Connector suppliers say it's likely that they will have to increase prices this year because of increased costs for precious metals and plastics.

"We continue to see rising raw materials costs most specifically for gold," says Peter Krehbiel, president, connector products division, Molex in Lisle, Ill. "We anticipate price increases this year due to rising costs for precious metals and plastic resins." The last price hike implemented by Molex was last summer.

Tyco Electronics' Communications, Computer and Consumer Electronics (CC&CE) business unit implemented 5% price increases for some products in certain segments on Jan. 1. Additional price hikes are under evaluation.

Tyco has felt the impact of rising metal and oil prices. Gold is used in connectors and oil has impacted the price of plastics that Tyco uses.

"We've been hit with some pretty big material price increases over the past several months and how this is going to impact us is a little tough to tell right now," says Jeff Brown, director of product management for the CC&CE business unit for Tyco in Harrisburg, Pa.

Brown says the biggest material cost impacts have been for palladium and gold, which are used heavily in the connector industry as plating materials. "Over the last few months we've been hit on multiple fronts with a lot of the raw materials we use," he says.

Despite having very focused programs in both manufacturing and engineering groups to reduce costs, Brown says it's getting more difficult to find ways to improve efficiencies and cost to offset those raw material price increases.

The connector industry is expected to see somewhat slower growth over the next several years although it is unclear if higher materials costs are contributing to the slower growth.

Global connector revenue will grow about 7% per year to $57 billion in 2011, according to researcher Bishop & Associates in St. Charles, Ill.

In 2008, connector makers are faced with flat to down demand from several sectors including cell phones, white goods, and storage products. However, within some of those sectors there are some hot growth spots. For example, although the cell phone market is fairly flat, it's growing significantly in developing markets, says Krehbiel.

That means more connector demand although the phones used in developing countries tend to be lower-end devices with overall less electronics content including connectors.

In the storage sector, while unit shipments are up, price erosion along with more cost-effective storage products is keeping revenue growth flat, Krehbiel adds.

A bright spot in the market is telecommunications infrastructure for Internet protocols. "Internet content and video-on-demand is driving more telecom infrastructure spending," adds Krehbiel.

In addition to slower growth and higher materials costs, another challenge for the connector industry is the rollout of more Green initiatives including the move to halogen-free materials. Molex is working with a number of resin suppliers on identifying and deploying halogen-free materials. Halogen is a flame retardant. It is used in wire insulation. At this point, Krehbiel says there is no indication that the new materials being developed to replace halogen will drive resin costs up significantly for plastic components.

Brown agrees that the industry is starting to hear more about halogen-free materials. "RoHS wasn't the beginning or end of it," he says. "We continue to see those types of requirements from our customer base and they do present a challenge. It's not a trivial task to address these types of initiatives," he says.

Besides more environmentally friendly products, buyers can also expect to see speedier connectors. Connector makers are developing interconnect systems capable of supporting 10 gigabits per second (Gbits/s) or higher data rates for next-generation telecommunications and data networking equipment, even though most systems are still running at between 3 Gbits/s to 6.25 Gbits/s. Some like Molex, say they will soon introduce 40 Gbits/s and 100 Gbits/s systems.

There are a lot of technology trends that are starting to be looked at for new equipment designs, which are driving the need for a lot of new interconnect capability, says Brown. "Increasing data rates through a lot of this equipment is a continuing trend but the jumps in speed they want to make continue to be ratcheted upward," he says.

This has driven several high-speed backplane connector manufacturers to bring product to market to address customer concerns for more speed.

Some recent examples include Molex's I-Trac backplane connector system with an orthogonal architecture targeted at 10 Gbits/s and lower applications, and its high-speed (20 Gbits/s) and high-density (80 differential pairs per linear inch) Impact backplane connector. The Impact connector delivers higher density and twice the speed of the I-Trac. Tyco has also recently introduced its high-speed, high-density Z-PACK TinMan backplane connector system that is capable of operating at 10 Gbits/s to 12.5 Gbits/s. Amphenol TCS released its XCede 20+ Gbits/s connector platform last year.

The good news for buyers is that leading connector makers Tyco and Molex have entered into second-source agreements for their high-speed backplane systems, namely the Impact and TinMan connector platforms.

The need for higher power is also a trend in the connector industry. Molex addresses the power market with its new Ten50 power connector with higher current-carrying capability with a low profile for improved airflow, and its EXTreme Power series of high-current power solutions. Tyco offers its MULTI-BEAM line of modular power signal connectors.