Rising materials costs may drive resistor prices up
Gina Roos -- Purchasing, 4/15/2004 2:00:00 AM
The resistor market is slowly recovering as inventories dwindle, unit demand increases and prices stabilize.
Component suppliers say demand from several sectors including computers, digital electronics, mobile communications, medical, industrial and telecommunications is fueling double-digit growth.
The chip resistor market is projected to reach $1 billion in 2006, up from $848 million in 2003, according to iSuppli Corp.'s latest study.
Price erosion has slowed for commodity resistors, while tags for custom or specialty productsmay rise 7-10% due to increased demand.
Rising materials costs, particularly for petroleum and nickel, may also impact prices as well as supply, say some suppliers.
Prices appeared to have stabilized in the first quarter, according to FC Tseng, director of marketing for Yageo America Corp.
Suppliers expect prices for resistors in 0805 and 1206 packages to remain stable. However, tags for resistors in 0602 and 0402 case sizes will decline about 2% in 2004.
Leadtimes are stretching for some resistors. Noncommodity resistor leadtimes have increased from six weeks last year to 12 weeks. Leadtimes for commodity chip resistors have stretched from about four to six weeks last year to six to eight weeks in 2004.
With resistor demand rising, forecasting is becoming an issue for resistor suppliers and buyers.
"One of the biggest issues that we're faced with right now is the positive change in the marketplace and little or no forecast or visibility," says Allan Cole, director of sales and marketing for IRC's Wirewound and Film Technologies (WAFT) Division.
Cole says that buyers have been used to ordering parts one day and taking delivery the next. But, with demand rising, leadtimes are stretching and suppliers need forecasts.
A lack of forecasting could impact materials supply. Allen Hilton, VP/GM of IRC's WAFT division explains that leadtimes for resistance wire, ceramics and plastics that are used for custom products are extending.
"Since they're custom and we don't have any visibility, we can't forecast very well, which is causing a problem when customers want immediately three times as much as they've been ordering over the past three years," Hilton says.
Another problem is the cost of materials. Hilton says many of its key materials suppliers are already requesting surcharges. The price of oil will drive up materials and logistics costs, and precious metals pricing is on the way up, Hilton says. "We even see surcharges for nickel."
This means that suppliers will have to pass along the price hikes in the supply chain. Although Hilton says the company is fighting the surcharges, some of the price increases are valid. "The petroleum costs and precious metals costs are what they are."
Hilton believes most of problem can be attributed to the lack of visibility, which means no one is willing to commit to a tremendous amount of inventory. So, when a big order comes in, it causes problems in the supply chain.
Although suppliers such as IRC-WAFT have been keeping customers updated on what's happening with leadtimes, they still expect to get orders expedited in four weeks without a forecast.
"It deserves to be said that times are changing. That we all have to use a different set of measurements as far as planning compared to the past 18 months or so," Cole says.
With demand growing and prices stabilizing, the commodity resistor market will experience double-digit growth in 2004. Yageo's Tseng expects 10-15% growth this year because of digital consumer electronics. The mobile phone, DVD player, digital camera and flat panel TV markets were all strong in the first quarter, he says. The specialized and custom resistor businesses will also experience growth at the same level. "We forecast [growth] in the 10-12% range, but if we use quarter one as a barometer, we may exceed that," Cole says.
IRC-WAFT sees growth from the computer, industrial and telecommunications industries, particularly for power supply applications for Internet routers, base stations and network line protection.
Current sensing is also a tremendous growth market because of the small motor controls used in various commercial and industrial automotive applications, Cole says. The key issue in current sense resistors is how much more power can the devices handle in smaller packages at higher frequencies.
"Everyone is interested in making the most efficient use of energy resources, so you'll find an increasing emphasis on being able to measure and take action on power for your system," says Keith Chipman, product manager, wirewound products at IRC-WAFT.
Similarly, David Ritchey, senior application engineer, for Yageo America Corp., says low ohmic values for current sensing in the one to 10 milliohm range also shows new growth potential.
Current sensing resistors are used in all battery circuits for consumer electronics applications, including digital cameras and mobile phones, Ritchey says, and it has become more important as these devices offer higher functionality.
Hand in hand with current sensing, miniaturization continues to be a big issue as wireless-technology OEMs want more functions in smaller handheld devices, which means less space for the battery, Ritchey says. "It's all about power management."
Wilson Hayworth, product manager for thickfilm on metal and power at IRC-WAFT also sees increased activity for its thickfilm on metal technology because it can offer both a reduction in weight and package size, particularly for automotive applications.
Initially, IRC-WAFT offered the thickfilm on metal substrate technology as an application-specific product, but within the past year, has launched a product standard offering.
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