Expect stable prices for resistor networks

By Gina Roos -- Purchasing, 11/16/2000

As goes the chip resistor market so goes the resistor network business. While not experiencing the same kind of shortages and long leadtimes plaguing the chip capacitor and resistor markets, deliveries for some resistor networks are stretching out to 30 weeks.

Demand for resistor networks including arrays is strong, driven by growing requirements from the communications, computer and Internet infrastructure industries. The worldwide resistor network market is expected to grow from 13 billion units in 2000 to 19 million units in 2005, at an average annual growth of 8%, according to Paumanok Publications Inc.

Several factors are impacting demand including the increasing sophistication of products and the need to save board space. There is also an increased focus on applications rather than on discrete components and component integration to increase functionality, according to Glyndwr Smith, senior vice president at Vishay Intertechnology Inc., Malvern, Pa.

"The rapid growth of conventional markets such as computers is increasing the demand for miniature resistor network components," says Matt Saltz, analyst for Frost & Sullivan, San Jose, Calif. "Newer growth markets such as the medical industry and the automotive industry are also increasing their demand for such products."

"Manufacturers of resistor networks are struggling to keep up with the demands being placed on them by electronics manufacturers to further miniaturize their products," Saltz says.

For passive component suppliers that means significant growth in the double-digit range. For instance, BI Technologies Corp. expects to grow its revenues by 25% this year.

Firmer prices ahead

For buyers, that translates into firming to rising prices and long leadtimes. In general, pricing has firmed significantly in 2000, and in some cases, prices have risen due to strong demand and increased materials costs.

Ron Sullivan, vice president of marketing and sales for BI Technologies Corp., Fullerton, Calif., says that material costs, particularly for ceramics and precious metals, have started to increase.

Overall, passive components leader Vishay has raised average selling prices between 5% to 8% for older molded and conformal coated resistor networks, and 8% to 10% for arrays and newer products. Price increases are expected to be moderate next year as the gap between supply and demand closes, Smith says.

Leadtimes for resistor networks are at an all time high, Smith says, although he expects that to decrease in 2001. The biggest demand is for the smaller case sizes, he adds.

To keep up with demand, component manufacturers continue to add production capacity, but the problem is whether they can add it fast enough.

Vishay's Smith expects that supply and demand will reach parity by next summer. Demand, incoming order rate and driving forces in the market are still very strong so it might be conservative, he says. "The book to bill is still very strong and we're already in the process of allocating our capacity for 2001."

Vishay spent $120 million in capital expansion in 1999 and this year the company will spend $260 million. "We have our most aggressive capital expansion program that we've ever had," Smith says.

Another factor in the capacity situation is that leadtimes are stretching for capital equipment needed to expand component production. And there's more bad news. Leadtimes for some resistor networks, particularly specialty packaging and thinfilm products, are stretching out to 30 weeks. For example, BI's leadtimes vary greatly between eight to 30 weeks depending on the product.

More precision networks needed

While the key technology trends in the resistor market aren't markedly different from the discrete resistor business, where users are looking for smaller package sizes and component integration, there is a surge in demand for precision thinfilm resistor networks driven by higher frequencies.

"We see more interest in precision-type products as OEMs move to higher frequencies and lower voltages," Sullivan says.

Thinfilm products can be more precise, offer tighter tolerance and better ratio tracking, he adds. BI Technologies offers precision resistor networks in both nichrome on ceramic and tantalum nitride on silicon.

Adding to the demand is that the cost differential between thinfilm and thickfilm products is not as great as it used to be, Sullivan says.

In addition, as OEMs move to higher frequencies and lower voltages, they are also looking for more integrated solutions in both passive and active products, Sullivan says.

Similarly, Smith says that all of the new demand is for arrays and thinfilm networks. "Everybody is trying to add production capacity, but when you look at demand from PDAs, wireless products, and other applications where size is critical, arrays offer the most effective and productive package," Smith says. "There are some allocations particularly for smaller sizes as well as for those with a higher number of elements," he adds.

"Traditional thickfilm networks in molded and conformal coated packages aren't quite as bad in terms of availability as compared with arrays," Smith says.

"Going forward, today's component manufacturers have to look at how they can supply the function rather than how they supply individual components. Most of the development tends to be in the thinfilm on silicon area in terms of its space versus functionality and that's the area that we are looking at the closest," Smith says.

Case in point: Vishay recently announced the introduction of its ultrafilm high-precision resistor arrays. Key features include absolute TCR of less than 10 ppm/degree C, TCR tracking to 1 ppm/degree C, ratio tolerance to 0.01% and 1-mm, 1.35-mm and 1.82-mm pitch. Vishay offers a complete family of resistor arrays, resistor networks and resistor-capacitor networks.