Capacitor shortage is ‘bellwether’ for the industry, says iSuppli

Rick Pierson, a senior analyst with iSuppli, says capacitors serve as a bellwether for demand trends in technology. "This is because they are extensively used in nearly all electronic products. For example, the iPad (pictured) contains 702 capacitors, while the iPhone 4 has 469." Lead times are in the 18week range – well beyond the normal 10 to 12weeks. "Unfortunately," Pierson continued, "the long lead times – and the resulting increased prices –won't show any significant improvement until late in Q4 2010 or even into the first quarter of 2011." The situation is exacerbated by a shortage of aluminum foil. Lead times for ceramic capacitors are also averaging 18weeks, with some products on allocation. "The hardest hit ceramic capacitors include high capacitance components and high voltage parts, which will take the longest to recover, as they require more capacity to build because of their longer cycle times," Pierson noted . However, iSuppli is seeing manufacturers expand their capacity due to high demand and, as a result, the segment should come back into balance by late Q4. No short term solution exists for problems with supply of tantalum capacitors, with manufacturers reluctant to add capacity. "Combined with issues in the supply chain for tantalum ore, serious shortages are the order of the day," Pierson said. "Not surprisingly, this is the reason why lead times for the parts stretch to 20 weeks and beyond." Not only has the recent downturn prompted manufacturers of raw materials for tantalum capacitors to scale back significantly, iSuppli says these manufacturers are reluctant to invest in further capacity without long term commitments from capacitor manufacturers. Some improvements can be expected in Q1 2011 as raw material issues get sorted out. "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," Pierson concluded. "Pricing should stabilise in Q12011, but will remain at higher levels in the foreseeable future."