Report Material Shortage & Price Trend...Report Material Shortage & Price Trend Author: Di Han June 13, 2018 Silecta Inc. 206-308 Legget Drive Kanata, Ontario, Canada K2K 1Y6 +1-613-270-0567Material

Report

Material Shortage &

Price Trend Author: Di Han

June 13, 2018

Silecta Inc.

206-308 Legget Drive

Kanata, Ontario, Canada

K2K 1Y6

+1-613-270-0567

www.silecta.com

Material Shortage & Price Trend

2

Executive Summary ...................................................................................................................................................... 3

I. Multilayer Ceramic Capacitors (MLCC) ................................................................................................................. 4

Market Overview of MLCC 2017 ...................................................................................................................................... 4

Overview of Current Manufacturers ................................................................................................................................. 4

MLCC Supply Chain ........................................................................................................................................................... 5

MLCC Cost Structure ......................................................................................................................................................... 5

Price Increase ..................................................................................................................................................................... 6

Reason for Increase ........................................................................................................................................................... 6

Future Trend ........................................................................................................................................................................ 9

II. Resistor .................................................................................................................................................................... 10

Market Overview of Chip Resistor 2017 ........................................................................................................................ 10

Price Increase ................................................................................................................................................................... 10

Reason for Increase ......................................................................................................................................................... 11

Future Trend ...................................................................................................................................................................... 11

III. MOSFET .................................................................................................................................................................. 12

Market Overview of MOSFET 2016 ............................................................................................................................... 12

Overview of Current Manufacturers ............................................................................................................................... 12

Price Increase and Lead Time ........................................................................................................................................ 12

Future Trend ...................................................................................................................................................................... 13

IV. NOR Flash .............................................................................................................................................................. 14

Market Overview of NOR Flash 2016 ............................................................................................................................ 14

Overview of Current Manufacturers ............................................................................................................................... 14

Price Increase ................................................................................................................................................................... 14

Reason for Increase ......................................................................................................................................................... 14

Future Trend ...................................................................................................................................................................... 15

APPENDIX ..................................................................................................................................................................... 16

MLCC Demand: Automotive Industry ............................................................................................................................ 16

Major Chip Resistor Manufacturers ............................................................................................................................... 17

Price Increase Notifications ............................................................................................................................................. 18

SOURCES ..................................................................................................................................................................... 22


3

Executive Summary

Since last year, price increases and extended lead times have been witnessed across many electronic

component manufacturing segments. This report provides a preview and analysis of some heated segments

such as MLCC, resistor, MOSFET and NOR Flash. A preliminary market overview was performed, and major

players were analyzed in every segment to provide a whole picture.

Though MLCC and resistor prices have been increasing over the last two years, the reasons behind this price

surge phenomenon are not all the same.

MLCC price increase is majorly driven by the significant demand from the automotive and smartphone

industries. The current capacity is unable to keep up with a substantially higher demand. Adding to this, key

players such as TDK and Kyocera exited the general MLCC market to focus on the more profitable electric

automotive industry, further exacerbating the situation. Even worse, Murata decided to cut 50% of production

capacity for their conventional MLCC line in 2018. Prices of raw materials such as nickel, copper and palladium

have also been climbing since the end of 2015, putting more cost pressure on MLCC manufacturers.

Fortunately, Taiyo Yuden, Samsung Electro-Mechanics, Yageo and Fenghua Advanced Technology are all

going to expand their capacity. The supply and demand imbalance should get better by the end of this year.

In January 2018, at least 7 resistor manufacturers announced price increases; some of them have already

increased twice or more since the beginning of this year. The overall price of ruthenium, primarily used as a thick

film paste in thick film chip resistors, has skyrocketed in value by 625% since March 2017. On a month-to-month

basis, the price of ruthenium metal has shot up to $250 USD per Troy ounce in June 2018. Current major

manufacturers are very wary of expanding their capacity. The price increases and lead time extensions

happening in the resistor manufacturing segment show no sign of turning around this year.

The largest manufacturers in the MLCC and resistor segments are Japanese, South Korean and Taiwanese

companies and the depreciation of the U.S. dollar hurts their revenue, leading to growing pressure in costing.

MOSFET shortages started last year. With the continuous growth of new energy vehicles and constant

upgrading of CPU/GPU/Type-C products driving up the demand, supply is being outpaced. Additionally, power

device manufacturers migrating to high-voltage, high-margin products has led to structural shortages of

MOSFETs. It is estimated that the shortage may continue until 2020.

NOR Flash price increases and shortages are resultant of the rising cost of wafers and the widening gap

between demand and supply. The two NOR Flash manufacturing giants, Cypress and Micro, are strategically

shifting away from NOR Flash business to more profitable business sectors. The shortage and price increase

issues won’t be solved in the short term.


4

I. Multilayer Ceramic Capacitors (MLCC)

Beginning last year, the signs of a solid upturn (extended lead times and more robust demand) for multilayer-

ceramic capacitors became increasingly evident and the situation has grown in severity over the past year.

Market Overview of MLCC 2017

Passive electronic components: World Market Outlook 2017-2022 1

Overview of Current Manufacturers

As far as competition is concerned, major global MLCC manufacturers are mainly from Japan, South Korea, and

Taiwan and include Japan's Murata, TDK, Taiyo Yuden and KYOCERA/AVX, South Korea's Samsung Electro-

Mechanics and SAMWHA, and Taiwan's Yageo and Walsin. While some Chinese manufacturers are starting to

get a small piece of the pie in this market, they are not yet considered big contenders..

Tier 1: Murata, Kyocera, TDK, Samsung

Tier 2: Walsin, Yageo, Holy Stone

Tier 3: Guangdong Fenghua Advanced Technology, Eyang Technology Development, Chaozhou Three-Circle

Group


5

MLCC Supply Chain

The chart below shows the upper and lower stream supply chains within MLCC manufacturing and applications.

The predominant application of MLCC is in areas such as consumer electronics, industrial, telecommunication,

automotive and data transmission. Almost all of these areas have strong growth momentum, driving up the

demand for MLCC.

MLCC Cost Structure

As far as the cost structure is concerned, due to differences in the use of raw materials, the cost composition of

low/high-capacitance products are quite different, mainly reflected in ceramic powder and packaging materials.

HCS Index 2


6

The international MLCC electronic ceramic materials are monopolized by Japanese and American Ferro

companies, among which Japanese manufacturers, including Sakai Chemicals, Japan Chemicals, and Fujitsu

Titanium, account for about 75% of the global market. MLCC manufacturers don’t have negotiating power for

better price.

Price Increase

Taiwan’s giant MLCC manufacturer Yageo implemented new pricing effective April 1, 2018. For the size 0201-

1206 series, the average unit price increased 2-5 times higher what it was in February of this year; the price of

some 0201 MLCC increased 200 times. Pricing is no longer executed according to contract, instead it is applied

based on the date of shipment.

On April 4, 2018 Samsung Electro-Mechanics (SEMCO) released a price increase notice to its distributors,

stating that SEMCO would adjust their MLCC pricing effective May 1, 2018. The range of price adjustments has

not been published yet.

In early April Murata, the world's largest MLCC manufacturer, issued notice of a price increase and imminent

EOL for most of the 0402-1206-size GR/ZR series products. The increase came into effect June 1,2018 and

EOL is expected by March 2020.

Fenghua Hi-Tech issued a notice on April 8, 2018 stating that the continuous increase in raw materials has led

to a substantial increase in production and operation costs. As a result, the price of their entire range of chip

thermistors was raised.

Fenghua Hi-Tech also issued a notice of chip resistance price increases on April 13, 2018. As the price of

international commodities and precious metals continue to rise, labor costs have increased year by year further

aggravating the pressure on operating costs. Effective April 16, 2018 the RC/RS series 0201 ~2512, along with a

full range of film products, increased in price by 25% -30%.

Reason for Increase

The widening imbalance between supply and demand over the past year has driven prices higher; some

contributing factors are:

1) TDK faded out of the general MLCC market mid-last year, which has worsened the imbalance. In 2018,

Kyocera decided to stop production of some size 0402 and 0603 MLCCs. Murata plans to cut back 50%

production capacity for its conventional MLCC line in 2018.

2) Top tier manufacturers have allocated resources to the more profitable automotive industry; Tier 1

manufacturers have shifted focus to this small size, high capacitance, high-end market. It is estimated

that each car needs 3000 MLCCs compared to the 700 required for a smartphone.

3) High demand driven by smartphones, including those from Samsung and Apple, increases the gap

between need and availability.


7

Statista 3

4) Strong demand from the automotive industry.

Zhiyan Consulting 4

5) By the end of 2017, China had shut down up to 40% of its factories in an unprecedented stand against pollution. The raw material suppliers of MLCC are impacted by this environmental policy enforcement initiative leading to tighter supply in the upstream.


8

6) The price of key metals used for MLCC production drives up the price of the MLCC. The price of raw

materials for all key metals consumed in the MLCC increased in 2017 and continue to do so in 2018;

nickel, copper and palladium have the greatest increase in price and impact on MLCC.


9

InfoMine 5

Future Trend

According to industry sources, Murata, in line with its plan to stop producing MLCCs sized 0402, 0603, 0805 and

1206 in fiscal 2020, has decided that it will stop taking orders for such products on March 31, 2019. Expected

last shipment date is March 31, 2020.

The good news is that most major MLCC manufacturers have started to expand their production capacity

however the construction period is very long. The huge supply and demand imbalance will only start to get better

in 2019.


10

II. Resistor

Market Overview of Chip Resistor 2017

Yageo 6

As shown above, Yageo is the leader in the chip resistor market, accounting for 34% of the total market share.

Among the top 5 manufacturers, Yageo is a Taiwanese company, KOA Panasonic and Rohm are Japanese

companies, Vishay is a US company. Asian companies take up more than half of the global market share.

Price Increase

The wave of price increases on resistors continues.

On April 8, 2018, LIZ Electronics increased its selling price by 20%-30% on all thick film resistors. It is the

second time this year that LIZ has increased its resistor price, in January they imposed a 15% increase which

took effect immediately.

Guangdong Fenghua Hi-Tech issued a chip resistance price increase notice on April 13, 2018. As the prices of

international commodities and precious metals continue to rise, labor costs have increased year by year, adding

pressure to the company’s operating costs. Effective April 16, the price of their RC/RS series: 0201~2512 chip

and array resistors increased by 25%-30%.

In April, Viking Technology issued its fourth price increase notice for resistors. Due to the substantial rise in cost

of raw materials (packages, pastes, electroplating materials, and ceramic substrates) for thick-film automotive

grade chip resistors, the company decided to adjust some product prices. The range affected includes CR-

A/0201/0402/0603/0805/1206/1210/2010/2512/CN-A43/CN-A42 package chip and array resistors. In March they

executed a price increase on their CR0201/0402/0603/0805/1206/1210/2010/2515/2512/CN-43J/CN-42J SMD

chip resistors and array chip resistors. Viking also increased the price of CR0603, 0805 and 1206 SMD resistors

by 10% in January. In addition to this, Wuxi Taiming Electronics, a subsidiary of Viking, increased the price of

some packaged chip resistors by 15% in February.

Relac issued a price increase notice on May 22, 2018 that came into effect on June 1st. Due to the tight supply of raw materials, the company's inventory levels continue to drop, resulting in a serious imbalance between supply and demand. With this increase, the price of Relac's thick film series resistors has risen by more than 50%.


11

Similarly, on May 24, 2018, Yageo issued a price increase notice. Due to the continuous increase in raw

materials, price adjustments were made on the thick film series and price of some will increase by more than

50%. The specific adjustment rate will be based on quotation and will commence June 1st.

Reason for Increase

1) Supply/Demand Imbalance

Back in December 2017, Yageo announced that they would no longer accept new orders for general

products of thick film resistors, because the demand is far greater than the existing production capacity.

On February 21, 2018, Relac stopped accepting new orders for thick film resistors. Both moves signalled

that the market demand for resistance was in short supply. Strong demand from bitcoin mining machine

drove up the price of resistors, especially size 0402. It is estimated that the demand from mining

machines accounts for 1/4 of the total 0402 size demand.

2) Raw Material Price Increase

The price of ruthenium metal skyrocketed to $250 USD per Troy ounce in June on a month-to-month

basis. The overall price of ruthenium, whose primary use is as a thick film paste in thick film chip

resistors, has increased in value by 625% since March 2017 (the price was previously $40 USD per Troy

ounce).

InfoMine 7

3) Chinese Government Environment Protection Tax Law

On January 1, 2018, the environmental protection tax law of China was formally implemented. The tax

burden on electronic component manufacturers pushed up the cost of manufacturing resulting in an

increase to their selling price in order to compensate for the extra tax.

Future Trend

There has been no capacity expansion news from resistor manufacturers or their upstream ceramic substrate

manufacturers. The price increase, long lead time and shortage will continue until the end of this year at least.


12

III. MOSFET

Market Overview of MOSFET 2016

Sohu 8


MOSFETs are dominated by major manufacturers such as Infineon, ON Semiconductor and Renesas which together account for nearly half of the global market.

In 2016, the global MOSFET market reached $6.2 billion USD and it is expected to reach $7.5 billion USD by

2022. The MOSFET application in automotive electronics will continue to increase, projected to reach 22% by

2022.

Price Increase and Lead Time

Demand

1. MOSFET is the core component of the new energy vehicle drive control system and power supply

module in charging piles. The rapid development of the new energy automotive industry has increased

MOSFET demand.

2. The PC occupies more than 40% of the low-voltage MOSFET market, and the upgrading of

motherboards and graphics cards will drive a new wave of market demand for MOSFET. With the

release of Intel's eighth-generation chip, the 300-series motherboard will drive a strong demand in 2018.

3. MOSFETs play an important role in Type-C interface power conversion and overload protection, and the

continuous penetration of fast charge and Type-C interfaces drives ongoing MOSFET demand.


13

Supply

1. While MOSFETs are mainly manufactured from 8-inch wafers, wafer foundries are cautious in

expanding their 8-inch production lines. Though there are a few new investments, they have not yet

entered the production phase. Wafer supply tensions will continue into 2019, and prices will continue to

increase.

2. Fingerprint recognition and double lens have driven the demand for fingerprint identification chips and

CMOS image sensor chips, putting pressure on the 8-inch production capacity of MOSFET chips.

3. Production capacity of global power semiconductor manufacturers has shifted toward high-voltage, high-

margin products for application in automotive and industrial resulting in the shortage of low-voltage

MOSFETs.

Future Trend

Because of continuous growth in the new energy vehicle sector and ongoing upgrades of CPU/GPU/Type-C

products, the demand for MOSFETs is strong. On the supply side upstream wafers are in short supply, with

fingerprint and dual-lens chips taking up a lot of capacity in MOSFET production. Power device manufacturers

focusing on high-voltage, high-margin products has led to structural shortages of MOSFETs. It is believed that

the surge in MOSFET prices will continue until at least the end of 2018and may be prolonged into 2020.


14

IV. NOR Flash

Market Overview of NOR Flash 2016

DRAMeXchange 9


As shown above, the top 4 manufacturers take up 74% of the NOR Flash market. Looking at the NOR Flash

industry, Micron and Cypress Semiconductor are providers of high-end and high-density products belonging to

the 64/128Mb bracket. Winbond and Macronix target the mid-range market segment that include products

having densities of 16, 32 and 64Mb. GigaDevice is the supplier of low-end NOR Flash devices with densities of

1~2Mb and 512kb.

Price Increase

NOR Flash prices will rise by about 20% sequentially in this third quarter due to supply scarcity.

Reason for Increase

1) The rising cost of wafers, which caused the increased costs in NOR Flash production, is an important

factor in the price increase of NOR Flash. With the continuous rise in raw material cost since the end of

2017, the average price of 12-inch wafers increased by approximately 10% in the first quarter of this

year.

2) The gap between supply and demand has widened. At the same time, manufacturers are stocking up

inventories to achieve a better selling price, causing NOR Flash prices to rise sharply. With the

introduction of NOR Flash as storage devices to the Internet of Things, smart applications (smart homes,

smart cities, smart cars) and drones, the demand for NOR Flash continues to grow.

3) On the supply side, major storage vendors such as Micron have shifted their focus to 3D NAND and

DRAM and have shut down some NOR Flash production lines, creating a supply gap and causing prices

to rise. In addition, adoption of the AMOLED screen by Samsung, Apple and other major mobile phone

makers is expected to generate a large amount of NOR Flash demand. The price will continue to

increase.


15

Future Trend

Some of the smaller NOR Flash suppliers have plans to expand their production capacity in response to the

current market condition. Winbond for instance, will add another 6,000 wafer starts to its total monthly capacity

by the year’s end, increasing from the current 44,000 pieces per month to 50,000. This additional 6,000 wafer

capacity is wholly designated for NOR Flash production. Macronix also wants to gradually raise its NOR Flash

production. Powerchip, which currently lacks in-house technology to produce its own branded NOR Flash

products, is also expressing interest in entering the market by collaborating with other IC manufacturers.

Though there are initiatives to expand NOR Flash supply, much of the additional production capacity is not

expected to become available until the second half of 2018 because time is needed to set up equipment and

perform trial production.

Cypress and Micro are strategically shifting away from NOR Flash business. Cypress is reducing NOR Flash in

its product mix to focus more on supplying ICs for automotive and industrial applications. Micron Technology is

reportedly seeking buyers for its NOR Flash memory business, as they intend to concentrate resources on the

more-profitable DRAM and 3D NAND flash areas.

The shortage and price increase issues won’t be solved in the short-term.


16

APPENDIX

MLCC Demand: Automotive Industry


17

Major Chip Resistor Manufacturers


18

Price Increase Notifications

RELAC

Translation:

Due to the tight supply of raw materials, the inventory level of our company continues to drop, leading to a

serious imbalance between supply and demand. Our company has decided to adjust the unit price of thick film

series resistors by 50% or more. For specific adjustment details, please refer to the official quotation. This new

unit price takes effect on 2018/06/01.

Relac Tech (Kunshan) Co., Ltd

May 22, 2018


19

VIKING

Translation:

To our respectful partner and clients:

thank you very much for your long-term support and trust. Due to the substantial increase in the cost of raw

materials (packages, pastes, electroplating materials, and ceramic substrates) for thick-film automotive grade

chip resistors, the company decided to adjust prices of some products to maintain the healthy and sustainable

cooperation. The range includes: CR-A/0201/0402/0603/0805/1206/1210/2010/2512/CN-A43/CN-A42 package

chip and array resistors.

Thanks very much!

Viking

April 23, 2018


20

GUANGDONG FENGHUA HI-TECH

Translation:

Respectful Fenghua Hi-tech partners:

First of all, thank you very much for your long-term support and trust in Fenghua Hi-Tech. In the past six months,

the prices of international bulk commodities and precious metals have increased, the labor costs have increased

year by year, and the company’s operating cost pressures have further increased. Therefore, we decided to

increase the price of our chip resistors. The specific price adjustments are described as follows:

1) Price adjustment range: RC/RS series: 0201~2512 and full row of products

2) Price adjustment: In the current sales price increase based on 25% to 30%, specifically based on quotation.

3) Execution date: executed on April 16, 2018, subject to shipment.

Fenghua Hi-Tech will continue to do a good job in product quality, delivery and service, as well as product

support. Thank you again for your concern and support.

Notice is hereby given!

Guangdong Fenghua High-Tech Marketing Center

April 13, 2018


21

LIZ ELECTRONICS (KUNSHAN) CO., LTD

Translation:

To my respectful customers and distributors,

Thanks very much for your long-term support and trust on LIZ.

To adjust the imbalance between supply and demand and the cost pressure because of raw material price

increase, we decide to adjust the selling price as follows,

Thick film resistors: all series and Array resistors; price adjustment: 20%-30% increase

Diodes: 15% increase

Protective devices: 15% increase

We really appreciate your understanding and support. Millions of thanks!

April 08, 2018


Silecta Inc. Suite 206 - 308 Legget Drive Kanata, Ontario, Canada K2K 1Y6

© 2018 Silecta Inc. All rights reserved. Silecta and Silecta logo are registered trademarks of Silecta Inc. All other products are trademarks of their respective owners.

SOURCES

1. Passive Electronic Components: World Market Outlook: 2017-2022. Cary, NC: Paumanok Publications,

Inc., 2017

2. Hailiang, Huang. “MLCC Cost Analysis.” HCS Index, September 2, 2013. http://www.hcsindex.org/blog/huanghailiang_222507.html

3. Statista (2017). Global smartphone shipments forecast from 2010 to 2021 (in million units). Retrieved from Statista database.

4. Zhiyan Consulting, MLCC Demand Report, http://www.zhiyan.org

5. InfoMine: Commodity and Metal Prices. Retrieved June 4, 2018, from http://www.infomine.com/investment/metal-prices

6. Company Profile 2017. Yageo Corporation, 2017

7. InfoMine: Commodity and Metal Prices. Retrieved June 4, 2018 from http://www.infomine.com/investment/metal-prices

8. “Power semiconductors, home-made alternatives under big price increases.” Sohu, December 16, 2017 http://www.sohu.com/a/210864568_132567

9. “TrendForce Projects Prices of NOR Flash Products to Go Up by 20% Sequentially for 3Q17 as Supply Scarcity Continues.” DRAMeXchange, June 22, 2017. https://www.dramexchange.com/WeeklyResearch/Post/2/4704.html

http://www.hcsindex.org/blog/huanghailiang_222507.html

http://www.zhiyan.org/

http://www.infomine.com/investment/metal-prices

http://www.infomine.com/investment/metal-prices

http://www.sohu.com/a/210864568_132567

https://www.dramexchange.com/WeeklyResearch/Post/2/4704.html

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