Chip Passive Components Industry Report, 2005-2006

Serving the operation of active electronic group ware, chip passive components are essentially unable to electronically start up, switch on/off, control the rapidity and function independently. At present, three categories of passive components i.e. MLCC (multi-layer ceramic capacitor), chip resistor and chip inductor are available in the market. Yet, chip passive components are mainly undertaken by Japan and Taiwan manufacturers, which are now transferring gradually to China mainland. As a result, the output of passive components in China mainland is also growing correspondently.

The total output value of the above three passive components had a moderately growth in 2005 compared to the preceding year. In 2005, the passive component industry achieved US$32.8 billion, with a year-on-year growth rate of 4.8%. Due to high standardization and mature technologies, resistors can be easily mass produced, resulting to a sharp price drop. In 2005, the total output value of resistors was US$ 5.6 billion, with a year-on-year increase rate of 1.99%. The price of capacitor dropped slightly as portable products grow rapidly. Its growth rate in 2005 had little fluctuation compared to that of 2004, and the total output value of capacitors reached USD15.6 billion in 2005, increasing by 2.5% over the previous year. As for inductors, most products were customized thus the price declined so slightly, and maintained a highest growth rate. The global output value of inductors was US$ 6.5 billion in 2005, with a rise of 6.14% compared to 2004. According to IEK, the total output value of chip passive components will add up to US$ 35.3 billion in 2006, with a year-over-year growth rate of 7.6%.

As downstream products are developing towards lightness, thinness, shortness and smallness, the dimensions of passive components is also tending to be little by little. After 1998 size 0603 created the record to won advantages over size 0806, size 0402 for the first time exceeded size 0603 in 2005. In the near future size 0402 is bound to outweigh size 0603 in the market demand and leads the trend for a certain period. While products of size 0201 share less popularity are mainly applied to 3G handsets and high-level consumer electronics. Currently, size 0201 can be produced only by Japan manufacturers while Taiwan manufacturers still take size 0805 and size 0603 as their pillar products. It is not until the recent two years that size 0402 products began to rise. As for 0201 line up, the shipment of goods accounts for less than one percent of the total.

Capacitors are mainly used for electric storage. Its product categories can be divided into Al-Electrolytic capacitor, Tantalum electrolytic capacitor, MLCC (multi-layer ceramic capacitor), and plastic film capacitor, in which MLCC is a sort of chip component. MLCC is stacked across by ceramic layers and interior metal electrode layers. Each ceramic layer is held between two parallel electrodes, giving rise to a flat capacitor. The linkage of interior electrode and exterior electrode makes each capacitor parallel connected. With the fast advancement of ceramic stack technology in recent years, the capacitance values rises accordingly, gradually replacing the medium and low-capacitance capacitors. As electronic products are developing toward thinness, lightness, shortness and smallness, the application will be widely used. For instance, a handset is usually attached with 150-300 MLCC; desktop PC 300-350 MLCC; and laptop 500-600 MLCC. Additionally, multi-layer ceramic capacitors are also used a lot in consumer electronics such as MP3/MP4 players, digital camera, and LCD TV, etc.

In recent years, MLCC supply has been over its demand although there is a steady growth in the demand. The supply/demand ratio was 120% in 2005, and this percentage will decrease to 108% in 2006 under the control of manufacturers on their production capabilities. Thus, the pressure of excessive supply is being eased. From MLCC prices of Yageo, the demand and the supply has nearly been in balance for three consecutive quarters since 2005Q3, indicating a positive turning point. The 2006H2 will witness the best distribution of consumer electronics. The demand and supply will remained basically balanced, and prices are to be rising steadily then. Inevitably, the concentration of market shares will be intensified in the future and the price-negotiating abilities of downstream manufacturers will be further weakened. Therefore, MLCC price will remain stable in a long period of time.

As for chip resistors, the low technical requirements admit of large shipment of standard products, resulting in a fierce price competition in the market. Being advantageous in the manufacturing cost, Taiwan producers are gradually taking market shares held by Japan producers. Taiwan manufacturers accounts for 50% of market shares. Yageo is the world largest chip resistor manufacturer, with a global market share of 30%. News spreads that Yageo will merge Ralec and its monthly output of chip resistors will increase from 25 billion to 33.6 billion unit, increasing by 8.6 billion. Thus its leading position among chip resistor manufacturers is consolidated. The monthly output of Walsin Technology can get to 8 billion units, and the figure will rise to 13 billion units after purchasing Kamaya. Further, its output will be expanded to 18 billion units at the end of the year. The output of TA-I Technology reaches 15 billion units per month and will be expanded to 18 billion units at the end of the year. Seen from the growing of chip resistor industry, the expanded production capabilities of Taiwan manufacturers far exceed the increasing demand. Such practice is aimed at forcing Japan competitors out of chip resistor market. It can be forecasted that chip resistor prices will keep declining in the future. Once Taiwan manufacturers hold more than 70% shares of chip resistor market, the price-cutting competition will be alleviated significantly. At last, the price will remain stable.