Booming telecom demand drives up resistor tags

By Jianfeng Pei -- Purchasing, 5/18/2000

Only one year ago, resistor manufacturers were struggling with declining prices and overcapacity. The situation is different this year. Surging demand is pushing up prices. Leadtimes are lengthening and some manufacturers are allocating product.

The tightness in supply in the resistor market is being caused by strong demand from the telecommunications industry, especially wireless communications. The surge in sales of cellular phones has triggered supply shortages of many electronics components, including resistors.

"This will be a very good year for resistor suppliers," says Steve Wade, director of sales and marketing, advanced film division, IRC, Corpus Christi, Texas. "Total demand is expected to increase 20% to 25%."

Jeff Rice, vice president of sales and marketing, KOA Speer Electronics, Bradford, Pa., predicts that demand will jump 15% to 20%.

Total sales of resistors in North America reached $1.552 billion in 1999. The market is expected to increase 8.3% to $1.680 billion this year, according to Electronic Outlook Corp.

One reason for the growth in the market is the cellular phone industry. Cell phones use a number of semiconductors and passives including resistors. Worldwide sales of cellular phones reached 283 million units in 1999, a 65% increase over 1998. This year sales are estimated to surpass 410 million units, according to Dataquest, a market research firm in San Jose, Calif.

A typical cellular phone uses about 255 capacitors and an average of 10 to 20 resistors for each capacitor. Many component manufacturers are adding capacities to ease the supply shortage. In the third and fourth quarter of this year, when new capacities are in place for capacitors and connectors, demand for resistors will be even stronger, says Rice of KOA.

Robust growth in computer and consumer electronics industries will also contribute to soaring demand for resistors. Sales of laptop computers and DVD players will remain strong this year.

The increase in demand for resistors is across the board, from discrete resistors to resistor networks, say industry sources.

Prices going up

Resistor prices had been declining in the past few years. But the trend has been reversed this year because of the surging demand. Most manufacturers are raising or plan to raise their prices.

"Prices are expected to jump 10% to 20% this year," says Wade of IRC. "This is the first time in many years that prices are going up. They will go back to the level they should be." For example, in 1,000-piece quantities, the price for 5% fixed film chip resistors is expected to increase from $1.70 to about $2.00.

Rice of KOA expects prices to increase 5% to 15%. He says that rising costs in raw materials and currency fluctuations are also pushing up resistor prices.

Most manufacturers were not prepared for the sudden reverse of the market. Only a few months ago, the industry was running at about 70% of its capacity. This year manufacturers are running at full capacity, but they still can not catch up with demand. Leadtimes have been extensively lengthened.

At IRC, leadtimes have been extended from three to four weeks to 12 to 15 weeks, says Wade. Leadtimes for 0603 and 0605-size products at KOA have lengthened from six to eight weeks to about 12 weeks, according to Rice.

For most manufacturers, leadtimes are more than 10 weeks. For some small size extended to over 20 weeks. To secure supply of resistors, some OEMs are double ordering, according to some manufacturers.

Many manufacturers are expanding their capacities in a bid to meet the soaring demand and shorten leadtimes. IRC will double its capacity by May, says Wade. KOA is expanding capacity on all products by 20% this year, says Rice.

But some manufacturers are cautious about adding new capacities. Visibility in the semiconductor market is no more than 60 to 90 days. It is hard to predict long-term market trends. The rush to add new capacities may turn the market around and the industry will end up again with overcapacity in the next few years, according to some suppliers.

Smaller and smaller

Integrated passive components are becoming more and more popular with OEMs because they can reduce overall size by putting several components on one chip or on the printed circuit board. With this technology, OEMs can place several components in a shorter period of time and reduce overall manufacturing time and costs, say experts at Frost & Sullivan, a marketing research firm in Mountain View, Calif.

To meet demand for smaller passive network packages with lower parasitic inductance, some manufacturers, including IRC, have expanded their series of integrated passive networks to include chip-scale packaging.

A typical chip-scale package measures just 2.7mm x 2.2mm with a board-mounted profile of 500 microns and ball grid array (BGA) contacts on a 0.8mm grid. "This technology can provide circuit designers significant savings in board space," says Wade of IRC.

The new chip-scale packages are expected to find extensive use in filtering and termination circuits for all types of high-speed data communication lines in telecommunications, networking and computer equipment.