Electronic Capacitors

SIC 3675

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing electronic capacitors. Establishments primarily engaged in manufacturing electrical capacitors are classified in SIC 3629: Electrical Industrial Apparatus, Not Elsewhere Classified.

Industry Snapshot

Based on global sales, in the late 2000s, ceramic capacitors was the largest sector of capacitors, followed by aluminum, paper and film, and tantalum. In 2008, shipment values within the electronic capacitors industry dropped below $1 billion, to $967.9 million, down from $1.08 billion and $1.14 billion in 2007 and 2006, respectively. There were roughly 160 companies in this industry in 2009, according to industry statistics. Most companies were small; over 50 percent had fewer than 25 employees and more than 75 percent had less than 250 employees. However, the few largest firms dominated the sales, with the top three companies accounting for nearly 70 percent of industry revenues.

Following the decline in revenues, the number of workers continued to drop during the late 2000s. By 2008, the number of employees was 6,377 down from 6,642 and 7,362 in 2007 and 2006, respectively. The industry was relatively labor intensive, having more than 40 percent as much investment per production worker as that for the manufacturing sector as a whole in the 2000s.

The recession of the late 2000s temporarily stymied the growth of the expanding industry. However, continued growth was predicted through the mid-2010s. Nonetheless, the U.S.-based industry continued to see a slight downward trend as manufacturing was moved to cheaper locations overseas. In addition, the industry is traditionally dominated by Japanese-owned firms.

Organization and Structure

Among the largest of the several trade organizations serving the industry were the Electronic Industries Alliance (EIA) of Arlington, Virginia, and the American Electronics Association (AEA) of Santa Clara, California. EIA was founded in 1924 and had 1,300 member companies in the late 2000s. The group produced a number of publications and was involved in the development of industry standards. AEA was founded in 1943 and had 3,000 member companies. In addition to organizing industry conferences and events, AEA published a variety of publications and special reports about the industry. The Electronic Components Association also served this industry in the late 2000s.

Background and Development

In his Basic Electricity and Electronics, Delton T. Horn defined capacitors and capacitance: "A capacitor is a device capable of storing charge in a circuit, and typically consists of two metal plates separated by an insulator, called a dielectric. Capacitance is directly proportional to the area of the plates and the dielectric constant of the insulator and is inversely proportional to the distance between the plates." Capacitors can store charges from voltage sources for a wide range of time, to be released as needed. The classification of capacitor types by material such as paper, ceramic, or tantalum refers to the insulating dielectric. Electronic capacitors are part of a class of electronic components called passive components. They differ from active components, such as vacuum tubes and transistors, in that they can neither distinguish voltage polarity nor amplify a signal.

The first capacitor was the Leyden jar, invented independently in the mid-1740s by both Ewald Georg von Kleist and Pieter van Musschenbroek. A glass jar acted as the insulating material. M. Bauer developed the mica capacitor in Germany in 1874. Mica had advantages over glass because it could better withstand shocks and could produce the same capacitance as a smaller capacitor. D.G. Fitzgerald received the first patent for the paper capacitor in 1876. Later, L. Lombardi produced the first ceramic capacitor in Italy. Ceramic capacitors can withstand extreme temperatures and are highly stable. The tubular glass capacitor was produced in 1904 by I. Moscicki in the United Kingdom. It was this capacitor that Guglielmo Marconi used in his early experiments with radio communication.

World War I provided an important catalyst for technical change in electronic communications, during which new radio tubes and circuits were developed. The radio experienced rapid growth in the years between the two world wars, and on the eve of World War II, millions of radios were in use worldwide. Paper dielectric capacitors enclosed in cardboard tubes and Bakelite-enclosed stacked mica capacitors were most commonly used during the interwar period.

During World War II, substantial developments were made in communications electronics, radio astronomy, xerography, and radar and computer technology, as well as in miniaturization and the improvement of the energy efficiency of components. The harsh conditions and importance of reliability imposed by the war led to the development of metal-cased and metalized paper dielectric capacitors, as well as improvements in ceramic capacitors. The tantalum capacitor was produced in 1956 by D. McLean and F. Power of the United States, after which it became among the most widely used capacitor types.

Among the most significant developments in electronic components in the post-war period were the transistor and integrated circuit. Transistors are based on solid-state technology, serving as substitutes for the older triode vacuum tube active components, developed by Lee De Forest in 1906. In 1948 Bell Laboratories developed the transistor (whose name derives from transferred resistor), which enabled electronic equipment to be produced in increasingly smaller sizes. The first integrated circuit was produced by Texas Instruments in 1959. This device made use of transistors and other components mounted on a semiconductor chip to form an entire electronic circuit. Prior to the development of integrated circuits, electronic circuits were made exclusively of discreet and separable components that were combinations of vacuum tubes or transistors and passive components. Since capacitors with high capacitance values were relatively large, they generally were not produced within an integrated circuit but rather added externally.

Chip capacitors are surface-mounted to circuit boards, in contrast to traditional capacitors with wire leads. Although chip capacitors are generally more expensive than those with leads, the price gap decreased in the 1990s. Also during this time, chip capacitors came into increasing use, especially in equipment such as portable phones, video cameras, and electronic notebooks, items for which space constraints were a prime consideration. Demand for surface mounting and miniaturization continued in the late 1990s, along with higher capacitance and integrated devices.

The value of shipments in the U.S. electronic capacitor industry declined from $1.7 billion in 1988 to $1.5 billion in 1990. This pattern reversed itself in the 1990s, with $1.6 billion in shipments in 1992, nearly $1.8 billion in 1995, and slightly over $2.4 billion in 1997. Annual capital investments were $95 million in 1988, $52 million in 1990, $57 million in 1995, and $124 million in 1997.

In the late 1990s, capacitor manufacturers were faced with declining prices. According to the Paumanok Group of Apex, North Carolina, overall prices dropped almost 9 percent in 1998. Some manufacturers reported price drops of as much as 15 percent. Prices of ceramic capacitors fell 3 to 5 percent. In response, companies partnered with customers to develop new high-margin products. They also established joint ventures overseas. For example, Vishay Intertechnology Inc. was working with the Chinese government in the area of tantalum capacitors, and KEMET established a joint venture with Tokyo-based Showa Denko KK to develop solid conductive polymer aluminum surface-mount capacitors. KEMET also had a joint venture with NEC Corp. involving tantalum capacitors.

Because multilayer ceramic capacitors could be surface mounted, they came to account for 90 percent of all ceramic types. Excess ceramic capacity, especially from Japan, continued to put pressure on prices in 1999. Therefore, competition from Japanese exports to the United States was expected to continue until domestic Japanese demand improved.

Globally, the market for fixed capacitors reached $9.5 billion in 1998, a drop of 4.2 percent from the prior year. Unit shipments rose 5.9 percent. Aluminum capacitors shared 31 percent of market value, followed by multilayer at 29 percent, tantalum at 18 percent, DC film at 15 percent, and single-layer capacitors at 7 percent. Tantalum capacitors started to compete increasingly aluminum types, and ceramic surface-mount capacitors were positioned to take market share from tantalum ones as prices became similar.

According to the U.S. Census Bureau, shipment values for electronic capacitors plummeted from $2.79 billion in 2000 to $1.73 billion in 2001, and unit shipments also dropped. For example, shipments of ceramic dielectric multiplayer chips, which were by far the industry's largest category, dropped from 60.3 billion units in 2000 to 33.7 billion units in 2001. According to the September 30, 2002, issue of EBN, iSuppli Corp. placed industry revenue for capacitors and resistors at $15.3 billion in 2001. Overall, capacitors accounted for 90 percent of these revenues. By category, aluminum capacitors accounted for the largest share of industry sales (33 percent), followed by multi-layer ceramic capacitors (25 percent), tantalum capacitors (15 percent), film capacitors (9 percent), single-layer ceramic capacitors (5 percent), and other types of capacitors (3 percent).

During the early 2000s, end-users of passive electronic components like capacitors, particularly original equipment manufacturers, applied continuous pressure on the industry to lower prices. This had a devastating impact on profitability, as many capacitor manufacturers were forced to produce components at or below the cost of production. In addition, the industry was forced to contend with a generally weak economic climate, heightened competition from areas such as Asia, and downturns in leading end markets like telecommunications equipment and computers.

Together, these negative conditions led to workforce reductions, consolidation, plant closures, and a reduction in overall capital spending and production capacity. For example, KEMET reduced its workforce about 60 percent during 2001 and 2002 and cut its capacity 50 percent. With manufacturers of passive components operating anywhere from 60 to 70 percent of capacity by July of 2002, EBN reported that vendors were "swimming in excess supply and fighting for contracts." Capacitor prices fell from an average of approximately 22 cents in 2000 to 16 cents by mid-2002, according to the publication.

In the February 10, 2003, issue of EBN, an analyst from iSuppli Corp. predicted that unit shipments of both capacitors and resistors would improve about 22 percent in 2003, resulting in industry revenue growth of 7 percent. However, as worldwide capacity continued to decline in early 2003, there were concerns about manufacturers' ability to respond to a sudden uptick in demand.

Employment of production workers declined from 18,100 in 1988 to 14,200 in 1991, but rebounded to 18,770 in 1997. The peak year for employment of production workers was 1984, with 25,100 employees. Employment dropped through the early 2000s, falling below 11,000 by 2003. Hourly wages were about $12.33 per hour.

In 2003, demand returned to the market, but because capacitor manufacturers had excessive inventory, the original equipment manufacturers (OEMs) continued to push prices down, and demand increased 10 to 15 percent, but prices deteriorated 20 to 25 percent. Although the industry continued to struggle under difficult conditions, including OEM price pressures, capacitor manufacturers began to experience improvement from late 2003 to 2004 as oversupply issues started to resolve themselves and the U.S. economy became more active. According to market research firm Frost and Sullivan, the tantalum capacitor market reached $2.2 billion in 2004 and was expected to increase slightly to $2.3 billion in 2005. Multilayer ceramic capacitors were $3.7 billion in 2004 and were expected to grow 5 percent during 2005.

Although revenues for tantalum capacitors were forecast to rise slightly in mid-2000s, between 2000 and 2004 tantalum lost approximately 10 percent of its market share, with 6 percent going to ceramics and 3 percent to aluminum. As demand declined following the short supply problem in 2000, tantalum faced stiffer competition from ceramic capacitors, which improved in quality. Ceramic capacitors once had values of one microfarad, and if higher performance was needed, a tantalum capacitor was necessary. By the mid-2000s, capacitor values of ceramic components had increased up to 100 microfarad, which put pressure on tantalum components.

The industry rode the inconsistent waves of the economy in the 2000s. Industry revenue was down in 2008 to $1 billion compared to $1.18 billion in 2006, along with a workforce of 6,642 in 2007, which was also down from the 2006 total of 7,362. In general, the driving force behind any increased sales in the mid-2000s was the strong cell phone market. A record 1.02 billion cell phones were shipped in 2006, due in part to increased use in developing countries. Many handsets can have more than 250 capacitors each, which translates into 255 billion capacitors for cell phones alone. Although most cell phone models contained only two or three tantalum capacitors in the mid-2000s, as the industry recovered from the shortage in 2000, a shift back to the use of more tantalum capacitors was expected because of the component's high quality and resistance to extreme temperatures. Because cell phone designers attempted to install more and more functions and features into smaller and smaller handsets, there is a high demand for the smallest capacitor components, such as the 0402 package, which is approximately the size of a pepper flake, and the 0201, which is approximately half that size.

Current Conditions

The industry experienced decreased demand during 2009 as a result of a recessionary economy. Although the most significant players in the industry, such as AVX Corporation and KEMET, managed to remain profitable during the downturn, they did so primarily by cutting costs. For example, AVX closed a number of its smaller manufacturing facilities around the global as well as one of its primary facilities in the United Kingdom. The company also moved its headquarters from Myrtle Beach, South Caroline, to Greenville, South Carolina, leaving 150 jobs unfilled. KEMET also cut costs, slashing about 14 percent of its workforce and instituting a 10 percent cut in pay for its remaining staff.

However, despite the downturn during 2010, growth was gradually returning by 2010. According to a report cited by KEMET 's 2009 Annual Report, capacitor global unit sales were expected to increase at a compound annual growth rate of 4.6 percent from 1.4 trillion pieces in 2008 and to reach 1.7 trillion pieces in 2013. This growth rate compares to a compound annual growth rate of 13 percent between 2003 and 2008. In 2008, ceramic capacitors was the largest sector with an estimated $8.3 billion in global sales, followed by aluminum, $3.9 billion; paper and film, $2.6 billion; and tantalum, $2.2 billion.

The trend in the U.S. industry of capacitor production for the firms was to continue to push production overseas to reduce production costs. For example, U.S.-based industry leader KEMET employed 10,400 in fiscal 10,400 to produce, market, and sell its capacitors around the world. Yet just 550 of those employees were located in the United States. Of AVX 's 10,600 employees, 1,800 are located in the United States. Smaller firms remained competitive by promoting customer service and the ability to provide smaller runs, easier and faster modifications, and faster turnarounds. In addition, the industry continued to be dominated by Japanese-based firms, including Murata Electronics with $4.49 billion in 2009 revenues, TDK Corporation with $7.48 billion in 2009 revenues, and Kyocera Corporation (primary owner of AVX) with $11.58 billion in fiscal 2010 revenues. The industry was expected to be fueled by ongoing demand for mobile technology, as well as increasing technology in other fields, particularly medical equipment and devices.

Industry Leaders

In the late-2000s, the leading manufacturers of electronic capacitors were the AVX Corp. of Myrtle Beach, South Carolina and the KEMET Corp. of Simpsonville, South Carolina.

AVX, which moved its headquarters to Greenville, South Carolina, at the end of 2009, was founded in 1972. The firm had roughly $1.3 billion in sales and 10,600 employees in fiscal 2010. The firm produced ceramic and tantalum capacitors. AVX is primarily owned (71 percent) by Japan's Kyocera Corp., previously the Kyoto Ceramic Co. The remaining 29 percent of its shares are traded on the New York Stock Exchange and the NASDAQ. Its customers included leading original equipment manufacturers (OEMs) in the telecommunications, computer, medical device, aerospace, and consumer electronics industries. In 2010, the company owned 25 facilities in 10 countries; 11 of the facilities were in the United States.

KEMET Corp., located in Simpsonville, South Carolina, is a public firm that trades over the counter, was founded in 1954. The firm had approximately $736.3 million in sales and 10,400 employees in fiscal 2010. KEMET produces tantalum, multilayer ceramic, solid and electrolytic aluminum, film and paper capacitors. In fiscal 2010, the company shipped an estimated 31 billion capacitors.

America and the World

By the early 2000s, imports as well as exports of electronic capacitors were down. After climbing more than 16 percent in 1999 and nearly 48 percent in 2000, exports dropped more than 47 percent in 2001, declining from about $2.5 billion to $1.3 billion. Imports, which increased 29 percent in 1999 and more than 69 percent in 2000, fell nearly 47 percent in 2001, declining from $2.8 billion to $1.5 billion. In 2003, the United States imported $473.7 million and exported $286.2 million in multilayered ceramic capacitors. The trade balance was even more askew for tantalum chips, with U.S. imports of $175.3 million and exports of $48.1 million, and aluminum capacitors (not exceeding 35 mm), with U.S. imports of $203.4 million and exports of $47.9 million. Much of the market competition came from China, which built up its capacitor industry in the 2000s. In 2006, the U.S. imports were $1.56 billion, up 16 percent from the previous year. Most imports came from Mexico, Japan, and China, while exports were $1.6 billion and went mainly to Mexico, China, and Honk Kong. As of 2008, the slight trade surplus reverted to a minor deficit with imports totaling $1.3 billion as exports numbered $1.2 billion. In 2009 decreased demand due to the recession caused a drop in import numbers, which fell to $900 million. Exports remained steady at $1.2 billion.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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