A marked decline in demand for telecommunications equipment has caused a similar reduction in demand for 2mm backplane connectors the past two years, but this connector sector is expected to slowly recover as prices stabilize and suppliers develop higher-performance devices.
Sales this year of 2mm connectors will reach $462 million, up from $437 million last year but still well below the $648 million recorded in 2001, according to Bishop & Associates Inc., St. Charles, Ill. The research firm cautiously projects that telecom industry demand will recover, with 2mm- connector sales growing at a compound annual rate of 9.3%, reaching $683 million in 2007.
"This assumes the telecom market does recover," said John Sweezy, a Bishop & Associates analyst. "If 2003 doesn't make it, 2mm-connector revenue growth rates will be more difficult to achieve in upcoming years."
Though telecom is the largest market for 2mm connectors, some suppliers are exploring other applications.
Erni Components Inc. is counting on more sales to medical and industrial customers, said Andreas Scheck, president and chief executive of the company's sales and marketing group, Erni Electronics.
Though 2mm-connector sales are no longer in free fall, neither have they been robust, according to suppliers.
"Demand is still fairly flat," said David Brearley, new-product development manager of backplane connectors at Molex Inc., Lisle, Ill. "All competitors have short lead times and hunger for business, so the competition is intense."
Vendors report abundant inventories along with short lead times. Teradyne Inc.'s 2mm connectors are available in four weeks or less, said Brian McGowan, connector marketing manager of the company's Connection Systems Division, Nashua, N.H.
While Tyco Electronics, Erni, FCI, Molex, and Teradyne are some of the better-known 2mm-connector makers, a growing number of Asian suppliers, including Japan's Hirose and Taiwan's Apfel, have entered the commodity end of the market.
This influx has helped erode average selling prices of 2mm connectors, but they are starting to stabilize.
"We think the worst price erosion is behind us," said Tim Sheaffer, product manager of 2mm connectors for the Communications, Computer, and Consumer Electronics (CCCE) Business Unit of Tyco Electronics Corp., Harrisburg, Pa. "We may see some prices erode a few percent, but it won't be as abrupt."
Sweezy estimates prices range from 3.5 to 4.5 cents per mated line for the commodity Type 1 connectors that meet Futurebus IEEE P896 specifications, to 15 to 21 cents per mated line for Type 4 connectors that incorporate internal ground shields and/or ground planes for higher performance.
Many U.S. and European suppliers are looking to Type 4 connectors to help them gain design wins in next-generation backplane systems and reap higher profit margins.
"Type 4 is clearly the direction for datacom and telecom connectors that require differential rather than single-ended signals," said Brian Burke, business development manager of Tyco's CCCE Business Unit.
In many cases, connector suppliers are partnering with each other as well as semiconductor designers to leverage design expertise and share costs while providing strategic second sources.
"Higher-speed, higher-fidelity interconnects using traditional materials are being developed through partnerships with silicon device manufacturers," said Teradyne's McGowan. The company has developed a 10Gbit/s backplane connector in conjunction with Rambus Inc.
Since 1996, Teradyne has also licensed its IP to Molex, which provides a second source for several products including the VHDM, an eight-row, right-angle male connector capable of mating 100 signals per inch.
But industry standards for advanced connectors are probably not imminent, according to Molex's Brearley.
"What makes it difficult is that you get into a minefield of IP. We don't believe there will be a standard at 5 or 10Gbits/s."