Electronics Sourcing approached Steve Rawlins, CEO of Anglia Components who regularly writes for us on the supply chain, to provide clarification: Readers asked our publisher, Mark Leary: “Can you publish an article on why capacitors are always a problem component when the market rises leading to shortage. I was talking to my purchasing team and none of us can work out exactly why capacitors are always involved. They are so plentiful, simple and cheap they should never be a problem to source”.
Your reader is absolutely right, capacitors, traditionally tantalum and in more recent years ceramic MLCC’s, are almost always the first to be hit when there are shortages. Some of the reasons behind this can be specific to the capacitor technology, but others are to do with the structure of the market and long-term trends.
Tantalum and MLCC capacitors are widely used and extremely popular components and as the market rises demand for them always rises too. High volume consumer electronics like games consoles, phones and tablets can for instance contain thousands of MLCC chip capacitors each. There are some potential alternatives to both MLCC and tantalum, especially low ESR Polymer capacitors, but these often require some circuit redesign and aren’t that popular because they are larger and/or more expensive on a like for like component cost basis but they can lower overall system cost in some instances. The supply chain for tantalum devices in particular has an added vulnerability because tantalum is a mineral that is mined in a limited number of locations which happen to be in some of the more unstable parts of the world.
When shortages of these and other passive components arise, available supplies are inevitably routed to the largest volume customers. This is the market we’re in right now. High volume users of components in the automotive and consumer electronics sectors are ramping up quickly. New consoles are coming up and demand for 5G is kicking in. There are now only 3-4 large manufacturers of tantalum chip manufacturers left, whilst there are many more MLCC manufacturers the main global production volumes are still controlled by the top 5 manufactures. Given the miniscule margins they make on devices that sell for only a fraction of a penny, they need to manufacture billions of devices to amortize the cost of their production facility and return a profit. Essentially, they service the industrial market when they can. It simply isn’t economic to put in sufficient capacity to support the peaks in the market only to mothball it when demand drops.
To make matters worse, high volume users don’t actually use the same devices as most industrial customers. This is true not only for chip capacitors but other chip passives such as resistors too. To drive down the size and cost of their products, mobile phone and other manufacturers are continually moving to smaller and smaller devices, and are now set up to place 01005 (0.4 x 0.2 mm). The sizes the majority of our customers ask for, 0603 and 0402, are legacy products as far as many passive manufacturers are concerned. They are sold at a premium and only produced when there is spare capacity. The larger sizes consume more raw materials and production anyway, creating an active disincentive for manufacturers to produce the larger sizes. It is no surprise that manufacturers are increasingly reluctant to commit scarce capacity to produce larger sizes given the relatively small demand that remains.
As manufacturers discontinue or reduce production of larger size chip passives, component users like your reader need to look at their options to ensure they don’t get caught out with stock shortages and unworkable lead times.They should consider moving to smaller sizes such as 0402 and 0201 for current and new designs if they work within necessary voltage and value requirements.