Capacitor demand high, but so are lead times warns iSuppli

iSuppli analyst, Rick Pierson said: "Despite their tiny size and minuscule price - commonly a fraction of a cent - capacitors serve as a bellwether for demand trends in technology. This is because they are extensively used in nearly all electronic products. For example, Apple's iPad contains 702 capacitors, while the iPhone 4 has 469." According to iSuppli, while demand for aluminum capacitors remains high, so do lead times and high prices. Lead times are said to be in the 18week range - well beyond the normal 10 to 12weeks expected for these parts. The firm's semiconductor market research shows the long lead times - and the resulting increased prices - won't show any significant improvement until late in the fourth quarter of 2010, or even into the first quarter of 2011. "Making matters worse is that aluminum foil, used as the conductor in capacitors, is in short supply, adding fuel to the fire of increased prices," added Pierson. Electronics market forecasts reveal that ceramic capacitors are also averaging 18week lead times, with some products being put on allocation in view of sustained consumer demand. The hardest hit ceramic capacitors include high capacitance components and high voltage parts, which iSuppli says will take the longest to recover, as they require more capacity to build because of their longer cycle times. However, unlike tantalum capacitors, Pierson says a diverse supply base exists for ceramic capacitors, and iSuppli is seeing manufacturers commit capital in order to expand their capabilities due to high demand. "As a result of the increased capacity," Pierson continued, "combined with a slowing of consumer demand for ceramic capacitors, the segment should come back into balance by late fourth quarter." Nonetheless, iSuppli sees the potential for spot shortages here and there, and specialty products will continue to have long lead times even though overall supply will improve significantly. For tantalum capacitors, no real short term solution exists on supply issues, and manufacturers have been conservative in adding capacity given the mature nature of the products. Pierson said: "Combined with issues in the supply chain for tantalum ore, serious shortages are the order of the day for tantalum capacitors. Not surprisingly, this is the reason why lead times for the parts stretch to 20weeks and beyond." In addition, the recent downturn is said to have prompted manufacturers of raw materials for tantalum capacitors to scale back significantly. Supply chain research shows that manufacturers won't invest in further capacity without long term commitments from capacitor manufacturers. iSuppli forecasts that such problems will continue until the end of the year, with some improvements occurring in the first quarter of 2011 as raw material issues get resolved. Pierson concluded: "And depending on the mix of product and the strategic importance of the OEM, pricing on these commodity parts can be expected to continue across the board. Pricing should stabilise in the first quarter of 2011, but will remain at higher levels in the foreseeable future."