China increases R&D for passive chip components

The trade war and supply shortage are driving efforts in China's passive chip components manufacturing sector to achieve greater competitiveness on the domestic and international fronts.

Market preference for high-end passive chip components, which come from just a few industry players, and outsized demand have resulted in a supply shortage, which began in 2018. Compounding this situation is a shift in focus by component manufacturers to the more lucrative market in mobile electronics, relegating automotive, industrial and other applications to the waiting list. An additional complication is the US-China trade war that has forced major suppliers with facilities in China or ties with Chinese factories to reshore some of their operations. It is still ongoing, with tariffs remaining in place. When the pandemic happened, trade ground to a halt and wiped out the modicum of demand-supply rebalance achieved in 2019. Into its second year, the COVID-19 crisis continues to pose challenges in sourcing materials for the production of electronic components.

Against this backdrop, China has embarked on a three-year plan to strengthen its component sector. Announced by the Ministry of Industry and Information Technology at the beginning of 2021, this plan includes a sales target of $325.1 billion, to be realized with fresh efforts to "cultivate a batch of internationally competitive local electronic components companies, with at least 15 of them having a revenue of over 10 billion yuan each by 2023," according to China Daily.

Reliance on foreign sources of components is still evident among Chinese manufacturers, says Wang Peng, deputy head of the China Center for Information Industry Development, the ministry's scientific research institute.

The initiative will facilitate the release of construction permits and financing, and provide assistance to meet required international standards, according to a report from Nikkei Asia. This extends to foreign companies who set up research and production facilities in China.

In the passive component category, Chinese manufacturers push on with miniaturization. Chip or SMD types have seen increasing demand in 5G communications, mobile and consumer electronics, automotive and medical applications.

While units in chip packages as small as 01005 are not attainable for the majority of domestic enterprises just yet, some large companies are already producing them on a mass scale. Guangdong Fenghua offers a range of capacitors, inductors and resistors at this size, while Shenzhen Sunlord currently focuses on inductors.

The global passive component market reached $28.6 billion in 2020, with chip units accounting for more than 70 percent, according to China Industry Information Net. Multilayer ceramic capacitors (MLCCs) garnered $11.5 billion, representing over 90 percent of the ceramic subcategory's share and over half of the overall capacitor segment.

In China, MLCCs dominated as well, having totaled $10.76 billion in the same year, according to the China Electronic Components Industry Association. Sales of chip inductors and resistors were also up.

Steady demand from the domestic and overseas markets is expected to boost sales of China's passive chip components by 5 to 10 percent in the coming years, according to suppliers interviewed by Global Sources Electronic Components.

This positive outlook has been encouraging production expansion among Chinese suppliers. Shenzhen Topmay Electronic Co. Ltd, for instance, recently invested $1.47 million in the installation of 10 production lines.

Wide gap

There are more than 1,000 manufacturers of passive chip components in China and over 70 percent are Chinese-owned. Despite this huge number, they are a minority in terms of market share compared to the foreign companies operating in their midst and abroad. Suppliers from Japan and South Korea lead in this product category, especially the high-end segment.

In MLCCs, top-tier companies have a global market share exceeding 50 percent. They include Murata, TDK, Taiyo Yuden, Kyocera and Samsung.

Typical chip component sizes

Chip capacitors, resistors and inductors form the bulk of China's production for passive components. They lead with a share of more than 90 percent.

By package size, the most widely available are 0402 and 0603, although 0201, 0805 and 1206 can be easily sourced. Units in 01005 footprints come only from large companies.

Major applications include mobile electronics, communications products, wearables, medical devices, and the automotive and military fields. The first two and the automotive sector will continue to lead based on demand.

Chinese manufacturers usually purchase materials from domestic providers, but accommodate requests for foreign sources.

Input costs have been increasing, prompting suppliers to hike up component prices by 10 to as much as 20 percent. Companies interviewed are projecting the material situation will not change, but hikes in product quotes may slow to 5 to 10 percent before end-2021.

The products in this gallery have been handpicked by our market analyst for representing current trends in passive chip components from the Chinese mainland and Taiwan.

Chip resistor

Suitable for use in consumer electrical and EDP equipment, computers, mobile phones and digital camcorders, this 1210R chip resistor from Aid Electronics Corp. has high reliability, stability and efficiency. The negotiable minimum order is for delivery within seven days.

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Chip inductor

From Dongguan Bullwill Electrical Co. Ltd, this CBM321609U800T chip inductor has enhanced solderability and heat resistance. It has an anti-interference feature and suits portable communication equipment, high-speed electronic devices, and radiation and high-speed noise suppression applications.

The 4,000-unit minimum order requirement has a lead time of five days.

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1 to 6kVDC-rated chip capacitor

Guangdong South Hongming (HK) Elec Science & Tech Co. Ltd's SMD High voltage 1KV-6KV capacitor has 1 to 6kVDC rated voltage, ≥10,000Mohm insulation resistance at 500VDC and NP0, SL, Y5P, Y5U or Y5V dielectric. It is suitable for use in backlight inverters, and snubber circuits of switching power supplies and high-voltage applications.

The supplier requires an order of at least 1,000 units. Delivery is within seven days.

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0.1 to 6,800µF chip aluminum electrolytic capacitor

This TMCE24 Series from Shenzhen Topmay Electronic Co. Ltd is a chip aluminum electrolytic capacitor with 4 to 100V voltage range, 0.1 to 6,800µF capacitance, ±20 percent tolerance at 120Hz, 20 C and -40 to 105 C operating temperature. It meets IEC 60384, JIS C-5101 and EU Directive 2002/95/EC requirements.

An order of at least 20,000 units is required. This has a 12-day lead time.

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