Expect tantalum capacitor price hikes to ease

For tantalum capacitor buyers, it seems like déjà vu all over again as lead times are long and prices are increasing just like in 1999-2000.

09/30/2010

It's not easy being a tantalum capacitor buyer these days. Demand is up and buyers have seen double-digit price increases.

The good news for buyers is demand will likely ease, so lead times may shrink and price hikes will slow. However, buyers need to keep an eye on tantalum ore and powder supply. Owners of tantalum mines have been reluctant to increase output at some mines and re-open others because they want higher prices and long-term contracts.

"They (mine owners) are pursuing three-plus year contracts and tantalum capacitor manufacturers are not willing to engage in that right now," said Rick Pierson, senior analyst for researcher iSuppli, based in El Segundo, Calif. "The tantalum capacitor suppliers aren't sure they want to do that and get locked into long-term deals."

In the short-term, demand for tantalum capacitors has been booming, according to suppliers. Some suppliers report that tantalum capacitor demand is up 40 percent over last year and demand is up across all equipment segments.

Market rebound

"Tantalum capacitor has rebounded faster than any of us anticipated. We are seeing strong demand in automotive, telecom and the industrial sectors," said Daniel Persico, vice president, strategic marketing & business development for Kemet in Fort Lauderdale, Fla.While demand plummeted in 2009, the tantalum capacitor market in 2010 "rebounded faster than any of us anticipated," said Daniel Persico, vice president, strategic marketing & business development for Kemet in Fort Lauderdale, Fla.

"We are seeing strong demand in automotive, telecom and the industrial sector," Persico said.

Persico added that after 2009, suppliers thought tantalum capacitor business would not reach 2008 business levels until 2011 or 2012. However, business has already bounced back to 2008 levels so "we are 18 months to two years ahead of where we expected the market to be from a demand scenario. Therefore it has put a supply strain on capacitors."

Demand had been strong for most of 2010, and eased in the fourth quarter, but will pick up again in the second quarter of 2011.

"Tantalum capacitor supply is tight, but not as bad as 2000," according to Dave Valletta, senior vice president worldwide strategic sales for Vishay Intertechnology.Dave Valletta, senior vice president worldwide strategic sales for Vishay Intertechnology, based in Malvern, Pa., also sees booming business for tantalum capacitors.

"Business has never been better. Profits are great. The only time this compares with is 2000. Tantalum capacitor supply is tight, but not as bad as 2000," according to Valletta.

Valletta said the current supply scenario for tantalum capacitors is similar to 2000, but "it isn't as serious. It's been manageable, but it doesn't mean it will not get that serious."

Valletta said the current supply limitations are due to raw material issues. In 2000, shortages started because of limited manufacturing capacity and the then tight material supply," Valletta stated. "This time it is a little of both. The powder guys and the companies that mine the ore are trying to get the price up and basically keeping tantalum off the market until it does come back up," said Valletta.

Powder prices rise

Valletta reported that because of high demand and limited supply, capacitor suppliers are getting double-digit price increases on tantalum powder. Capacitor suppliers have been passing increases on to buyers.

How long prices will increase remains to be seen. The price of tantalite from which tantalum is derived has been increasing since the first quarter. The average price of tantalite increased from about $38/lb in March to about $70/lb in August and then to $80 in the fourth quarter of 2010, according to metalprices.com. The high price may be enough to encourage mine companies to reopen closed mines or increase production at existing mines.

The price of tantalite has increased because of soaring tantalum capacitor demand

Mine owners may also be encouraged by the fact that tantalum capacitor use will likely grow in the next several years because the component is used in a wide range of equipment. After the capacitor shortage of 2000, many OEMs designed tantalum capacitors out of equipment in favor of multilayer ceramic capacitors (MLCC), but that likely won't happen again, according to Valletta.

"That has run its course and anything that could be switched has switched," Valletta said.

Advantage: Ta caps

Tantalum capacitors will continue to be used in existing applications such as cell phones, telecom infrastructure and portable electronics equipment. Their use will likely grow in automotive and industrial applications because they offer advantages over other dielectrics.

"Tantalums don't exhibit a piezoelectric noise and that is important in audio circuitry," said Ron Demcko, application engineering manager for AVX Corp.Ron Demcko, an engineer at AVX, headquartered in Myrtle Beach, S.C., says tantalum polymer capacitors have a very high operating voltage capability. "Polymer will give you flexibility because they give you high voltage and they are low profile. Because of that you can use them in monitors now, even some ultra-slim monitors," said Demcko.

"They are also very good in liquid crystal display televisions and light-emitting diode TVs. They provide high reliability," Demcko added.

Another advantage is noise, according to Demcko. "Tantalums don't exhibit a piezoelectric noise and that is important in audio circuitry," he said. "In many applications such as audio-visual equipment and cell phones, that is a real design feature."

Another advantage is ease of placement on a board. "A tantalum capacitor in a molded package is easier to place on a board than an aluminum electrolytic, which has a surface mount feed on it and it is a little more difficult to place and more difficult to solder and it has a higher profile," said Demcko.

Demcko said that tantalum capacitors will be used in more high-temperature applications. "We have 175C high-temperature tantalums and that is significant. Even at those high temperatures they are getting low equivalent series resistance (ESR) and good reliability. There will be expanded use of tantalums in harsh environments" such as automotive and industrial controls.

With tantalum capacitor demand growing, sourcing tantalums may remain challenging for buyers for awhile.

"Tier one OEMS such as Apple and HP will not have problems buying tantalum capacitors," said Pierson. "Some tier 2 OEMs will get product, but the rest of the world will have a hard time," he says.

Buyers at smaller companies who require tantalum capacitors will need to forge closer relationships with distributors.

"It's always good to have multiple suppliers, but the fact is it depends where you are in the pecking order with that supplier or distributor," said Pierson. "It's good to have closer relationships with them."

Many buyers stuck for supply will look to the open market for tantalums. "They need to be careful because there is a lot of counterfeit product out there," said Pierson. "There is a huge black market out there and we see a lot of counterfeit products. Whenever there is constraint like this, the chop shops spring up and start cranking out bogus products," Pierson said.