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.

By Gina Roos, editor-in-chief

Editor’s note: As part of our Special Project scheduled
to go live next week, AspenCore Media’s Special Project team is taking a deep
dive into the supply chain’s IP&E component shortage, identifying
high-demand markets; sourcing solutions and tips; production forecasts; and how
suppliers are working with designers and buyers to manage through this crisis.
Here’s the first of several supplier profiles.

After nearly two years of passive component
shortages
, suppliers are having difficult conversations with their
customers about keeping their production lines humming. While no one likes to
use the word “allocation,” it’s a reality. Lead times for multilayer ceramic
capacitors (MLCCs) are about 12 months, and lead times for MnO2 and
polymer tantalum capacitors aren’t much better at eight to nine months,
according to Kemet Corp.

Like other suppliers, Kemet is having a difficult time supporting
new customers whose requirements are not in its forecast.

“We don’t accept orders that go out more than 12 months because we
don’t know if that is going to be real,” said Per Loof, Kemet’s CEO. “We are
starting difficult conversations with customers about how we can guarantee supply
for a longer period of time.”

Loof also noted constraints for aluminum electrolytic capacitors,
particularly for specialty products and axial types, often used in automotive
applications. Inductors also have long lead times, but Kemet primarily plays in
the specialty niche market. However, this may change.

“We’re being encouraged to adapt our product portfolio to fit more
commonly used types of inductors instead of more specialty ones that we’ve done
in the past,” said Loof. “We have the materials science and we’re working on
that.” Kemet acquired its inductor portfolio through its acquisition
of Tokin
.

           Capacitor Lead
Times Continue to Climb

  • 1210–1825 case sizes, hi-CV: 33 weeks ↑
  • 1210–1825 case size, MLCC: 32 weeks ↑
  • Aluminum electrolytics, axial leaded: 18 weeks ↑
  • All tantalum: Highly constrained,
    no quotes

Source: TTI Inc.

 

Allocation, of course, goes hand in hand with pricing. Prices have
risen significantly over the past few years. Just in the past year, industry
prices for MLCCs have doubled.

While Kemet won’t publicly announce the degree of its price
increases, Loof said, “We are strategically looking at our pricing and
adjusting what we think is reasonable and sustainable. Our customers don’t feel
like they are being taken advantage of in a difficult situation.”

“From 2010 to 2015, there has been a 50% increase in pieces and
price declines matched, so to make the same revenue dollars, you had to make 50%
more,” he said.

Supply strategies

Capacity constraints for many passive products, including ceramic
capacitors, tantalum capacitors, and inductors, have prompted component
manufacturers to invest in production capacity expansion and help customers
manage potential downtime.

“We basically have a call from a customer to expedite, increase,
or ship something faster every three minutes,” said Loof. Kemet is working on several
strategies to keep their customers’ production lines up and running, but it’s
not always easy or completely successful.

 

“We are starting difficult conversations with customers about how we can guarantee supply for a longer period of time,” said Per Loof, Kemet’s CEO.

“If we don’t have the inventory, we need to figure out what can we
do,” said Loof. In some cases, it means shipping inventory slated for customers
— if they can wait one or two weeks — to customers who need it immediately.

In other cases, Kemet may ask distributors to return inventory, so
the supplier can send it to a customer who needs it. “We’ll replace the
inventory whenever we can,” said Loof.

Other strategies include shifting production of a constrained part
to another plant with comparable equipment and working with customers on
potential design changes. Kemet may get product to customers faster if they use
a product with a higher voltage or higher capacitance as it’s in the same
package size or if they use a tantalum part to replace a ceramic capacitor.

“All of these things are being deployed to help customers,” said
Loof. “The design changes are a longer-term issue because you have to design
it, test it, and qualify it. If it’s an automotive customer, the qualification
time is often quite lengthy.”

“There is particularly overlap with tantalum and ceramic
capacitors,” he added. “A lot of the shift from tantalum to ceramics happened
over the last 20 years, driven by a shortage of tantalum in 2000 as well as the
cost difference.”

Kemet is working on shrinking the price gap between tantalum and
ceramic capacitors, so customers can make an informed decision. But swapping
parts isn’t going to change the overall supply situation much, said Loof. “Because
of the supply shortages, these types of conversations are much more active than
they were in the past.”

Supply and demand

The MLCC shortage continues to worsen, and many suppliers and
distributors expect supply constraints into 2019 and 2020. Kemet expects
tightness to continue for at least another 12 months.

Loof believes that there is currently a 500-billion-unit gap
between supply and demand. “Supply is around three-and-a-half trillion pieces
and demand is around 420 trillion.”

“Some are surprised by the demand surge that we’ve seen over the
past couple of years,” he said. “It pushed us all to get more out of what we
have in terms of efficiency and manufacturing improvements, but there comes a
point where it’s not going to help.”

New supply is being planned and being brought online, he added. “Most
people [in the industry] talk about a 10% increase in capacity, and that is
going to deal with the [supply] issue today — not with the demand increase going forward.” The piece count for
MLCCs from 2010 to 2015 grew between 5% and 7% annually; but in 2016 and 2017,
the piece count grew by 12% to 17%.

“If demand continues to grow, we’re looking at supply constraints
for some time to come,” said Loof.

Kemet plans to invest about $100 million in 2018, of which $70
million to $80 million is allocated for production capacity increases. “The two
big chunks of spend are for tantalum polymer and ceramic capacitors,” said
Loof. “In October, we may come back and update that number and do more.” Kemet
is also investing in aluminum electrolytic capacitor capacity. “It’s a small
product line, but the demand picture is more opportunistic. We have to work on
our yields and efficiencies as well as implement aggressive capacity increases.”

Kemet also is looking at new formulations and new ways of
manufacturing from a technological perspective. That includes implementing new
or better processes, using better-quality materials, and moving to better-quality
machinery.

“I think the overall increase in the use and demand of electronics
in all kinds of segments has been driving demand,” concluded Loof. “We haven’t
even seen 5G kick in yet. We could be in for a supply shortage for some time.”