July 10, 2000, Issue: 1219
Section: News
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OEMs search for tantalum options
Claire Serant
Although some cell-phone makers and other OEMs are finding an alternate means of filling orders for tantalum capacitors until shortages ease, the remedy is not a cure-all.
OEMs are reducing their usage of large and small tantalum capacitors and substituting ceramic and other types of capacitors, according to a recent report by iSuppli Inc., a Web-based component-sourcing company.
However, such measures could cause a shift in the supply/demand balance for tantalums and ceramics. iSuppli and other industry players anticipate that the parts, which have been scarce since late last year, will be more readily available.
The company expects shortages of large-case-size tantalum capacitors to ease in the second quarter of next year because OEMs are switching to ceramic, electrolytic, conductive polymer, or film capacitors.
"The Internet-infrastructure market has been a driving force in the larger-case-size tantalum-capacitor market," the report said. "These case sizes are produced mainly by U.S. sources, such as Kemet and AVX, with little production in other countries."
Tantalum-capacitor makers have also increased their production of smaller case sizes, so supply and demand of the parts is expected to balance in next year's first quarter, the report stated.
The push for alternatives, however, will not affect the high prices tantalums command, according to Greg Sheppard, vice president of premium services at iSuppli, El Segundo, Calif.
"We see supply and demand being more balanced," Sheppard said. "We're not seeing a push down in pricing. There's not enough rationale for a price decline."
Others say the current tantalum shortage will last longer and that the component switch could create a tighter market for ceramic capacitors.
"We're seeing an easing in the market because people are starting to get delivery on products they've been [requesting] for months," said Paul Meyers, a commodity manager at American IC Exchange, an Aliso Viejo, Calif., independent distributor.
"In times like these, OEMs and contract electronics manufacturers try to find a variety of ways to circumvent this components- shortage situation, including substitutes. If this means using smaller capacitors, then so be it," said Herve Francois, an analyst at Credit Suisse First Boston in New York.
Ceramics are a good replacement for tantalums, Sheppard said. "In addition to being fairly low cost, ceramic capacitors have multiple product advantages, including better performance at higher frequencies."
Although cell-phone shipments should increase this year and next, each handset will incorporate fewer tantalum capacitors, according to the iSuppli report.
"Motorola Inc. and other manufacturers of cell phones are not currently producing any non-tantalum-capacitor phone models; however, there's a clear trend to reduce the number of tantalum capacitors used per phone. Motorola's 1995 DPC 650 model used 22 SMD tantalum capacitors, but its recent Triband phone uses only 13. This represents a decrease in usage of 10% per year for the past five years at Motorola," the report said.
Motorola officials could not be reached.
"Not all cell phones are constructed alike," said Jerry Labowitz, an analyst at Merrill Lynch & Co. Inc. in New York. "The number of components used are only part of the story."
Many OEMs favor integrated passive components that could put as many five tantalum capacitors on a single substrate, which could be counted as a reduction in parts, he said.
Although agreeing that the shortage has eased, some industry watchers note that mature electronic products often contain more components than newer devices.
"OEMs try and do design outs for whatever's in short supply. At the end of the day, you still need [tantalum] capacitors," said Glenn Spears, executive vice president at capacitor maker Kemet Electronics Corp. in Simpsonville, S.C.
Europe's LM Ericsson is launching its CDMA World Phone, which doesn't use tantalum capacitors, according to iSuppli. But the phone will not go into production until late 2000 or 2001, the company said in its report.
Because alternatives could cost more, some OEMs will still use tantalums, Sheppard said. "Nothing in electronics ever totally goes away if it's cost-effective and it does the job. ... You'll see some switching and some companies staying with tantalums," he said.
At Vishay Intertechnology Inc., demand for tantalums has risen along with MLC [multilayer-ceramic] capacitors," said Glyndwr Smith, senior vice president at the Malvern, Pa.-based component maker. "Sure, we see some tantalums switched to MLCs, but not too much. The indication we get from the market is that wireless-communications, automotive-electronics, and semiconductor companies still want tantalums."
Meanwhile, trade-offs exist for OEMs that make the switch. "From an engineering perspective, you have to worry about tolerances and broadbands. Some companies feel they're cutting corners," Sheppard said.
Ceramic capacitors are in demand, but not as much as tantalums, Meyers said. "It would take a severe switch in demand to reverse [strong demand for tantalums]."
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