Although questions linger about the strength of the overall economy, distributors of passive electronic components are focused on growth—especially in the capacitor market, which is expected to take an upward turn in the second half of the year, according to industry analysts.
The market for capacitors was weak through this spring due to excess inventories throughout the supply chain, but analysts are predicting that the market has bottomed out and is getting ready for an upward climb. Reporting for distributor TTI’s Market Eye report in April, Paumanok Group president and owner Dennis Zogbi pointed to slowing lead times for capacitors early this year—including little change in monthly lead times in preliminary reports for March—as a growth indicator for the second half of 2012 and into 2013. Overall, Zogbi noted a positive outlook for the passive components market going forward, due in no small part to the insatiable demand for electronic products in general worldwide.
TTI’s senior vice president for the Americas Michael Knight echoed those sentiments at the Electronics Distribution Show in Las Vegas, held May 7-10. Commenting on the overall economy, Knight told attendees at the event’s annual TTI update meeting that the second half of 2012 is “nothing to be afraid of.” He then recognized strong customer forecasts, a steadily growing manufacturing economy, and global demand for medical electronics, transportation equipment, and other technologies as positive signals on the economic horizon.
“The electronics industry is still a great place to be,” Knight said.
In a separate interview with Electronic Design/SourceESB, Knight added that the capacitor market is a great place to be as well, pointing to end markets such as hybrid electric vehicles and alternative energy—particularly wind power—as key drivers of capacitor business.
In his Market Eye report, Zogbi identified demand for gadgets such as smart phones and tablet computers as a key driver of passives, as well as the automotive industry, commercial aircraft, medical electronics, LED technology, and the oil and gas industry worldwide.
“Another positive sign along the road to rapid turn-around and recovery is the television set market, which has been alarmingly down in [fiscal year] 2012 by a whopping 20% year-on-year—which is surprising and unusual,” Zogbi wrote in his early April report.
“At the Capacitor & Resistor Technology Symposium many key suppliers to the segment from Asia theorized that television set manufacturers were waiting to see if the rumors about Apple entering the flat panel display market are true before they replenished channel inventories (which must be desperately low at this point),” Zogbi continued.
Global demand for electronics of all kinds from key emerging markets such as Brazil, Russia, India, and China is also expected to continue to drive demand for capacitors and other passive electronic components.
Accelerated Growth On The Horizon
Despite the recent weakness in the capacitor market, the general market trend is one of growth—and analysts expect that to continue in line with overall electronics industry trends.
“For the past 23 years of dedicated study on the passive component supply chain, one key fact remains the same—unit demand for capacitors, resistors and inductors continues to grow in accordance with the global insatiable desire to own electronic gadgets,” Zogbi also wrote in his April Market Eye report.
“The only variation in component consumption volumes has been the influence of events coming from outside the industry or through manmade manipulation of the commodities in the supply chain. The recent events are no exception, and in fact, consumption still appears to be in a state of accelerated growth (which should be maintained at accelerated rates through 2015) because of the increase in sales of black boxes to both the established and emerging economies, and the increase in passive components per box to support enhanced functionality. This trend is not slowing down—it is speeding up,” Zogbi added.
In the end, Zogbi, Knight, and others say the positives far outweigh the negatives in looking at the component market outlook through 2013.
“There are loads of positive signs for the economy overall,” said Knight. “And especially for our business, which outperforms [the overall economy]. When you filter out North American politics, the economy in Europe… the second half of the year will be pretty good.”