Passive-component suppliers have learned to expect some ups and downs in the marketplace. Capacitor and resistor makers are often caught on the twin horns of increasing demand from customers and a squeeze on their manufacturing capacity. This usually causes lead times to lengthen and component shortages to occur, forcing the suppliers to increase capacity.
But capacity increases have a way of kicking in just as the market begins to soften. In previous cycles, passives manufacturers have been stuck with excess capacity, which was often exacerbated by many customers over-ordering and holding inventory.
"Prices were dropping and nobody could justify the investment," said Eric Pratt, director of SuppliTools Services at iSuppli Corp., El Segundo, Calif.
Then the situation reversed, as demand shot up unexpectedly, and suppliers couldn't ramp up quickly enough. Vowing not to get burned again, passives suppliers are now looking more closely at the demand patterns and investing more cautiously in capacity expansions.
Demand is still high for ceramic and tantalum capacitors and multilayer ceramic capacitors (MLCCs). The costs of materials are affecting both markets, and analysts say prices of the components could rise even further. .
But the current high level of inventory in the pipeline is a matter of concern, said Sandy Beck, vice president of worldwide marketing at Kemet Electronics Corp., Greenville, S.C. "It's not clear at this point how much of the product is actually being consumed," he said.
This special report also looks at Yageo Corp., which has quietly entered the top ranks of passive-component manufacturers. The Taiwanese company began making a series of acquisitions in the mid-1990s, culminating in the buy-out of Philips Components last summer.
Indicative of the type of consolidation that's becoming more common in the component business, Yageo's acquisitions have helped the company broaden its offerings and geographic reach. But it could be just getting started.