Expect lower tags, steady leadtimes for networks

Gina Roos -- Purchasing, 10/20/2005

The average price for resistor networks and arrays is expected to decrease slightly in 2006, while leadtimes remain stable in the four- to six-week range.

Many resistor network and array manufacturers say prices have fallen 3-5% so far this year, but the rate of decline is slowing.

Price erosion could continue to slow because materials costs used in parts are rising. "Base materials such as ceramics are trending up in price but we've tried to hold prices for customers," says Ron Sullivan, vice president of marketing and sales, for BI Technologies in Fullerton, Calif. If oil prices remain high then it will eventually impact raw materials pricing so there could be a little upward pressure if anything," he says.

However, heavy competition among suppliers would make it difficult to increase prices.

To offset eroding margins, many passive component manufacturers have turned their attention to high-end or application-specific markets. Pricing for specialty or custom arrays that are developed for a specific function are a lot more stable, says David Valletta, senior vice president of global strategic sales for Vishay Intertechnology in Malvern, Pa.

Suppliers estimate that the global resistor network and array market will grow between 5-10% in 2006. North American sales are expected to be flat.

While component manufacturers report they are still doing a lot of design work in North America, it's not translating into sales dollars. "We do a lot of designs here, but they are moving offshore so consumption ends up in Asia," Sullivan says.

Sullivan expects flat sales in North America with global sales pegged at 6-8% in 2005 and 2006.

Jeff Rice, vice president of sales and marketing for KOA Speer Electronics in Bradford, Pa., doesn't expect growth in North America, but believes the global market for resistor arrays will grow as the miniaturization trend continues in telecom, computer and industrial sectors. He also sees demand growing in the automotive sector for radios.

As consumer products such as mobile handsets, MP3 players, cameras, and personal digital assistants (PDAs) continue to shrink in size, while functionality increases, there will be greater demand for passive arrays because they save board space.

"Historically growth is driven by applications that have a need to get maximum functionality into a small space," Valletta says. "What continues to be the tipping point for arrays is a value justification between the price of the array vs. the price of the discrete component."

Typically arrays are used when space is an issue and more functionality is needed.

"Buyers tend to look at the price of the array vs. the price of discrete devices. Discrete devices always come up cheaper on a piece-part basis," says Valletta.

However, KOA Speer's Rice says the cost issue is not as great as it used to be. For example, he says the price of a 0603 x 4 array, which is one of the most popular array package sizes, is getting closer to price parity with four discrete 0603 chip resistors.

Adding a little more value, particularly for space-constrained applications, is also a key factor in the choice of arrays. For example, Valletta says Vishay's CZA pi filter series for signal attenuation not only can replace four or more discrete devices with one array, it provides a mini drop-in circuit.

Smaller is also better. While the 0603 x 4 and 0402 x 4 chip arrays make up the majority of the market's consumption, products are being driven smaller, down to 0201 x 4 and 0201 x 2 packages, Rice says.

In the area of customization, Sullivan says BI is looking at more integrated passive devices, screened-on resistors, caps and inductors, and combining such components into a small subassembly. He also sees big opportunities for ball grid array (BGA), thick- and thin-film networks as well as BGA resistor/capacitor devices because they take up less space and still meet the same requirements.

Network and array manufacturers are also in the process of evaluating the industry's need for new integrated devices, including resistor/capacitor/inductor arrays and diode arrays.

One of the biggest issues that passive components makers are addressing this year is the European Union's Restriction on the Use of certain Hazardous Substances (RoHS) directive that bans the use of six substances including lead. The biggest challenge, they say, is transitioning their customers over to lead-free products. They also believe there could be an inventory imbalance between lead-containing and lead-free components as customers make the transition to lead-free manufacturing.

The biggest challenge is to have them qualify lead-free versions where they've used standard lead (Pb)-terminated versions qualified in the past, Valletta says. "For Vishay and all component suppliers we're trying to balance our capacity between lead and lead-free with customer demand. So as soon as a customer qualifies we want to switch them to lead-free," Valletta says.

Sullivan says there will continue to be demand for leaded parts. "The issue is balancing inventories between the leaded product and the nonleaded. We think some customers will want leaded product for a long time so we have to be able to support both types, which doubles the amount of part numbers that we have to manage in the foreseeable future," he says.

Sullivan adds some markets such as military and medical are very concerned about lead-free and high-temperature soldering. "Some will be reluctant to transition and there is a concern that there will be tin whiskers," Sullivan says. "We'd like to get back to one part number in the future that is RoHS compliant. That is the goal but in the meantime we will offer both."