Passive Comp Industry Searches 2nd Feb 06-dhj

Passive component A passive component is an electronic component that does not require a source of energy to perform its intended function. Examples of passive components include resistors, capacitors, inductors, and diodes. The classic crystal radio receiver, an AM radio receiver that does not require any electricity, is made entirely from passive components. A passive filter is an electronic filter made entirely from passive components. Compare to active component, an electronic device that requires a source of energy to perform its intended function.

RESISTOR A resistor is a two-terminal electrical or electronic component that resists the flow of current, producing a voltage drop between its terminals in accordance with Ohm's law. The electrical resistance is equal to the voltage drop across the resistor divided by the current that is flowing through the resistor. Resistors are used as part of electrical networks and electronic circuits.

CAPACITORS An electronic component that stores an electronic charge and releases it when required. It comes in a huge variety of sizes and types for use in regulating power as well as for conditioning, smoothing and isolating signals. Capacitors are made from many different materials, and virtually every electrical and electronic system uses them.

INDUCTOR An inductor is a passive electrical device that stores energy in a magnetic field, typically by combining the effects of many loops of electric current.

diode

Types of diodes In electronics, a diode is a component that restricts the direction of movement of charge carriers. It allows an electric current to flow in one direction, but essentially blocks it in the opposite direction. Thus the diode can be thought of as an electronic version of a check valve.

Prices keep dropping despite strong demand.(PASSIVES UPDATE) Purchasing; 8/11/2005; Roos, Gina

Buyers can expect continued price erosion for most passive components despite healthy demand and increases in raw materials costs for suppliers. Many passive component suppliers say they're expecting 5-6% price declines this year, although pricing for some products has declined more. The price drops are occurring although most suppliers report that unit demand is increasing in the 10% range. Component manufacturer KOA Speer, for example, expects dollar growth in the 35% range in 2005, but unit demand will increase 10-15%. "Over the past three years, dollar growth has stayed flat to slightly-up with units growing tremendously," says Jeff Rice, vice president of sales and marketing for the Bradford, Pa.-based company. Oversupply and competition for market share by Asian component manufacturers are blamed for price erosion. "It's still a buyer's market. Price pressure is still there although I'd like to say it's abated," says John Denslinger, vice president of sales for Murata Electronics North America in Smyrna, Ga. Resistor manufacturers are dealing with more severe price decreases. Price declines for surface-mount resistors is about 10-15% a year, says Rice. Facing an oversupply situation, resistor manufacturers are attempting to maintain their market share by dropping prices, which is expected to keep pricing on a declining trend through to the first quarter of 2006, according to Anny Li, industry analyst for iSuppli. Rising prices for raw materials combined with China's leading resistor suppliers expanding their production capacity this year, has resulted in lower profit margins for resistor makers in the 5-8% range, says Li. While the capacitor market looks a bit better, manufacturers, particularly those in China, continue to add ceramic capacitor production capacity so there continues to be downward price pressure on surface-mount aluminum electrolytic capacitors. The good news for buyers is that there shouldn't be any availability problems for capacitors in 2005.

In general, leadtimes for resistors and capacitors remain stable in the six- to eight-week range, while deliveries for standard inductor lines are about eight weeks. The only devices that capacitor suppliers say they need to keep a close watch on in the second half of the year because of the seasonality factor, is low-equivalent series resistance (ESR) capacitors. Those devices are often used for wireless applications as well as cell phones, consumer devices, game consoles, PCs, and plasma screens. Low ESR devices are in greater demand "because of the efficiency of the power conversion that is needed particularly for wireless applications because the circuits are more sensitive to noise," King says. Currently, iSuppli says that low ESR and high-temperature aluminum electrolytic capacitors are holding steady, and tantalum capacitor suppliers continue to focus on the higher margin, low-ESR products so there should be sufficient supply. Capacity is also tightening for other specialty products such as high capacitance/voltagetype parts, where leadtimes are about 12 weeks. The high ground To offset eroding margins in the commodity areas, many passive component manufacturers have turned their attention to high-end or application-specific markets. To remain a healthy, profitable company, passive component manufacturers have to be in both the commodity and noncommodity markets, says David Valletta, senior vice president of global strategic sales for Vishay Intertechnology in Malvern, Pa. Commodity products keep the plants full and operating, but those parts have lower margins so the focus is always on being a low-cost supplier and having manufacturing in low-cost regions, he says. However, profit can be derived from noncommodity products that provide a technology advantage. The complexity of specialty parts is one reason why commodity manufacturers don't get involved with high-end component manufacturing, says Willie King, vice president of marketing for AVX in Myrtle Beach, S.C. There is limited competition, and with only niche players it tends to keep the prices up and help maintain margins, he says. Denslinger says Murata and other long-term players have embarked on a couple of strategies including moving into more application-specific designs as well as exploiting technology areas not yet attainable by low-cost competition such as Chinese suppliers. Application-specific designs include high-frequency, high-voltage, high-capacitance and low inductance devices. KOA Speer, while also moving into high-end product lines such as current sense resistors and LTCC technology, is also expanding its breadth of product offerings into magnetics including inductors and ferrite beads, as well as capacitors.

One of the reasons for the product line expansions may be the fact that many Taiwanese suppliers are now entering the value-added resistor market for the higher margins, which has caused the price war to spread into the high-end arena, according to iSuppli's Li. Another key way that passive manufacturers are offsetting low margins is by continuing to move their manufacturing production into low-cost regions. Many manufacturers such as AVX, have moved manufacturing facilities into Asia, China and Malaysia, as well as Eastern Europe, including the Czech Republic. Still, many of them are maintaining U.S. manufacturing facilities for specialty devices that require a much tighter relationship with their customers. High-end customers value their relationships with operations and sales where they develop new solutions by working hand-in-hand, and they value performance and quality levels, King says. These customers are primarily in aerospace, homeland security, instrumentation, medical, and military markets. The business model in the U.S. now is not a high-volume commodity market, King says. "We used to have major OEMs manufacture in the U.S. but today you won't find much high-volume manufacturing in the U.S., so what's left is distribution with a lot of second and third-tier accounts and a lot of prototyping by the major OEMs through the contract manufacturers. Therefore you don't get the high-volume/low-mix, you get more of the high-mix/low-volume type of product," he says. However, some suppliers have opted out of manufacturing in the U.S. altogether. Murata, for example, has gone from a full-fledged manufacturing enterprise in North America to a resale organization with the closure of its U.S. factory. As a result, the company has focused on improving its global systems to better utilize its overseas factories for supply. The company has not only improved its IT systems, but its supply chain, logistics and warehousing, and should be on a common platform by year end, Denslinger says. Similarly, a big focus for Vishay over the past year has been streamlining its logistics processes with all divisions on a single SAP system, allowing for what can be best described as a virtual global warehouse. As part of this initiative, Vishay started to implement its' "one-face-to-the-customer" program so customers could deal with Vishay as a single entity regardless of product, as well as to shorten the supply chain. Ready for RoHS One of the biggest issues that passive component makers have addressed this year, is the European Union's Restriction on the Use of Hazardous Substances (RoHS) directive. While many passive leaders have been working to convert their lines to lead-free over the past several years, they believe there could be a problem with too much lead-bearing inventory in the supply chain. Although all equipment, with a few exceptions, needs to be RoHS-compliant by July 2006, companies need to start procuring products around September because they have to

start manufacturing in January in order to have product ready for shipments in April and on the shelf by July, King says. Most leading passive component manufacturers, including AVX, Murata, KOA, and Vishay, embarked on RoHS-compliant programs a couple of years ago, and have transitioned all of their products to RoHS status. Most will also continue to offer both lead and lead-free devices as long as there is customer demand. One exception may be Murata, which says it doesn't sell any products that aren't Rolls compliant, except through the distribution channel. However, the company will honor its commitments on a conversion schedule for selected customers. Denslinger says the biggest customer concerns are more administrative than technical, such as what to do with new part numbers, and how to handle change orders. The distribution channel is also wrestling with the RoHS issue in terms of preparing for the changeover and dealing with transitional stocking issues while not being burdened with excess lead-bearing inventories. Another big issue is managing the inventory crossover, particularly because not all suppliers are changing part numbers to indicate RoHS-compliance or lead-free status, Denslinger says. Some suppliers are indicating compliance by lot code or cutover date so it's not easily recognizable, he says. Valletta agrees. Distribution is working on leaner margins and the industry's ability to carry inventory is impacted by customers' progress in their conversion to lead-free, he says. "With the distribution business based largely on inventory it has caused them to hold back a little bit." "Another big challenge is that not all of our customers are ready to transition to lead free so we're running into some [temporary] capacity crunches because we have switched over and our customers haven't yet," Valletta says. However, he notes that all of Vishay's passive components are backward compatible, which means they can withstand both lead and lead-free processing. Inventory will also be an issue because of the sheer number of items along with the transfer of information to customers, Valletta says. Vishay has had to set up an entire team to deal with customer requests by part number. Rising materials costs for metals such as nickel and copper and oil-based products such as for solvents and plastic carrier tapes are also contributing to decreased margins. But suppliers still expect minimal growth, thanks to rising demand from several key sectors, including cell phones, digital TVs, game consoles, and other consumer products.

Despite Designers' Best Efforts, Passives Persevere.

Power Electronics Technology; 7/1/2005

Byline: John H. Day, Contributing Writer Almost every day, it seems, semiconductor devices are introduced that reduce the need for capacitors, resistors and other passive components in power electronics equipment, but manufacturers of passives say that demand for their products remains strong. That's because of the size reductions and performance improvements they've made over the past 30 or more years, and because lower passive components counts per pc board are largely offset by the huge increase in the number of boards being shipped. The passive components industry, however, has changed in a couple of significant ways. For one, its center of gravity has shifted to Asia, and for another, passives suppliers and IC vendors work more closely together than they did in the past. "Thirty years ago, there was a robust passive components industry in the United States, and it stayed healthy into the late 1980s, when business began flowing to Asia because of the manufacturing cost benefits," said Rich Hannon, a senior engineering fellow at Astec Power (Carlsbad, Calif.). Advances in silicon integration also have made an impact, often reducing the need for passive components in power supply designs. For example, Hannon cited the ADM1041, a secondary-side power supply controller that Astec worked closely with Analog Devices (Norwood, Mass.) to develop. The IC replaces hundreds of discrete devices, eliminating the need for manual calibration and adjustment and lowering a power supply's component count by up to 70%. However, despite the power IC designer's ability to eliminate some passives, they still play vital roles in most power-management applications. And power chip developers now must pay greater attention to the passive components that will be used with their components. "We keep hearing about the death of passives, but they keep reappearing," said Jim Williams, staff scientist at Linear Technology Corp. (Milpitas, Calif.). His firm, like other integrated circuit developers, keeps in close contact with passive component suppliers. As recently as the early 1990s, Williams noted, "Our customers' design engineers knew a lot more about their end applications than we did, and they asked very specific questions about line items on our data sheets." By contrast, designers today want solutions that include passive components as well as semiconductors. "They'll tell us what the power and size constraints are, and what performance is required, then they rely on us to produce a board-level solution. That's been a huge sea change," said Williams. "The days of selling an IC based on its specs are long gone, and it means that we have to be aware of what passive component suppliers

are offering, so we can recommend what particular passive devices are needed to make our parts work in each application." "The market for passive components is growing and will continue to grow," said Dave Valletta, senior vice president, worldwide strategic sales, at Vishay Intertechnology (Malvern, Pa.). "Capacitor usage is up tremendously," he added, citing the power proximity requirements of higher-speed microprocessors as one contributor. Acknowledging the trend toward integration of passive functions into integrated circuits, Valletta noted that most integrated devices still require support from passive components. "Historically, the semiconductor and passive components industries have tended to grow in parallel, with semiconductors leading and passives trailing by approximately six months," said Valletta. There have been two major trends in passive components technology, especially for capacitors and resistors," Valletta continued. "The first is to make components smaller, and the second is to increase their power-handling capacity or other performance characteristics." "When I entered the business in 1972, we'd make a 104 (0.1-[micro]F) capacitor - a common building block - in a 1210 case size. Today we can make it in an 0402 or, at lesser voltage, in an 0201, or about a magnitude smaller than it used to be," recalled John Denslinger, executive vice president of sales and marketing at Murata Electronics North America (Smyrna, Ga.). The size reduction re-sulted in part from the use of ceramic materials such as barium titanate, which offer a higher dielectric constant than most other materials. "Ceramic sheet thickness used to range from 10 to 30 microns, but now we can produce film or cast sheet dielectric materials in the submicron range. The semiconductor industry has gone to nanotechnology, but so have passive components," said Denslinger (Fig. 1). "Years ago, a 1-[micro]F capacitor might be half an inch long. Today, it's about the size of a grain of rice," said Jimes Lei, application engineering manager at Supertex (Sunnyvale, Calif.). "There's been a huge improvement. A 1-F capacitor the size of a garbage can is now the size of a nickel. It's the same with resistors; what used to be 0.6 in. is now 0.03 in., or about 20 times smaller." Passive component packaging also has evolved. Caddock Electronics (Riverside, Calif.) is credited with pioneering the use of semiconductor packaging, introducing resistors in TO-220 packaging (Fig. 2). Other vendors soon followed suit. Passive suppliers are continually moving to new materials. In the resistor area, carbon composition resistors have given ground to metal or thick film (Fig. 3). Similarly, there have been material changes in familiar capacitor types such as the electrolytics.

"Capacitor makers are moving from manganese dioxide (MnO2) to an organic semiconductor (Oscon) electrolytic material that offers lower impedance," said Astec's Hannon. "The biggest trend over the past few decades has been the migration from leaded to surface-mount devices," said Vishay's Valletta. "Leaded parts are still out there, and we sell a lot of them, but they were huge compared with today's higher-end surface-mount parts." Hannon noted that the migration from through-hole to surface-mount resulted in denser, lower-cost products, in large part because there is so much less material in surface-mount parts. "Surface-mount was a turning point in terms of cost," Hannon said. "With components automatically inserted, as opposed to manually inserted, there's been a 5-to-1 reduction in resistor sizes for the same power-handling capacity," added Sarkis Nercessian, chief engineer at Kepco (Flushing, N.Y.). "In capacitors, there's been a 10-to1 size reduction," he said. "Since the 1980s, when surface-mount technology caught on, passive components are much smaller and offer lower inductance and higher frequency performance," observed Ken Scott, vice president of engineering at the Westcor Products division of Vicor (Andover, Mass.). "Power density has increased tremendously," he added, "from a handful of watts, back in the days when power supplies were linear, to over 1000 W/cu in." Surface-mount technology "crept in over the years," according to Scott, and while it's the dominant assembly technology, applications remain for through-hole components. He cited inexpensive, silver-case power supplies for computers as one example, suggesting that if there is no significant cost advantage to be gained from moving to smaller components, manufacturers are likely to keep the larger parts with which they are familiar. Precision increased as part of the migration to surface mount, according to Joseph G. Renauer, principal designer at Texas Instruments Plug-In Power Solutions (Warrenville, Ill.). "Thirty years ago, you had to pay a premium for 1% tolerance resistors. Now there's no cost premium - 1% is standard," Renauer said. "A resistor with 0.1% tolerance [used to] cost anywhere from $0.30 to $1, but now you can buy it for a nickel. The price of precision has come down. Manufacturers are using laser trimming or precision abrasive trimming in volume, cost-effectively." Renauer added that the use of newer materials in passive components enabled higher switching frequencies. "In the mid-1970s, 50 kHz was pretty much the standard," he said. "When everything was through-hole, designers were limited by the stray inductance of the wires and the leads. As things got smaller, there was much less stray inductance, so 500 kHz doesn't raise any eyebrows now." Not every product family benefits from new materials or processes. "The [wirewound power] resistors we make are exactly the same as they were in 1932. They haven't

changed at all. Neither the materials, nor how resistors are made, or how they are being applied has changed," said Kirk Schwiebert, director of marketing at Ohmite Manufacturing Co. (Rolling Meadows, Ill. "More options are available today than were available 70 years ago, but wirewounds are probably still the best option for high-current applications" (Fig. 4). "Back in the 1970s, for requirements above 1 W, you had to use wirewound resistors, which are inductive by nature," recalled TI's Renauer. At that time, he said, the market was dominated by linear power supplies, and switching regulators were scarce. "Now the situation is just the opposite," Renauer continued. "The threshold is 5 W to 10 W, with linear supplies used below that, though there are some switching regulators that can perform cost-effectively at the 1-W to 2-W level. Thirty years ago, linear supplies were used at the 100-W level and beyond. You could warm your office with that on a cold winter day." International Components Corp. (Hauppauge, N.Y.) still sells a series of miniature polyester film capacitors that it launched in mid-1977. The units were said to have "leads welded to the foil for positive contact, minimizing contact resistance and intermittent connections." The capacitors offered "a multiple epoxy coating that ensures resistance to humidity and soldering iron contact damage." "We still have customers who prefer this product, which is inductively wound and very compact - smaller than a lot of other products with the same capacitance values," said Irwin Friedman, president of International Components. "Tantalums are smaller, but quite a bit more expensive." They can also be dangerous. Astec's Hannon said designers are shying away from tantalums. "They can't be sold in Japan because of the danger of explosion." "Back in the 1970s, sometimes a capacitor might be labeled wrong and connected wrong, and when you'd turn on a product, it would explode, and a smell would fill the area, if you didn't burn up the place," recalled Bob Leonard, product marketing manager at C&D Technologies (Datel) Inc. (Mansfield, Mass.). "A tenth of a penny capacitor in a telecommunications product catches fire and destroys a lot of expensive equipment," Leonard said. He added that the temperature performance of capacitors was also a problem in the olden days. "The quality of capacitors and other passive components has evolved," he said. The raw earth materials from which passive components are made have been improved, according to Vishay's Valletta, as have the processes used to manufacture them. One result has been a dramatic improvement in product quality. "The difference between the passive components available today and those of 10 to 20 years ago is day and night," he said.

"It's the process improvements that have allowed us to make parts so much smaller and so much more reliable. Normally, when you shrink the size of a device and add more functionality, reliability can suffer, but processes and materials have made a difference." Performance-wise, Valletta noted that a 50-layer MLCC was ample 10 years ago, whereas 100- and 200-layer devices are common today. Beyond smaller size, improvements to passive components benefiting power supply manufacturers include better thermal characteristics and increased control over parasitics, both resulting from planar magnetics technology, according to Paul Greenland, director of marketing for power management products at National Semiconductor Corp. (Santa Clara, Calif.). "In the past, it was necessary to design for worst-case conditions," he said. "Now, manufacturing processes are more consistent, and components can be designed for better efficiency." He cited the move from hand winding to automatic winding of transformers as another sea change to benefit power supply makers. "There have been major developments in dielectrics for electrolytic capacitors - like the migration to organic semiconductor electrolyte - and we've seen refinements in multilayer ceramic capacitors," Greenland continued. "Capacitors today offer higher capacitance values for a given case size and voltage, [and] also higher ripple current. Manganin alloy and other new resistor materials have produced better temperature coefficients and stability." Innovation in the passive components industry has been both evolutionary and revolutionary, according to AVX applications manager Chris Reynolds. "In the last two or three years, we've seen an evolution to higher capacitance and higher voltages in ceramic and tantalum capacitors. In ceramic capacitors, the difference is due to the spacing between electrodes, the number of electrodes that can be stacked and the dielectric constant of the ceramic material," Reynolds observed. According to him, reducing the thickness of dielectric layers by half results in a quadrupling of capacitance, while reducing the separation between ceramic layers results in a doubling of capacitance. AVX said its medium- to low-voltage, high-capacitance multilayer ceramic capacitors are designed to support the trend toward smaller capacitors with higher-capacitance values as well as to conserve board space and minimize component counts. Reynolds said AVX used advanced manufacturing technologies to produce thinner dielectric layers, and also benefited from enhanced material performance. The capacitors, which target output filter and decoupling applications, feature a base metal electrode system. Other passive component industry landmarks, according to Murata's Denslinger, include a widespread shift away from precious metals to base metal for cost reduction; Restriction of the Use of Certain Hazardous Substances/Waste from Electric and Electronic Equipment (RoHS/WEEE) compliance and multilayer substrate packaging. AVX's Reynolds said RoHS requires the most significant change in soldering since Roman times. "It's more a political issue than a technology issue," he said. "Manufacturers will be required to replace materials considered hazardous with materials

that are usable, but may not be as good. Then they have to be sure that their parts are compatible with the old as well as the new processes." Reynolds said that for the past several years, customers have been investing in new equipment for higher-temperature reflow soldering. Customers have dealt with soldering issues before. "The tendency in factories today is to want everything in surface mount," said International Components' Friedman. "The components are placed on a board, and the board only has to go through the solder process once. But manufacturers didn't have that option in the early days of surfacemount technology. Some components were surface mount; others had to be inserted by hand, and there were different temperature requirements in production for surface-mount versus leaded devices, which meant two different soldering processes."

Recovery builds for resistors, capacitors: strong end equipment demand means buyers can expect longer leadtimes and higher prices for some passive components.(passives) Purchasing; 8/17/2004; Roos, Gina

Growing global demand from several end market segments including computers, consumer electronics, medical and wireless communications is driving price stabilization for passive components. Most leading passive component suppliers say the rate of price declines has slowed, and for some products where leadtimes are extending, buyers should expect pockets of price hikes. Rising demand coupled with price increases translates into a growth market for passive components in 2004, say industry analysts and suppliers. Researcher Frost & Sullivan forecasts that the global capacitor market will grow to $13.13 billion in 2004, up from $12.4 billion in 2003, and the resistor market will reach $2.27 billion, up from $2.17 billion in 2003. Although suppliers say there is increased demand across the board from several vertical markets, they expect much of the growth to come from the cellphone market. There are also strong indications that the telecommunications infrastructure market is starting to pick up. The only sector experiencing no growth is automotive, but suppliers say it will pick up again as auto dealers implement new buyer incentives. "We're looking at double-digit growth, driven by across-the-board demand and distribution," says Ron Sullivan, vice president of sales and marketing for BI Technologies.

The first half of 2004 will be very healthy and that is very encouraging, says Allan Cole, director of sales and marketing for IRC's Wirewound and Film Technologies (WAFT) Division, a subsidiary of TT electronics plc. "The doldrums that we've been saddled with over the past three years seems to be replaced with a more healthy and robust market not only in North America, but also on a global business," he says. Suppliers are optimistic that increased demand for passive components will continue into the second half of 2004. Mark Burr-Lonnon, chief executive for Yageo Corp. says business picked up globally in the first two quarters of 2004. "Our business is up more than 20% year-on-year. Some of that is due to price stabilization and we've been able to increase prices for some products," he says. Burr-Lonnon believes the remainder of the year will remain strong; unit consumption will climb and prices will continue to rise throughout the year. However, some report uncertainty in the market. "We started the year with strong indicators of growth but in May and June we're seeing a small correction in terms of demand level," says John Denslinger, executive vice president of sales and marketing for Murata Electronics. Despite the current uncertainty, Denslinger is forecasting a very positive second half due in part to the introduction of new cell phone models later this year with increased passive component content for digital camera features, color LCDs and multiband requirements. "This is a great sign for the second half of this year," he says. Smaller case size capacitors, particularly for 0402 and 0201, are taking the lead in spaceconstrained applications such as cellphones and small consumer devices. However, as the telecommunications infrastructure business continues to grow over the next 12 to 18 months, it will drive a lot of demand for higher capacitance value and larger case size devices, says Ravi Sastry, vice president of worldwide marketing for Kemet Electronics. In general, product strategies for passive component manufacturers continue on the same track. For capacitors, the trend is to continue to offer the smallest packages and pack more capacitance in the next smallest case sizes. Some suppliers like Murata are also moving into specialized areas such as high voltage, low equivalent series inductance (ESL) and low equivalent series resistance (ESR). For instance, Kemet continues to advance its tantalum product business with low ESR products, smaller case sizes and higher capacitance value parts, and to offer advanced ceramic parts that offer higher capacitance in smaller case sizes. Others are focused on providing design work and value-added type products, emphasizing niche products providing lead-free components to meet compliance to the European Union's Reduction of Hazardous Substances and Waste Electrical and

Electronic Equipment initiatives in 2006. But still, passive component manufacturers face a number of challenges this year, including increased competition from Asian suppliers, rising materials costs, and a continued trend to move manufacturing to China. Buyer headaches Buyers will also have to deal with several key issues. One of them includes price hikes for larger case sizes as component manufacturers place more focus on producing 0603 and smaller case size parts. This resulted in slightly longer deliveries for the larger devices earlier in the year but as manufacturers increase production capacity, leadtimes will improve. To ensure steady supply, suppliers say that buyers need to provide forecasts even if they don't want to place orders months ahead of time. In many cases, suppliers can provide product from stock to four weeks for forecasted demand, while unplanned demand means longer leadtimes in the six to 12-week range. [GRAPHIC OMITTED] Leadtimes are stretching for several component types. Deliveries for some resistors, particularly current sense resistors, have stretched from 6-8 weeks out to 12-14 weeks, and several non-commodity products are also stretching from 5-6 weeks to 9-11 weeks. In general, suppliers don't expect allocation issues this year with capacity utilization ranging between 75%-95%. Buyers need to keep an eye on rising materials costs, too. A few suppliers report rising costs for metals, ceramics and inks that may drive up component prices throughout the year. "Materials suppliers held off from increasing prices over the past three years because demand was so slow," says Steve Wade, director of sales and marketing, IRC's Advanced Film Division, "and now that demand is up they have the ability to negotiate for some price increases." Wade says materials prices are going up as much as 15%. "We've had an across-the-board increase or at least an attempt to increase prices for just about every raw material we use," he says. Some suppliers such as Kemet see price hikes for high capacitance values and lower ESR products, but how much prices will climb is still difficult to determine, says Sastry of Kemet. Buyers should also start taking a closer look at lead-free components. One of the key concerns has been that the higher temperatures involved in the reflow process have a tendency to crack some of the components, says Keith Robinson, industrial manager for electronic components and surface-mount technology for Frost & Sullivan. This will result in a new class of defects, he says.

Some of the early OEM adopters are seeing their repair and rework costs climb as they start to evaluate the lead-free process. So some of the component manufacturers are trying to develop better components that will handle these processes, Robinson says. More competition Sastry says one of the biggest challenges is trying to determine what the cycle changes will be going forward in the passive component market. "It's becoming more difficult to determine due to a couple of factors including the crash that occurred after the bubble, more players in the component market especially from Asia, and additional links in the supply chain that include the component manufacturer, distributor, EMS providers and end customers," Sastry says. "A lot of the dynamics have changed over the past five years." A big concern for suppliers is continued price pressure from Asian suppliers. In some cases, these pricing headaches will mean a change in business strategies. Although competitive price pressure has eased up in many Asian countries there is still a significant drive to maintain prices or push them lower, but overall price pressure has waned quite a bit, Denslinger says. There are a number of ceramic chip suppliers from China and Taiwan that have now become part of the approved vendor list process with major global customers, says Sastry. "They drive increased capacity even in a down market and they tend to drive lower prices. We have to make sure that we're competitive against those players," he says. Selling on function, value and features, not just on price is one way to stay ahead, Cole of IRC says. "Pricing pressures for noncommodity resistors hasn't been as severe as it has been for commodity products," Cole says, "but we have to recognize that suppliers in Asia are real competitors. In some cases, they appear to strictly offer a good price but customers are not sure about who they need to talk to when there are problems," he says. There is some uncertainty about component quality from some Asian and Chinese suppliers, which means there could be some risk involved in sourcing from them.