The crystal and oscillator market is showing signs of reversing its slide of the past year, despite continuing price erosion and consolidation.
Suppliers are developing next-generation crystals and oscillators that combine higher frequency and lower noise in smaller packages, which they expect will give rise to higher margins.
Total worldwide crystal and oscillator revenue in 2002 was $2.3 billion, down from $2.7 billion in 2001, according to Scott Smyser, an analyst at iSuppli Corp., El Segundo, Calif. Though the second half of 2003 looks flat, Smyser projects revenue for this year to reach $2.4 billion as market conditions slowly improve.
"We've seen some stabilization in pricing," Smyser said. Oscillator prices will drop 8% this year, vs. 12% last year, but crystal prices will exhibit sharper erosion, from 6% last year to 12% this year, as vendors based in China and Taiwan continue to penetrate the market with smaller crystal packages.
"Newer crystal packages, like the HC-49, are not in shortage like they were several years ago," he said.
Crystal and oscillator makers believe pricing pressures are beginning to ease.
"We do quarterly price negotiations with large EMS companies, and their expectations haven't been as dramatic recently," said E.L. Fox, president of Fox Electronics, Fort Meyers, Fla. "One of them, for example, is willing to go to six-month contract negotiations instead of quarterly. And instead of asking for 15% to 20% lower pricing, they are asking for 5%."
Fox added that a slight demand increase has extended lead times for parts such as tuning fork, watch, and surface-mount crystals and oscillators. "Six months ago, everything had a four-week lead time; now, some parts have lead times of four to six weeks."
But other suppliers are experiencing an inventory buildup.
"The first quarter of 2003 saw a slight pickup, but that seems to have slowed in the latter half of the second quarter," said Brandon Ogilvie, manager of the marketing and e-business group at SaRonix LLC, Menlo Park, Calif. "The inventory is expected to burn off over the next quarter, with the fourth quarter exhibiting an upturn similar to the first quarter of this year."
Another part of the picture is a supplier shakeout that some say is not likely to subside soon.
In May, AVX/Kyocera announced it would acquire a 100% share of rival Kinseki Ltd. (KSS) in a stock swap. The merged companies will have combined revenue of $397 million, surpassing Epson Co. Ltd. as the second-largest supplier behind leader NDK Co. Ltd., according to iSuppli.
Smyser said the combined company will become the largest supplier of TCXO oscillators for mobile phones, capturing 32% of a sector valued at $523 million. AVX/Kyocera and KSS are the second- and fourth-largest suppliers of TCXO oscillators, respectively.
Most mergers have involved smaller companies. For instance, Valpey-Fisher Corp. acquired MF Electronics in April.
"We've seen some consolidation, but it's not been the dramatic variety that ultimately can reshape an entire industry," said Allen Pangaro, business unit director of the Timing Products Business Unit at Epson Electronics America Inc., El Segundo. "That's because most of the companies involved so far have not held a significant overall market share or position."
Many smaller vendors that resell crystals and oscillators from low-cost suppliers in China and Taiwan could be threatened as those companies establish direct sales and marketing operations in the United States, according to Smyser.
"In the late 1990s, lots of companies entered the market as resellers, but they ended up with too many products and too much inventory. Resellers are not going to survive. You have to be a manufacturer with a broad portfolio and a global presence," he said.
Indeed, some suppliers are bolstering their product offerings and adopting a global footprint.
Fox is developing more custom and programmable oscillators with higher stability, temperature ratings, and equivalent series resistance, and is also making commodity crystals in China.
SaRonix is manufacturing mid- and high-end clock and voltage-controlled oscillators with frequencies to 670MHz in 5 ¥ 7mm packages.
Discera Inc., a start-up based in Campbell, Calif., has developed a micro-oscillator machined with MEMS techniques, allowing multiple oscillators operating at different frequencies to reside on a single die. Aimed at wireless applications, the oscillator replaces several bulky quartz crystals to save space, cost, and power.
"If we can achieve the high level of performance handset makers require, we can carve out a market," said Didier Lacroix, Discera's chief executive.