The wave of strong demand that began to sweep through capacitor and SAW-filter supply last year is expected to wash away stock in other portions of the passive-component industry in 2000, analysts say.
Asia's recovery and a growing appetite for parts from several industries, particularly communications, will keep inventory low at manufacturers of such passive components as resistors, fuses, cable, and certain connectors over the next several quarters.
"Every segment of the electronics market is hot now," said Richard Schuster, president of NIC Components Inc., Melville, N.Y., a subsidiary of Nu Horizons Electronics Corp.
Indeed, NIC Components is actually turning away large orders for small-case-size surface-mount tantalum and multilayer ceramic capacitors, according to Schuster.
"Worldwide, there is an approximate 250 million piece-per-month production shortfall for tantalum chips, and a shortfall of roughly three billion pieces per month for ceramics," he noted.
Since several customers have turned to high-capacitance ceramics as well as surface-mount aluminum capacitors in place of tantalum products, lead times for these products are lengthening, according to Schuster.
"High-capacitance 10 mF and 22 mF ceramics in the Y5V dielectric are at 30 weeks," he said. Chip resistors are also becoming scarce, he added.
The latest market upswing will push worldwide sales of capacitors to $12.2 billion in 2000, up 8.9% from $11.2 billion in 1999, according to research firm Frost & Sullivan Inc., Mountain View, Calif.
"It's going to be a great year for passives makers, especially capacitor and resistor makers," said Dennis Zogbi, president of Paumanok Publications Inc., Cary, N.C. "This is real. I don't see any indication of double ordering."
Several companies, however, have acknowledged that orders are being inflated by anticipated Y2K problems.
Littelfuse Inc., for example, said that it has started to put customers on allocation for certain electronic fuses.
"We continue to experience strong demand for our electronic products throughout the world, in some cases exceeding our near-term production capacity," said Howard B. Witt, chairman, president, and chief executive, in a statement. "The upward trend in sales to both distributors and end-use customers is encouraging. However, we also believe there has been some Y2K contingency buying."
As a result, Littelfuse, Des Plaines, Ill., expects to cap off 2000 with top- and bottom-line growth in the 20% range.
Historically, the company has grown in the low double-digit range, according to William Blair & Co., a research firm in Chicago. The firm recently raised its earnings per share (EPS) estimate for Littelfuse for this year to $1.35 instead of $1.30, and is expecting revenue of $345 million in 2000, compared with approximately $295 million last year.
Merrill Lynch & Co. Inc., New York, has also been consistently raising its 2000 EPS estimates for companies like AVX Corp., Epcos AG, Kemet Electronics Corp., and Vishay Intertechnology Inc.
The basis for the upgrades is surging passive component demand, as well as robust growth in Asia, good momentum in North America, and bottoming trends in Europe.
Merrill Lynch is enthusiastic about the prospects for the specialty wire and cable sector, which includes the likes of Belden Inc., BICCGeneral, Cable Design Technologies Corp., and Superior Telecom Inc.
"We think the companies with positive surprises will finally outweigh the disappointments by a large margin in 2000," noted Jerry H. Labowitz, a Merrill Lynch analyst.
Wired and wireless
Several factors will contribute to a solid year for wire and cable companies, including positive pricing trends in networking cable, strong demand for coaxial cable, less volatility in building wire prices, and a reduction in industry capacity of building wire and magnet wire, he said.
The wireless boom is also increasing sales from connector makers like Amphenol Corp., Molex Inc., and Thomas & Betts Corp.
According to Fleck Research, a division of Global Connector Research Group Inc., Santa Ana, Calif., worldwide merchant shipments for connectors, backplanes, interconnect devices, and cable assemblies will grow 7.1% this year, compared with 6.7% in 1999. Last year's connector sales totaled $36.6 billion.
Molex Inc., though, expects a slight downturn in January, which could cut into sales growth in 2000, according to Joseph King, president and chief operating officer at the Lisle, Ill.-based company.
"Some customers have ordered components in anticipation of Y2K delivery hiccups. The impact should be a couple of weeks revenue at the outside."
On the other hand, because of Y2K there could be pent-up demand that will not be released until this year, according to King.
"If that's the case, this year could look very attractive indeed," King noted.
Molex isn't experiencing any problems with lead times, with the exception of a few new products such as fiber and micro- miniature connectors for communications applications, King said.
"Communications is the most buoyant part of the connector market at the moment," he said.