Press: Tantalum Capacitor Suppliers Still Wary about Ability to Meet Demand

Tantalum capacitor suppliers still wary about ability to meet demand

By Gina Roos
EE Times & Planet Analog
February 6, 2001

Component makers are cautiously optimistic that unit demand for tantalum-chip capacitors will remain strong
this year, which could result in a tight supply of these devices in the second half of 2001. Contributing to the
problem is a shortage of raw materials that became apparent at the end of 2000.

Although supply for tantalum-chip capacitors in smaller package sizes such as A and B is more in line with
demand, larger C, D and E(X) sizes are still in short supply, say passive-component suppliers.

"Supply for A, B and P case sizes has loosened up dramatically due to lower demand from cell-phone manufacturers," said Rich Schuster, the president of NIC Components Corp. (Melville, N.Y.). "They're probably off allocation."

Schuster said lead times for tantalum-chip capacitors in A- and P-case sizes have dropped to eight to 10 weeks, while deliveries for devices in B-size packages are a little longer at 10 to 12 weeks. Devices in the B-case size are used in a variety of applications in the telecom and PC sectors.

The larger case sizes are still in short supply, primarily because of limited production capacity. During last year's shortage many capacitor manufacturers, particularly in Japan, shifted most of their production to the smaller packages to meet explosive demand in the cell-phone and handheld-device markets.

Demand for the larger tantalum capacitors is still pretty high, Schuster said. These devices are used in consumer, industrial, PC, peripheral and telecommunications applications-and are still on allocation, he said.

"Most of our production capacity for tantalum capacitors has been on allocation to our strategic customers for this year and that will remain so until we get a better feel for where the market is headed," said Glyndwr Smith, assistant to the CEO and senior vice president at Vishay Intertechnology Inc. (Malvern, Pa.). Smith said demand will depend on several factors, including the overall economy, inventory-adjustment time frames and growth in key end markets in 2001.

Mike Morton, senior vice president of product marketing for passive-component manufacturer TTI Inc. (Fort Worth, Texas), said he believes the industry will start to see improved availability for the larger D- and E-case sizes in the second quarter.

However, a key challenge tantalum-chip-cap manufacturers face is a shortage of the tantalum powder
needed to produce the parts, particularly for the larger devices that consume more raw materials, said Eric Pratt, director of information services at iSuppli Corp. (ElSegundo, Calif.).

Strong demand for tantalum capacitors has severely strained the supply of capacitor-grade tantalum powders.
The production of tantalum powder to manufacture tantalum capacitors represents about 60 percent of the
overall consumption of tantalum, according to materials supplier H.C. Starck Inc. (Newton, Mass.).

Until additional tantalum-ore production capacity comes online in the middle of 2001, supply will remain tight,
materials suppliers and component manufacturers agreed.

In addition to shortages, the tight supply of materials has produced price hikes, which in some cases are being
passed on to the customer. For instance, NIC Components has recently increased prices between 10 and 15 percent and anticipates an additional price hike in April.

Although the component market appears to be in the midst of an inventory adjustment period and a general
slowdown from key industry sectors, capacitor makers predict that won't last long and are in fact preparing for
severe shortages of tantalum-chip capacitors by the second half of 2001.

To meet customer requirements, some cap makers have formed partnerships with materials producers to establish independent supply sources of tantalum to meet their increased demand. Kemet Corp., for instance, has established a 50/50 joint venture with Australasian Gold Mines NL to own and fund the development of existing Australasian tantalum projects, including the pilot plant at Dalgaranga, Australia. It also provides for the purchase of processed tantalum products by Kemet from the pilot plant and other processing entities.

COMPANY CONTACTS

NIC Components Corp.
(516) 396-7500
www.niccomp.com