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Thailand Flood Impacts Tantalum Capacitor Supply

Buyers can expect leadtimes for some tantalum capacitors to remain long through the first half of 2012 because of the shutdown of production facilities for two major capacitor suppliers, caused by the flooding in Thailand.

NEC TOKIN Corp. and ROHM Co., said production at their Thailand factories, which have been shut down since October, would not resume until mid 2012.

As a result, tantalum capacitor leadtimes from other major suppliers have stretched from between 6 and 10 weeks up to 25 weeks for some parts. For example, leadtimes for Kemet's tantalum capacitors in the B case size extended out to around 24 to 25 weeks, while other parts (A, C, D and V-cases) stretched out to between 15 and 16 weeks, according to Joe Porter, vice president tantalum product marketing at Kemet Corp. based in Greenville, S.C.

Similarly, Vishay Intertechnology Inc. reported that leadtimes have stretched out to about 24 weeks from six to eight weeks for some smaller tantalum capacitors.

"We don't know how long this will last," said David J. Valletta, executive vice president worldwide sales, Vishay Intertechnology, Inc., based Malvern, Pa. "Even once the flood waters recede, it's not an easy thing to flip these factories back on. Suppliers will need to replace equipment. From our perspective, this has had a much bigger effect on supply than the earthquake in Japan.”

Porter noted that whether Kemet will expand capacity to increase supply and lower leadtimes depends in part on how quickly inventory in the supply chain gets depleted.

“Lead times for tantalum capacitors in smaller case sizes have stretched from six to eight weeks out to about 24 weeks,” said David J. Valletta, executive vice president worldwide sales, Vishay Intertechnology.
Kemet's distributors estimate there is anywhere between three to five months worth of tantalum capacitor inventory on hand, on average.

Due to the amount of inventory in the supply chain, suppliers said the supply situation for tantalum capacitors could have been worse.

"Thailand's flooding has had an impact, but not as great as we would have thought by now," said Porter. "However, I think the impact will be greater in the early part of next year."

Both traditional MnO2 tantalum and tantalum polymer capacitors have been impacted by Thailand's flooding. With only three major tantalum polymer suppliers, and one of them NEC TOKIN, these parts could be harder to find next year.

Flood waters recede

The good news is water is receding in Thailand. NEC TOKIN reported that it is working on the recovery plan for its tantalum and super-capacitor production lines impacted by the flood.

Prior to the flood, NEC TOKIN had been supplying 400 million units per month (combined traditional tantalum and tantalum polymer capacitors). "To get back to those volumes, it's going to take some time, maybe until the third quarter of 2012," said Victor Lim, product marketing manager, NEC TOKIN America Inc. in San Jose, Calif.

Lim added that NEC TOKIN is working on a recovery plan for the tantalum capacitor lines and expects to release its plan "very soon. He noted that the Thailand facility stored inventory on the second floor, which was allocated to existing orders.

"It's a small quantity compared to our monthly production, so it's going to be painful supporting our customers," said Lim. "We have been helping them by providing cross part numbers from other vendors."

In the meantime, all of NEC TOKIN's tantalum capacitor production is in Japan. The company has added a low-profile, high-performance tantalum capacitor line at its Japanese plant to support smart-phone applications. Production has increased from about 10 million units per month prior to the flood to 13 million units per month. Lead times for these P2 case size products (2 x 1.25 x 1.0-mm) run about 16 weeks.

Prior to the flood, NEC was in the process of increasing capacity at its Thailand plant, and still plans to bring increased production back online in Thailand sometime next year. Lim noted that the Thailand plant was producing about 20 different case sizes. The company also is looking at other locations in Asia for future production facilities.

ROHM said it will not have an update on its production plans at its Thailand plant until the beginning of next year. However, it had earlier said that there would be “full recovery of all products” by February.

The company produces tantalum capacitors, resistors, diodes, transistors, and other ICs at the Thailand facility.

Prices should rise

Suppliers are reporting that whether or not there will be price hikes in the first quarter of 2012 hinges on the amount of inventory in the supply chain.

"If it's enough to sustain the market for a period of time then it won't have a lot of impact but my guess is that there isn't enough so the laws of supply and demand will kick in," said Porter.

Prices for tantalum capacitors have been on the rise for the past few years because of rising materials costs. Although capacitor pricing has now stabilized, raw material prices have not dropped. Couple this with a short supply and buyers should expect some price increases next year.

"We want customers to feel comfortable about designing in a tantalum capacitor and not worry about getting enough supply in the future and at what price," said Joe Porter, Kemet's vice president, tantalum product marketing.
"It's good for the industry that pricing stabilizes and eventually goes down because the last thing you want is customers fearful of designing in a product that they can't depend on supply and stable pricing," noted Porter.

Another issue impacting both supply and pricing of tantalum capacitors is the Dodd-Frank conflict materials regulation, which calls for transparency in the mineral sector's supply chain. This means manufacturers will have to put supply-chain processes in place to capture and store information on the origins and use of these materials, including tantalum, tin, tungsten, and gold, which are all used in electronic circuits.

Porter attributes the shortage of raw materials and subsequent price increases to the shutdown of tantalum mines in Australia a couple of years and the conflict in the Congo, which led to the Dodd-Frank Act.

"The Dodd-Frank Act says if you're going to be a responsible manufacturer, you have to make sure that you're not buying materials coming out of the conflict mines in Africa," said Porter.

"In order to do that, the Congo was shut down, and so were countries like Rwanda and Uganda because you couldn't prove that material wasn't smuggled over from the conflict area in the Congo," noted Porter. "Basically, you had a mineral-rich area like the Congo that was banned and off limits because responsible people wouldn't buy from the conflict area and Australia mines were shutdown."

"Combine those two things together and that put a big strain on the supply of raw materials in the market as well as pricing," Porter added.

The industry is in the process of implementing the tin industry's "bag and tag" tracking system in the tantalum supply chain. The tracking data attached to each bag of ore follows the product all the way through the supply chain to ensure that the material comes from conflict-free mines and smelters.