Uses Silicon MEMS resonator instead of a Crystal resonator for frequency generation.
• Expect longer lead-time and price increase due to shortage in Wafer.
• SiTime is the main supplier for MEMS Oscillators. Lead-time are at 26 weeks and continues to increase. Other smaller suppliers have announced products on allocation. 

Ceramic Resonator

• Murata is the market leader with approximately 80% share.
• Lead-times have stretched to 16 weeks.
• Tighter supply conditions due to huge growth in global demand but situation is much more manageable as compared to the Crystal Resonator.

Key Recommendations

• Lead-times are extremely fluid, need to work very closely with suppliers to ensure lead-times are up to date. Provide suppliers with longer-term demand visibility and ensure sufficient PO coverage to book supplier's capacity in advance.
• Secure open market stocks.
• Consider increasing additional safety lead-time and buffer safety stocks. Avoid orders push out or cancellation. Any order pushed out will be placed behind the queue. Once the allocation is lost, any pull-in again cannot be supported.
• Check inter-site stocks for opportunities.
• Expand supplier qualification to mitigate the risk related to having a limited or single source. With increasing products going obsolete due to maturity or unavailability of raw material, OEMs need to design their products to align with suppliers’ latest technology roadmap.
• Downsizing is essential. Propose these packages: 1610 size for KHz Crystals, 1612 or 2016 size for MHz Crystals and 2550 or 3225 size for SPXO.
• Ensure price increases are communicated and explained to the customers.

Impact to Jabil and Its Customers

Shortage of raw materials and capacity constraints will force suppliers into allocation mode and discontinue their legacy products. This results in additional price increases. It is essential that we work very closely with our customers to ensure continuity of supply and appropriate management of price increases. We will continue to assess and update the situation.

Should you have any questions or need any clarifications, please do not hesitate to contact me directly (Shirley_lim@jabil.com).

Shirley Lim, Global Commodity Manager