Understanding the Global Market for Aluminum Electrolytic Capacitors

Market Positioning In The Larger Capacitor Market in FY 2013

Aluminum electrolytic capacitors account for only 6.5% of all worldwide capacitor shipments in terms of volume, but a full 22% of the global capacitor market in terms of dollar value.

Aluminum electrolytic capacitors are considered a niche component compared to the trillion plus ceramic capacitors (Multilayered ceramic chip capacitors, or MLCC) produced each year, but provide an important solution for all design engineers faced with the requirement of achieving high capacitance beyond the capabilities of ceramic capacitors. However they are the most economical choice when a design engineer needs a combination of high capacitance and high voltage in a component, and is not encumbered by the constraints of volumetric efficiency.

Technical-Economic Maxims:

There are two primary technical factors that impact the economics of all capacitors- 1) capacitance is required for almost all electronic circuits and 2) capacitance is equivalent to the physical size or available surface area of the finished component, which makes raw materials used in the production of capacitors key to cost, price and technical advancement. In aluminum capacitors, the key elements are (1) etched anode and cathode foils (2) capacitor can, tab and packaging; and (3) electrolyte. The other key elements are (4) rubber stoppers and end-seals, and (5) capacitor separator papers and (6) lead wires.

Aluminum capacitors have a competitive cost structure when compared to other capacitor dielectrics due to the (1) low price per pound for thin aluminum foil (which is made from bauxite) (2) and the high level of automation involved in the production of aluminum capacitors. Aluminum capacitors differ from other capacitors with respect to cost structure as a result of the number of raw material types consumed per capacitor- i.e. foil and paper, liquid or solid electrolyte, tab, can, leads, stoppers, end seals. None of the other dielectrics, other than perhaps OPP film capacitors have so many different raw materials and required disciplines to produce the finished capacitor. In terms of raw material feedstocks, aluminum is more cost effective when compared to tantalum and plastic film, but not as cost effective as ceramics, which have lower cost feedstocks in barium carbonate and titanium dioxide. Still, at higher voltages, and in higher capacitance values, aluminum electrolytic capacitors are the most economical choice for any design engineer working in the high technology economy today.

Component Configurations:

There are seven primary configurations (or form factors) which aluminum electrolytic capacitor come in, these are-

• Radial Leaded Aluminum Capacitors
  Radial leaded aluminum electrolytic capacitors continue to represent the largest segment of global consumption in terms of dollar value for all aluminum electrolytic capacitors by type in FY 2013. Radial leaded aluminum capacitors are used in consumer electronics and professional electronics in large volumes. The global market environment for radial leaded aluminum electrolytic capacitors can be described as a mature market, with slow volume growth over time, with intense competition between Japanese and Chinese vendors and aggressive price erosion.
• Vertical Chip Capacitors (V-Chip)
  Vertical chip aluminum capacitors represent a rapid growth portion of the aluminum capacitor industry in FY 2013, and has shown the largest amount of growth over the past five years in terms of both value and volume of consumption. This has been caused by demand from the flat panel display television set market and from various portions of the computer industry. Vertical chip aluminum capacitors continue to fill slots previously held by radial leaded aluminum capacitors designs. The need for a more volumetrically efficient aluminum electrolytic capacitor solution to satisfy the growing need of the flat panel TV market, the notebook computer market; and various consumer audio and video imaging device markets, such as game console, DVR, and cable set top box have increased demand for these devices. The V-Chip market is highly competitive between Japanese and Chinese vendors; including aggressive price competition, but still a growth market over time.
• Horizontal Chip Capacitors (H-Chip)
  The horizontal aluminum electrolytic capacitor (also known as the solid polymer aluminum capacitor) market represents a molded chip technology with aluminum anode that matches molded tantalum chip capacitor case sizes. Market growth has been prohibited due to high pricing (2X that of a V-chip aluminum design) and a limited number of vendors. Intended markets match that of tantalum capacitors and therefore, these devices can be found in computers, automotive electronics, game consoles and related markets. This is where the majority of new polymer cathode aluminum designs can be found. And it is expected that solid polymer aluminum H-chips will be a larger portion of the total aluminum electrolytic capacitor market over the next five years.
• Axial Leaded Aluminum Capacitors
  Axial leaded aluminum capacitors are considered a legacy item in the global components market and the number of vendors has declined steadily over the years; however, the product line remains quite lucrative as a result of its legacy status. The product is primarily consumed in the automotive industry and the lighting ballast industry.
• Screw Terminal {Large Can}
  These large cans are also used in industrial and utility grade power inverters. They had been growing rapidly in worldwide consumption because of their use in renewable energy systems for inverter filtering, especially in wind turbine, solar and wave generation renewable energy systems. The capacitors are also used in many other types of power conditioning equipment, although inverter applications represent the large opportunities and the focal point of rapid growth in recent years. The European market had been the largest region of screw terminal capacitor consumption, especially for solar and wind operations in Germany and Italy, however the new feed in tariffs for 2013 in those two countries due to regional economic austerity has idled the market.
• Snap-In/Snap-Mount Aluminum Capacitors
  These designs are physically large, have large amounts of capacitance, and high voltages. They are used in the output filters of power supplies. The snap-in models are easy to mount and are replacing older, screw terminal products. This sector faces some encroachment by SMT designs, but their large size and application specific nature makes them somewhat immune to encroachment. Thus, these markets will continue to play an important role going forward.
• Specialty Aluminum Capacitors
  Includes the flash and pulse type aluminum electrolytic capacitors for use in medical device, as well as parts that comply with specific military specifications or offer high temperature or high vibration frequency resistance.

Current Market Conditions and Future Outlook:

The market for aluminum electrolytic capacitors remained difficult throughout FY 2013 due to a sluggish market environment in TV set and home theatre equipment, as well as in the desktop and computer markets. Both TV sets and computers are critical end-markets for aluminum electrolytic capacitors because flat panel TV sets, desktop and notebooks computers are all aluminum electrolytic capacitor intensive. With respect to TV sets, the global market has been sluggish due to the economic austerity that is gripping the European economy and because the transition from CRT monitor to flat panel technology has largely run its course. Still however, we remain optimistic that an improving European economy will revive the global TV set business. In computers, the market is a bit more complex as the shift in consumer preference for tablet devices has literally halted production of the larger notebook and desktop computing devices. Unfortunately for aluminum electrolytic capacitor manufacturers, tablet computers do not employ aluminum electrolytic capacitors because of volumetric efficiency requirements. Still, over the long term we remain optimistic that a portion of tablet owners will eventually expand their needs to include notebook and/or desktop computer functionality, which will in turn help the aluminum electrolytic capacitor supply chain.

Also, in FY 2013, additional declines were realized in the industrial end use market segments, especially for large can screw terminal and snap-in aluminum capacitors consumed in inverters in renewable energy systems in Europe. New Feed In Tariff structures in Germany and Italy are now curtailing overall growth in renewable energy systems in its largest regional market. Still however, for the long term we still see the viability of global renewable energy markets driving demand for large can aluminum capacitors for inverter applications in wind and solar energy. Renewable energy targets for many countries for the year 2025 supports continued growth in demand for DC link circuits and their related capacitors to meet the minimum requirements for electricity generation by renewable means.

FY 2014 Market Outlook and Beyond:

In FY 2014 - automotive electronics remains a bright spot for sales of aluminum capacitors, although this is a small piece of the overall demand chart for aluminum capacitors by end-use market segment. Commercial aircraft markets are also continuing to outperform, as are medical device markets and telecommunications infrastructure equipment markets.

Here is a summary of FY 2013 market conditions and the longer-term outlook for aluminum electrolytic capacitors for FY 2014 and beyond-

1. Aluminum electrolytic markets were at a low point in the market cycle in FY 2013, however we believe that the market will begin to recover along with improvements in the European and global economies.
2. Aluminum Electrolytic Capacitor markets are at a low point because the end-use markets into which the products are being sold are demonstrating lackluster performance or undergoing significant change.
3. Television set markets, for example, a key end-use market for radial leaded and vertical chip aluminum capacitors, have been struggling for the past two years and this is having an adverse negative affect on the aluminum capacitor supply chain.
4. Many consumer electronics products that consume aluminum electrolytic capacitors are losing demand at the customer level because they are redundant with increased functionality of the Smartphone, which uses no aluminum capacitors. End-markets that have been displaced by the smartphone include point and shoot cameras, traditional stereo equipment, some smaller television sets, GPS equipment, and automotive inertial mapping systems.
5. Large capacitors such as the screw terminal aluminum capacitors and the snap mount aluminum capacitors continue to hold great promise for the future, however, in the near term demand for their use in renewable energy systems has slowed down because of the change in the structure of feed-in tariffs in Germany and Italy, which has slowed demand for electronic equipment consumed for wind and solar projects for FY 2013 and into FY 2014.
6. Promising markets long-term markets for aluminum electrolytic capacitors include commercial aircraft, medical devices, oil & gas services electronics, communications infrastructure, electric rail and automotive electronic subassemblies.
7. Longer term prospects for aluminum capacitor applications for inverter filtering in wind turbine, solar farms and ocean wave generation renewable energy technologies remains promising because of the targets set by multiple countries around the planet regarding the employment of renewable energy systems to augment coal based electricity generation by 2025.
8. Over time we expect both the TV set market and the computer markets to recover. TV sets represent a market that should experience growth in accordance with improving global economies. Computer markets should revitalize over time as the glut of recent tablet buyers require more computing power in the form of desktop and notebook computers in the future.