Price erosion, no shortages, plentiful supply

Staff -- Purchasing, 1/13/2005

Buyers can expect a price erosion of between 2% and 3% for connectors in 2005 even as the global connector market grows about 7% to $35 billion. Supply will be plentiful and there will be few if any shortages.

Like semiconductors, connector growth will continue, but at a lower rate than in 2004 when the connector industry grew a hefty 17% to $33 billion, says connector industry researcher Bishop & Associates.

"The average growth of the connector industry over the past 25 years has been 7%," says Ron Bishop, president of the research firm. "So 2004 was phenomenal," especially since demand was strong across all customer segments and product types.

Demand won't be as strong in 2005 as the economies of regions slow down. And connector buyers should keep a close eye on raw materials used to make connectors. Manufacturers were able to head off demands for price drops because of rising raw material costs including precious metals. If raw materials costs rise in 2005, buyers can expect suppliers to try to keep prices flat.

As with semiconductors and capacitors, mobile communications will have a big impact on the connector industry in 2005. Connector makers see more demand for smaller connectors for use in cell phone handsets.

In particular, demand is growing for microminiature connectors—with a .3mm pitch and a height of 1.5mm—that connect boards to other boards or connect a board to a cable assembly," says Mike Picini, corporate director of marketing and planning for connector manufacturer Molex. "We are being challenged in the linear dimension of pitch, but also in the height of the product and the depth of the product," says Picini.

Picini also expects to see more demand for higher density connectors with a high pin count. "A lot of telecommunications storage and networking equipment need high density connectors because they have higher I/O (input output) requirements."