Fun with Data – Passive Components
Passive components are the Rodney Dangerfield’s of the electronics world, they get no respect, however they have become increasingly important since 2020 for two reasons. First, the use of MLCCs (Multi-layer Ceramic Capacitors) has increased rapidly as their use in consumer devices (smartphones, etc.) and automotive applications (EVs) has increased demand, and second, the prices of the raw materials needed for producing passive components have increased considerably over the last two years, creating a volatility that is rarely seen in passive component prices.
The increased demand for consumer products during the COVID-19 pandemic was responsible for much of that volatility, however while passive raw material prices remained at unusually high levels in 2021, the Russian invasion of Ukraine last year caused a secondary spike to even higher levels but relatively quickly returned to that new baseline as supply chain routes were restored. That said, as shown in the chart below, prices for passive raw materials have been on the rise again which is concerning for passive component pricing as we move through 1Q.
While the overall effect of increasing passive component cost will be offset a bit by lower silicon based product prices, the inflationary environment we face is pushing consumers to be more frugal with their CE purchases, leading to the expectation that brands will offer significant discounts to entice buyers. There has also been an increased focus on renewable energy over the last few months as a large number of weather incidents bring forward the demand for less carbon emissions from global industries, also contributing to demand for the same raw materials that are present in passive components, and that renewed demand competition seems to be, in part, responsible for the most recent spike in passive raw material prices.
However, if this rise in passive raw material component prices continues in early 2023, which it is expected to do, CE brands will have little room or incentive to lower prices and CE sales will continue to suffer at least through 1Q, so we see this as a negative datapoint in our expectations for the CE space in 1Q and possibly 2Q. That said, given the volatility seen in some passive component raw material pricing, we expect things could change substantially during the year. CE product brands will likely pass on cost increases more quickly this year in order to preserve margins that are already under pressure, so we expect CE product sales to be even more closely tied to manufacturing costs and raw material prices, for both passive and active components for the 2023 year.
The increased demand for consumer products during the COVID-19 pandemic was responsible for much of that volatility, however while passive raw material prices remained at unusually high levels in 2021, the Russian invasion of Ukraine last year caused a secondary spike to even higher levels but relatively quickly returned to that new baseline as supply chain routes were restored. That said, as shown in the chart below, prices for passive raw materials have been on the rise again which is concerning for passive component pricing as we move through 1Q.
While the overall effect of increasing passive component cost will be offset a bit by lower silicon based product prices, the inflationary environment we face is pushing consumers to be more frugal with their CE purchases, leading to the expectation that brands will offer significant discounts to entice buyers. There has also been an increased focus on renewable energy over the last few months as a large number of weather incidents bring forward the demand for less carbon emissions from global industries, also contributing to demand for the same raw materials that are present in passive components, and that renewed demand competition seems to be, in part, responsible for the most recent spike in passive raw material prices.
However, if this rise in passive raw material component prices continues in early 2023, which it is expected to do, CE brands will have little room or incentive to lower prices and CE sales will continue to suffer at least through 1Q, so we see this as a negative datapoint in our expectations for the CE space in 1Q and possibly 2Q. That said, given the volatility seen in some passive component raw material pricing, we expect things could change substantially during the year. CE product brands will likely pass on cost increases more quickly this year in order to preserve margins that are already under pressure, so we expect CE product sales to be even more closely tied to manufacturing costs and raw material prices, for both passive and active components for the 2023 year.
Passive Component Raw Material Price Trend - 4/12 - 12/22 - Source: 2022 Passive Electronic Component World Market Outlook - Paumanok Publications - Chart components are: Nickel, Copper, Aluminum, Zinc, Palladium, Ruthenium, Tantalum, Silver, and Oil
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