Predictions of skyrocketing growth in the electronic chemicals market from a few years ago haven’t happened exactly as some had hoped. The good news is that a steady semiconductor and PCB market are allowing prices for wet chemicals and photoresists to remain relatively flat; however, prices for several key electronic chemicals are on the rise, including hydrogen peroxide, which is currently holding at 51¢/lb, up from 37¢/lb just a year ago. It’s no surprise as to what’s to blame: Natural gas.

When natural gas spiked in September 2005, it had a ripple effect throughout the chemical industry, affecting commodities created with hydrogen such as hydrochloric acid and hydrogen peroxide. According to information from Purchasingdata.com, leadtimes for basic commodity chemicals such as hydrogen peroxide hit a peak in September and December 2005 at about 12 weeks on average, but have been consistently trending downwards since then towards as low as only two weeks.

Somewhat surprisingly, acetone has until recently been on a steady down trend, peaking at 70¢/lb in August of last year. It hit prices as low as 47¢/lb as recently as April, only to creep back up slightly in the past few months.

More recently, Eastman Chemical is pushing price increases on a variety of its solvents and acetate mostly in the 4-5¢/lb range, citing raw materials increases. Celanese Chemicals is also increasing prices for all solvent products.

Ned Zimmerman, industry analyst for the Cleveland-based Freedonia Group for electronic chemicals, says the U.S. market over the past two years, “chemicals for semiconductor production have generally experienced healthy growth, although high polysilicon prices are likely leading to pressure on wet chemical and photoresist manufacturers to keep prices down.”

Zimmerman believes that “polysilicon prices have risen dramatically in the last two years due to strong global semiconductor production growth, as well as heavy investment in solar cell production that is resulting in a supply shortage.”

Robert N. Castellano, president of consulting and market research company The Information Network in New Tripoli, Pa., disagrees with Zimmerman’s assessment of the wet chemicals pricing. “In the wet chemicals market, there is always pressure and it has nothing to do with the polysilicon shortage. Semiconductor manufacturers have moved to chemical management services in the past 10 years to alleviate pricing issues,” he says.

According to an August report from The Information Network, “the worldwide market for chemicals and materials for semiconductor manufacturing grew 6.1% in 2005 and is projected to grow another 20% in 2006.”

Electronic chemicals buyers reported that, across the board, the current prices for what they buy are manageable, but they are starting to feel the pinch. Kurt Carlsen, director of strategic procurement and alliances at Air Liquide Electronics in Dallas, says that “the problem you have across the board is all these raw materials are going up in cost, the manufacturing costs are going up, and it makes for a lot of tense times when you’re out there seeing the price increases for manufacturers and the fabs are trying to reduce their costs.”

Carlsen reports that the chemicals manufacturers, in some cases, try to pass along their rising fuel costs to his purchasing price. Bill Lampert, purchasing manager at M/A-Com in Lowell, Mass., is feeling that pressure as well. With the price of the end product M/A-Com’s fabs produce every year declining, Lampert finds it harder to get price reductions from suppliers who are battling the rising fuel prices.

" I don't think it's going to be another 1999-2000 frowth period, but I think we're looking at a fairly decent market." --Mark Mirelez

Both Lampert and Carlsen also noted slight increases in volume purchased chemicals as a result of increased fab output.

Castellano points to “strength in demand for CMP pads and slurries” for the current health of the semiconductor market. “In the CMP slurry market, sales increased from $541 million in 2004 to $601 million in 2005,” he says. “There is no heavy competition in the CMP slurry market except for copper, which represents only about 33% ofthe market.”

Though use of low-k dielectrics was initially slow to pick up, both Castellano and Zimmerman say that trend is changing. “Difficulties in incorporating [low-k dielectrics] into the most advanced manufacturing processes have led many companies to implement work around,” says Zimmerman. “Going forward, however, this will be an area that cannot be avoided, particularly as the next technology node begins coming online in late 2007 and 2008.Increased competition and more advanced production processes will likely mean growth will not approach that originally forecast.”

Carlsen agrees with Zimmerman’s outlook from what he is seeing at Air Liquide. About five years ago, Carlsen says that “there was a lot of talk that the low-k and the high-k materials were going to pick up speed a lot faster. I think it’s been delayed but now things are starting to pick up, as I’m seeing a lot more work in that area.”

The reason for the initially slow pick up, says Carlsen, is that there is “no clear winner out there as far as which material to go with, so different semiconductor firms are looking at things differently.”