Capacity is up, inventory is down, prices are down and electronics buyers can sleep well knowing capacitor manufacturers have spent a lot of time preparing for the turnaround. Industry sources say the raw materials issues that plagued the capacitor market in recent years have been rectified in the low-demand period of late 2001. When demand spikes again, there should be adequate supply.

Demand for capacitors hit bottom in mid- to late-2001 and leveled off at the low end. Prices responded in kind, plummeting through most of 2001. As a result, the capacitor market fell 30% from 2000 to $13.9 billion in 2001, according to market researcher iSuppli, El Segundo, Calif. In 2002, however, the cap market is expected to grow to $14.4 billion and most experts feel capacitor prices have gone as low as they will go, as manufacturers claim to be working at or below cost levels.

According to a recent iSuppli report, capacitor inventory should be balanced at all levels, including the supplier level by second quarter 2002.

The tantalum powder supply issues of the past have been a major focus in the industry over the last year and will not likely slow the manufacture of tantalum capacitors when orders come back. The high demand and price phase that occurred in 2000 gave most tantalum suppliers the capital to improve operations. iSuppli says suppliers of tantalum ore have increased output and now the 'tantalum supply chain is at its strongest in history.' According to capacitor maker Kemet Corp. of Greenville, S.C., one new tantalum facility upgraded in the past year has enough capacity to handle current global tantalum demand. Granted, the current demand level is very low, but the notion shows the problem is being rectified.

The one caveat seems to be that while equipment investments have increased capacity at raw materials suppliers, personnel cutbacks among component makers may temporarily slow the ability to ramp up quickly for increased demand.

Despite assurances from tantalum capacitor makers, the rampant supply problems of 2000 are still fresh in buyers' minds and many product designers are incorporating ceramic capacitors into their products for several reasons. Japanese capacitor maker Taiyo Yuden says it sees increasing interest in its ceramic products with customers citing the tantalum shortages of 2000 as a primary reason to switch.

'All of our active markets are either already using or are looking harder at ceramic capacitors,' says Katsuhisa Yokota, marketing manager at Taiyo Yuden (USA) in Schaumburg, Ill. 'For example, notebook PCs and wireless handsets-where capacitance values relative to case size are critical-are the industries we see leading this trend.'

Karun Malhotra, capacitor marketing manager at Murata, a Japanese maker of ceramic capacitors, also sees a shift away from tantalum products due to bad memories of 2000. Malhotra says ceramics have replaced tantalum capacitors in their improved electrical performance. Malhotra also says all capacitor values up to 100µF and beyond will soon be dominated by ceramic capacitors. Murata has moved away from precious metal and toward base metal electrodes to avoid exposure to raw materials supply and price fluctuations.

Many industry sources say the application will determine which type of capacitor to use. 'Ceramics have lower equivalent series resistance and equivalent series inductance,' explains Willie King, divisional vice president of product marketing at tantalum cap maker AVX Corp. of Myrtle Beach, S.C. 'This is important for power supplies and high speed decoupling.' King says tantalums have an advantage in their volumetric efficiency and capacitance within a given case size. For capacitances higher than 4.7µF, tantalums are less expensive but for capacitances less than 4.7µF, ceramics are more cost effective.

Some capacitor makers are eyeing niobium as a possible replacement material for some low voltage tantalum applications. Vishay Intertechnology of Malvern, Pa., introduced a niobium capacitor in 2001 and has seen moderate interest as buyers and designers consider its advantages and compatibility with their product designs. Glyndwr Smith, Vishay's senior vice president of marketing intelligence, says niobium competes most directly with tantalum in the mid-capacitance ranges right now.

King says AVX has a niobium solution scheduled for release in the second quarter. 'Niobium is also a potential replacement for aluminum electrolytic capacitors because it offers better electrical performances than most standard aluminum capacitors,' King says. 'Niobium fits in between tantalum and aluminum. The properties are similar to tantalum but there are some temperature and voltage restrictions with it today.'

Taiyo Yuden has not looked into niobium because of its lack of acceptance in the market, but the company agrees that most tantalum makers are looking into it.

Capacitor prices have bottomed out after a fairly wild ride in the past two years. Smith says capacitor prices have stabilized to pre-2000 levels and are expected to increase when demand comes back. Currently, the automotive market shows the most promise for demand improvement with increasing quantities of electronic components going into automobiles.

iSuppli expects demand for capacitors to grow throughout the year. Inventories are very low, with some leadtimes as short as two weeks for low-end items. iSuppli says capacitor prices will increase toward the end of the year but products between 10µf and 1F will continue to see price reductions through year end. Prices for tantalum caps are predicted to rise 3% in fourth quarter 2002 and another 8% in second quarter 2003. Expect price swings to be more pronounced than in the past, due to increased availability of market information.