Passive components & power semiconductor demand and shortage in industry

Interview with Prashant Awasthi, Manager (Sales), Saison Components & Solutions

65What do you think is the main reason behind the shortage of components?

On hearing about the passive component shortage, the immediate logical thought in the mind is the increased demand of the industry which is partly true. The main reason behind the shortage is because of the shift towards the technology integrated products and automotive electronics and smartphones playing the major role.

The automotive industry has been experiencing a rapid transformation with products incorporating electronic components at an unprecedented rate. While we may be a few more years away from fully autonomous vehicles, cars are evolving to become even more sophisticated: with embedded software, sensors, connectivity, and electrification.

The Electric vehicle uses around 22k capacitors which is 10 times of the standard combustion engine car which uses around 2k-3k capacitors, with the number expected to grow as more functions are added.

Talking about smart phones, there are approximately 1.5 billion smart phones manufactured per year and each model contains roughly 1k capacitors. With the total global output of MLCC sitting at roughly 3 trillion pieces per year, you can quickly deduce that nearly 50% of the MLCC output goes directly to smart phone manufacturers. This makes the smart phone market the primary driver of consumption and technology.

What are the major components included in the shortage?

The major components included are:

Capacitors: Due to the scientific principal governing electrical circuits, it is necessary for electronic equipment to have quite a lot of capacitors.  From home appliances, automotive, smartphones and industrial robotics, it is impossible to find an electrical product without a capacitor. Capacitors are widely used to store energy, suppression and coupling, decoupling, suppress filter noise, sense changes in capacitance and start motors.

Among several types of capacitors, ceramic capacitors, especially multilayer ceramic chip capacitors (MLCC), are the most produced and used in electronic equipment. The annual production is estimated to be 1 trillion pieces. MLCC has been the “workhorse of the Electronic Component Industry” for more than 25 years. By stacking advanced dielectric materials and nickel electron powders, MLCCscome with an extremely high capacitance that can fit well into the higher priced electrolytic range. Additionally, the stability of ceramics, lower cost, and robust performance provide design engineers with attractive solutions.

The shortage of MLCC started in the 2nd half of 2017and to make it worse, industry experts are expecting the shortage to last beyond 2020.

The significant jump in demand for MLCC from the handsets and automotive sectors is putting pressure on the supply chain. As shown in the chart below, the number of MLCCs increased from around 500+ pieces to over 1000 pieces from iPhone 6s to iPhone X. Furthermore, electric vehicles require 4 times more MLCCs than the traditional internal combustion engine (I.C.E.) automobile. Hideki Maruyama, President of Murata (China) Investment Co. Ltd, also confirmed that alternative fuel automobile and ADAS auto pilot supporting system is developing at a speed that is much faster than they anticipated, consuming a huge portion of MLCC supply in the market. Additionally, Chinese smartphone brands such as Huawei, Xiaomi, Oppo, and Vivo are requiring more MLCCs in their products as they are entering into to the high-end market and expanding global presence beyond China. Saison is supporting customers and fulfilling their MLCC requirement through Top Diode and Holystone which are known makes in MLCC industry.

Resistors: The demand of chip resistors has risen exponentially due to the increase in electronics content in automotive, consumer & industrial applications. The shortage is in synchronisation with the MLCC shortage. The raw material prices are also on the rise which is because of the increasing demand. Industry will face short supplies with increased prices for some time.Yageo, one of the largest manufacturers of surface mount (SMD) resistors and multilayer ceramic capacitors, announced in last December that they were not taking new chip resistor orders and was cutting production of cheap chip resistors to focus on higher-margin niche-market components for automotive, IoT, and other industrial uses, as reported by Digitimes. However, they resumed taking orders for chip resistors, but with 15-20% higher quotes.

Saison is supporting customers through Thunder Components Ltd which is a leading resistor manufacturer based in Taiwan.

What do you think is the largest market for Power semiconductors?

The largest market, especially for power semiconductors is expected to be industrial & automotive. The revenue from industrial sector was projected to surpass $10 billion in 2018 itself primarily due to power modules used in industrial motor drives and solar-photovoltaic inverters.

On the other hand, Revenue from power semiconductors in the automotive sector is forecast to exceed $7.1 billion in 2018, with growth coming from all vehicle areas: infotainment, chassis and safety, and advanced driver assistance systems (ADAS). Growth in power modules will come from powertrain inverters used in hybrid and electric vehicles, as well as in electric power steering in larger cars and light trucks with conventional internal combustion engines. Growth for power ICs will be particularly strong in ADAS applications in 2018, becoming the third largest sub-segment, after chassis and safety systems and powertrain applications.

The next largest revenue sectors for power semiconductors in 2018 are consumer electronics ($6 billion) and wireless communications ($7 billion). Consumer market growth is fuelled by shipment growth of high-end TVs, set-top boxes, home appliances, and power adaptors for wearable devices. It will be boosted further, thanks to increasing shipments of smart, connected appliances and the use of variable motor-speed control in appliances. The wireless communication segment is dominated by power-management devices (PMICs) for mobile handsets and tablets—delivering more power when higher performance is needed and less power when devices are idle.

 What is the challenge in the supply chain?

Some challenges for discrete power semiconductors in 2017—in particular, as demand exceeded factory capacity delivery, and as lead times increased for MOSFETs and rectifiers. Semiconductor manufacturers were squeezed from both sides: Customer demand exceeded factory capacity, and silicon wafer shortages affected production. A transition to larger wafer sizes could eliminate some of the shortages, but the supply chain is not aggressively doing so, choosing to benefit from higher prices before expanding capacity.

How can the pitfalls of electronic components shortage avoided?

With demand for components increasing and shortages continuing to plague the marketplace, additional up-front planning is necessary to ensure you are still able to meet your design schedules and product timelines. One of the best ways to be prepared is to monitor trends currently happening within the electronics industry. Another way to cope is to broaden your approved vendors list (AVL). This gives you and your contract manufacturer flexibility in procuring parts from alternate sources, especially when the shortage exists primarily with one manufacturer. Working with a full-service electronics manufacturing services provider who knows the entire scope, supply list, and the components of your project can help you be aware of and prepared for such eventualitiesand often provide solutions.

Saison is playing an important role by supplying passive components & power semiconductors to Indian manufacturers with comparatively quicker supplies and at competitive prices.

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