MARKET DYNAMICS

• SEKISUI CHEMICAL CO., LTD. will expand the production capacity of SELFA® at its Musashi Plant (Location: Hasuda City, Saitama) by 2030.  It will also establish a new R&D base in Taiwan by the end of the year.
• SELFA® is high adhesion-easily removable UV tape that combines strong adhesion and easy peeling with UV irradiation (gas is generated between the tape and the adherend by UV irradiation, which makes the tape easily peelable without adhesion) that makes it possible to process thinly polished wafers without damage.  These kinds of tape are widely adopted in advanced semiconductors for AI (artificial intelligence) high-speed communications and power semiconductors for automotive applications.  The market will reach $1 trillion by 2030, double the 2023 level.
• The upcoming quarter is expected to witness a varied performance across sectors.  A lower increase in the electronics sector and advanced materials is anticipated, contrasting with a decline in automotive, aerospace, commercial branding, and transportation.  Industrial adhesives and tapes are set for smooth growth.  However, the Performance Tapes and Medical segments experienced a slight downturn, indicating potential challenges ahead.

TECHNOLOGY OVERVIEW

SUSTAINABLE ADHESIVES

• Bio-based Adhesives: The increased focus on environmentally friendly alternatives has led to the development of adhesives derived from renewable resources like plant-based starches, soy proteins, and cellulose.  
• Recyclable and Compostable Tapes: Efforts are underway to create easily recyclable or compostable tapes, reducing their environmental impact at the end of their life cycle.

HIGH-PERFORMANCE TAPES

• High-Temperature Resistant Tapes: These tapes are engineered to withstand extreme temperatures, making them ideal for applications in automotive, aerospace, and electronics industries where high heat resistance is crucial.
• Structural Bonding Tapes: Advancements in adhesive technology have led to the development of tapes that can replace mechanical fasteners in various applications. These tapes offer benefits like weight reduction, improved aesthetics, and enhanced structural integrity.

FUNCTIONAL TAPES

• Conductive Tapes: These tapes incorporate conductive materials like silver or copper, enabling applications in electronics, grounding, and EMI shielding.  
• Antimicrobial Tapes: These tapes are infused with antimicrobial agents to prevent the growth of bacteria and fungi, making them ideal for applications in healthcare, food packaging, and hygiene-sensitive environments.

RECENT DEVELOPMENTS

Date	Adhesive Tape Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
June 2024	Avery Dennison Corporation (US)	-	Product Development & Launch	Avery Dennison introduced new pressure-sensitive adhesive tape solutions for electric vehicle (EV) battery cell wrapping applications.	-
February 2024	Avery Dennison Corporation (US)	-	Product Development & Launch	Avery Dennison Performance Tapes introduced a new portfolio of pressure-sensitive-adhesive (PSA) tape solutions for the appliance industry.	-
November 2023	tesa SE (Germany)	-	Product Development & Launch	Tesa, an international manufacturer of innovative adhesive tapes and self-adhesive product solutions, is introducing another more sustainable tape. The new tesa® 51345 is a paper-based reinforcement adhesive tape that can be used, for example, to reinforce packaging or cartons at sensitive points such as side hole handles, flap handles, and top-hole handles. It is part of a comprehensive assortment of corrugated board manufacturers.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW

DEMAND COMMENTARY

• The demand for adhesive tape is expected to maintain a steady growth trajectory in the coming years, driven by various factors such as e-commerce expansion, automotive industry growth, technological advancements, and increasing demand from emerging markets.

SUPPLY ANALYSIS

• The leading tape manufacturers, including 3M, Nitto, and Tesa, maintain stable production with ample capacity.
• By the end of the year, Tesa will transition some thin adhesive tape manufacturing from China to Vietnam, enhancing supply chain localization for Southern Asian automotive and electrical clients.
• The adhesive tape market is sensitive to global economic and political fluctuations. Forecasts indicate a rise in smartphone demand due to recovering semiconductor and consumer goods markets, especially for high-performance products. Monitoring these changes is essential to managing inventory levels effectively.

PRICING SITUATION

• Adhesive tape market prices are expected to remain stable compared to the previous quarter.
• The average price of copper increased by 22% in May and June, but in August, it fell back to early-year levels, showing only a 5% difference.  Given the improving macroeconomic environment, tight international supply, and gradual demand recovery, short-term opportunities for copper price increases are anticipated.  However, high global inventory continues to suppress prices.  We will closely monitor the global economy and inventory levels.
• The price of acrylic acid, an upstream raw material, has risen by approximately 10% in 2024.  It is expected to fluctuate modestly for the rest of the year, influenced by changes in its feedstock, propylene.

MARKET DYNAMICS

• In the fourth quarter, the macroeconomic landscape continued to align with the trends observed in previous quarters. Notably, seasonal demand for electronic products increased significantly.
• Rogers, the leading company, had Q2 net sales that slightly increased compared to the previous quarter. This growth was driven by higher sales in the EMS business unit, particularly in PU and siEMS net sales rose by 10.5%, primarily due to increased sales in electric and hybrid electric vehicles (EV/HEV) and portable electronics, partially offset by a slight decline in aerospace and defense (A&D) sales.

TECHNOLOGY OVERVIEW

SUSTAINABLE FOAMS

• The development of foams from recycled or bio-based materials like sugarcane and algae is gaining traction, addressing environmental concerns and promoting sustainability.

HIGH-PERFORMANCE FOAMS

• New foam formulations offer improved properties like fire resistance, acoustic insulation, and impact absorption, expanding applications in various industries.

CONDUCTIVE FOAMS

• Foams embedded with conductive materials find applications in electronics packaging, EMI shielding, and anti-static solutions.

RECENT DEVELOPMENTS

Date	Foam Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
August 2024	UFP Technologies, Inc. (US)	AQF Limited (Ireland)	Acquisition	UFP Technologies, Inc. announced the acquisition of AQF Limited (“AQF Medical”). Headquartered in Navan, Ireland, with additional joint venture operations in Singapore, AQF Medical develops and manufactures custom-engineered foam and thermoplastic components used in various medical devices and packaging.	-
May 2024	Zotefoams plc (UK)	D30 (UK)	Partnership	Zotefoams enters an exclusivity agreement with D30. Under the partnership with D3O, Zotefoams is set to develop high-performance impact protection solutions for the defense and law enforcement sectors.	-

Source: Press releases & company websites

 DEMAND/SUPPLY OVERVIEW

DEMAND COMMENTARY

• The demand for die-cut foam is projected to maintain a positive growth trajectory in the coming years, fueled by its diverse applications in Packaging, Automotive, Electronics, Medical and Healthcare, and Construction, among several other industries, and the increasing need for customized, protective, and sustainable solutions.

SUPPLY ANALYSIS

• Foam supply in Q4 remains consistent with the previous quarter, but higher customer inventory levels constrain sales in key markets.
• Lead times for major brands have not changed since last quarter.
• Ongoing tensions in the Red Sea have resulted in an 18% reduction in sea transport capacity between Asia and Europe, which has a limited effect on lead times for die-cut materials.

PRICING SITUATION

• The primary producer, Rogers' foam prices, are predicted to remain flat in Q4 2024.
• The feedstock for PU foam, derived from polymeric MDI, experienced minimal price fluctuations throughout 2023, closely following demand variations.  Global MDI prices exhibited an upward trajectory in Q2'24.  Q4'24 prices are anticipated to remain in a narrow range, with the short supply of MDI offset by declines in benzene price.

MARKET DYNAMICS

• As peak shipment season approaches, the seasonal demand for electronics is increasing, particularly with anticipated orders for the iPhone 16, Apple's first AI smartphone featuring the A18 chip.
• Recycled Protective Film has become essential for producers, reflecting a growing focus on sustainability and reshaping supply chains.  Producers who successfully implement recycled technology for mass production will gain a competitive edge.
• Nitto continues to dominate the high-end protective film market, especially in the 3C and automotive sectors, while local manufacturers in China boost allocations due to cost advantages, flexibility, and quality.

TECHNOLOGY OVERVIEW

ADVANCEMENTS IN NANOTECHNOLOGY

• This enables films to "heal" minor scratches and swirl marks automatically when exposed to heat from sunlight or warm water, ensuring long-lasting protection and maintaining the pristine look of the protected surface.  

IMPROVED CLARITY & GLOSS RETENTION

• New formulations and manufacturing techniques result in protective films that are virtually invisible once applied, preserving the natural beauty and color of the underlying surface without any distortion.  

WATER & OIL REPELLENCE

• These coatings create a slick surface on the film, causing water and oil-based substances to bead up and roll off easily. This makes the film more accessible and helps prevent staining and contamination.

GERM & BACTERIA RESISTANCE

• Infusing films with antimicrobial agents helps to inhibit the growth of bacteria and other microbes, making them ideal for applications in healthcare settings, food packaging, and high-touch surfaces

THICKER AND STRONGER FILMS

• Advancements in material science have led to the development of thicker and stronger films that offer superior protection against scratches, chips, and other forms of damage.

RECENT DEVELOPMENTS

Date	Protective Film Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
May 2024	XPEL, Inc. (US)	Tint World® Automotive Styling Centers™ (US)	Partnership	Tint World® Automotive Styling Centers™, a leading auto accessory and window tinting franchise, and XPEL, Inc., a global provider of protective films and coatings, announce a new partnership that ensures Tint World customers and franchisees have convenient, comprehensive access to the premier protective films and coatings for automotive, marine, commercial and residential applications.	-
February 2024	XPEL, Inc. (US)	-	Product Development & Launch	XPEL, Inc. unveiled several exciting products that elevate the industry standard in asset protection, including XPEL’s first-ever Windshield Protection Film and additions to their surface care product line.	-
January 2024	Toray Industries, Inc. (Japan)	-	Product Development & Launch	Toray Industries, Inc., announced that it has created a plastic film almost as strong as stainless steel, with a maximum tensile strength of 1,200 megapascals. The material also offers the lightness, insulation, flexibility, and other benefits of polymers.	-

Source: Press releases & company websites

 DEMAND/SUPPLY OVERVIEW

DEMAND COMMENTARY

• The demand for die-cut protective films is expected to maintain a positive growth trajectory in the coming years, fueled by their critical role in safeguarding surfaces and products across various sectors, technological advancements, and rising awareness about surface protection.
• The industry actively responds to environmental concerns by developing sustainable alternatives and exploring innovative technologies to expand applications and cater to evolving market needs.

 

SUPPLY ANALYSIS

• Globally, consumer sentiment showed signs of recovery as inflation eased, boosting the consumer and packaging markets.  The supply of protective film is steady due to the overcapacity of raw materials in China and adequate supplies in Europe and the US
• Global producers like Nitto and other Asian protective film producers are maintaining sufficient capacity, ensuring a stable supply in the market.

PRICING SITUATION

• The price of protective film in China remains stable due to lower costs of local chemicals and raw materials, but exports face challenges from high sea freight rates and disruptions in the Red Sea.
• The primary raw material for silicon protective film is silicone DMC (DiMethylCyclosiloxane) polymer, and its price has remained low since 2022.  The price is predicted to rise slightly with demand recovery in 2H'24, but there is no clear indication of a significant cost impact on protective film producers.

• Despite ongoing risks, gradual improvement in the market is evident due to geopolitical and macroeconomic factors. The peak period of consumer product stocking is approaching rapidly, and flexibility in adapting to these changes is essential.
• The third quarter of fiscal 2024 was a stable business environment, though demand varied across regions and industries.  Consumer product sales are increasing, driven by large-scale shopping events in China and international sporting events in France.
• In the fourth quarter, the macroeconomic landscape continues to follow the trend of previous quarters, indicating a lack of significant signs of demand recovery.  Notably, there has been an increase in seasonal demand for electronics.  At the same time, wireless infrastructure sales have experienced a significant boost, driven primarily by the burgeoning market in India.
• The global economy is expected to recover gradually, with inflation declining, driven by stabilizing energy and raw material prices.  However, several risks could temper this recovery, including winter energy cost increase in the EU and potential shifts in US fiscal and trade policies due to the upcoming presidential election.  Japan also faces challenges from changes in its monetary policy and foreign exchange fluctuations.
• Global smartphone shipments increased 6.5% vs. the prior year to 285.4 million units in the second quarter of 2024 (2Q24).  Worldwide tablet shipments recorded year-over-year growth of 22.1% in the second quarter of 2024 (2Q24), totaling 34.4 million units.  This marks the fourth consecutive quarter of shipment growth and builds the momentum toward the expected recovery this year.
• AI smartphones are expected to grow from 20% to over 40% between 2025 and 2027.  The top five smartphone brands have all introduced AI devices, and the increasing penetration of AI smartphones is expected to encourage high-end smartphone users to upgrade their devices.  The iPhone 16 series is expected to bring significant changes, such as a periscope lens and Apple Intelligence features, with projected annual sales growth of 5-10% in 2024.