A common thread running throughout the component market is rising demand, which crosses a variety of end market sectors, contributing to passive component shortages.

By Gina Roos, editor-in-chief

The first rumblings of a components shortage
were heard in late 2016. Scarcity became a
sobering
reality
in 2017 as rising demand spread across industry sectors. But many
component manufacturers questioned whether the uptick in demand was real,
leading to their reluctance to ramp up production capacity. Component
manufacturers weren’t ready to invest in factories, fearing a repeat of the
2000 industry downturn marked by ballooning inventories and rock-bottom
pricing. This contributed to further supply constraints.

What’s made the situation worse is that many
suppliers have decided to obsolete many of their parts at the same time,
widening the supply gap. Distributors report that many Japanese passive
component manufacturers are dropping their legacy commodity lines and shifting
production over to newer products, creating further sourcing challenges.

 Currently, many MLCCs and resistors are on
allocation or are quoting lead-times well into 2019. But the supply shortages
are spread across capacitor technologies including aluminum electrolytics, film,
and tantalum, as well as inductors and all types of resistors.

Industry
players don’t expect to see much relief until mid-2019 and some think shortages
will last well into 2020. As part of AspenCore’s look at the current state of
IP&E component shortages, EPSNews has polled leading passives suppliers
AVX, KEMET, Murata, and Vishay to find how they are meeting supply challenges
and helping their customers stay up-and-running.

Like most major ceramic capacitor makers, AVX Corp. is dealing with constrained supply for almost all
its ceramic products. Tantalum capacitors in the “A” case and some specialty
module products are also scarce. Although AVX isn’t specific about current lead
times for these products, they’re expected to remain extended for the next
several quarters despite additional production capacity coming online this
year.

Lead times are all over the map, said AVX’s Senior Vice President
of Global Marketing Eric Pratt. MLCC lead times for strategic customers could
be 12 weeks while lead times for new customers stretch to one year. Similarly,
lead times for A-case tantalums could range from six weeks to six or eight
months.

“It just depends,” Pratt said. “Lead times become less meaningful
in a shortage
market
. A more meaningful approach is to look at what a distributor is
quoting for lead times, and what you look for is lead-time trends.”

Distributors report that lead times continue to extend.

  • TTI Inc. reports constrained
    supply

    for AVX’s commercial and automotive ceramic capacitors, select values in 0201
    through 1812 case sizes, and low and high capacitance/voltage (CV) values in
    X5R, X7R, X7S and Y5V dielectrics.
  • Future Electronics said all of AVX’s automotive ceramic capacitors
    are sold out and 44 series of parts are on allocation, according to its Q2 market
    conditions report
    . The distributor also noted that lead times
    for AVX’s surface-mount ceramic capacitors is 24+ weeks and increasing, while
    lead times for leaded ceramic devices remain stable at 18 to 20 weeks. AVX also
    is experiencing long lead times across all case sizes for tantalum capacitors,
    currently quoted at 14 to 20 weeks and increasing.
  • Independent distributor Fusion Worldwide reported in August that AVX’s
    MLCC lead times are extended to 52 weeks in some cases; and common series,
    including 08055C, 06035C and 04025C103/104, are on allocation and facing price
    increases. “AVX order levels for MLCC products have reached levels never seen
    before in our industry,” said Fusion. “Their customer backlog has reached a
    point that greatly exceeds their ability to produce.”

Price increases are also all over the map. While AVX is not
“aggressively” raising prices to strategic customers, prices have been
increasing. Tags for some product mixes have gone up by 25 percent, while
others have doubled this year. Most component manufacturers report that price is
not the issue right now for buyers or designers — it’s getting inventory.

Widespread
demand

A common thread running throughout the component market is rising demand,
which crosses a variety of end market sectors. “What’s different about this
cycle is the demand is more diverse,” said Pratt. “If you look back to the implosion
in 2000, that was primarily driven by the infrastructure market; then there was
the financial meltdown in 2007/2008. Unlike those cycles, what we see now is
true demand because it’s coming from diverse markets.”

Pratt cites handsets, mobile communications and infrastructure —
especially with 5G coming –as major consumers, along with IoT, including
automotive – vehicle-to-vehicle communications and autonomous driving.

“With a lot of the new designs and forecasts we anticipate demand
to remain very strong,” Pratt added.  “We
try to support new designs when we can. It’s a balance.”

Security of
supply

Security of supply for passives is becoming a bigger concern for
customers. Typically, passives availability is not a high risk for buyers and
designers. Many are priced at less than a penny.

“These parts have been in short supply for over a year and
companies aren’t shipping their end products because of these ceramic
capacitors,” said Pratt. “They’ve become a much more strategic product.”

 “Certain customers,
particularly in the distribution channel, continue to increase their long-term
orders to secure future availability,” said John Sarvis, AVX’s chairman,
president and CEO, during its Q1
2019 Earnings Conference in July
.

 Customers are looking three
to five years out, explained Pratt. “They are looking for longer term support for
their product, and it’s a good thing. There is a lot more communication and
transparency on what the demands are coming. We encourage that. We’ve always
looked at roadmaps and developed joint roadmaps with our strategic customers. The
communication has to get much better than what it is.”

That type of process is very standard for more complex design
products, he added. “You’re very involved on the upstream with the design
efforts. There is a lot of collaboration on what works and what doesn’t,” said
Pratt.

Finding
alternative solutions

Preventing customer downtime is an ongoing process, said Pratt. “It’s
happening multiple times per day in this market. We have a dedicated team that
works with customers on what their requirements are. Everybody in management is
engaged all the way to the CEO.”

The volume of the shortages is so large that it “just needs to be
manned a little differently, putting more resources into communicating with the
customer on our planning, product and control sides,” added Pratt.

The key is timely communication. “Some of these situations become
their own mini research project where we are looking globally to find inventory,”
said Pratt. “A lot of it is automated, but the visibility in the supply chain
is not as good as we’d all like. So we work with our distributor partners and
try to match them up with product they may have.”

Increased demand for tantalum capacitors in an A case may be due
to designers using them as replacements for MLCCs. These capacitors can be used
in all types of applications – automotive, industrial, medical, PCs, etc. – that
currently implement a ceramic capacitor.

Tantalum can also be a very viable replacement for ceramic
capacitors, said Pratt. “We’re also seeing a move to passive integration on
silicon, but that gets very expensive.”

In other cases, AVX’s application engineers work customers to
determine if another capacitor will work, such as a part with a lower voltage
or a different package size. “There isn’t an easy across-the-board replacement
alternative for the shortage of ceramic chip capacitors,” said Pratt.

Capacity
considerations

Production capacity expansion is ongoing, according to Pratt, but
there are now long lead times for equipment. The range is between nine to 18
months, he said.

AVX began one of its largest capacity expansion programs during
the middle of last year. MLCC and tantalum-polymer capacitor production was
scheduled to increase. However, expansion scheduled through 2020 has been
delayed due to equipment lead times. CEO Sarvis believes AVX will still
increase its production capacity by 18 percent to 20 percent this year.

“These shortages don’t last forever and everyone is investing so
we’ll start seeing some things free up by next summer,” said Pratt. “We have
capacity coming on every quarter and next summer we have a new facility [in
Penang, Malaysia] that will be up and running that will give us a capacity
boost.”

Pratt noted that AVX is adding capacity in all its key manufacturing
facilities for ceramic and tantalum capacitors, including in El Salvador,
Japan, China and the Czech Republic.