By Melissa Pistilli—Exclusive to Tantalum Investing News

Tweet

Recent reports on the global electronics industry show steady growth continuing in 2010 and onwards as emerging economies, particularly in Asia, drive demand for electronic products. Tantalum capacitors are an integral part of many such products and several capacitor manufacturers have recently come out with new products likely to be in high demand. However, tantalum supply lines may soon come under increased pressure as the US government, various international NGOs, and the consumer public push for measures to curtail the flow of conflict minerals into the electronics industry supply chain.

Electronics Industry Bouncing Back

Manufacturer confidence and rising customer demand have prompted a “booming” recovery in the semiconductor industry, with sales projected to be about 30 percent higher this year than in 2009, reports Graham Pritcher, New Electronics.

Malcolm Penn, chairman of semiconductor market research firm Future Horizons, forecasts sales growth at $300 billion for 2010 with room to grow.

According to Pritcher, even the European semiconductor distribution sector is performing well so far this year with first quarter sales up 33.2 percent over the same quarter in 2009. Pritcher quotes DMASS chairman Georg Steinberger who said in his 25-year career he’s never witnessed such a “market rebound from crash to cash in five quarters.” Steinberger went on to suggest the rebound isn’t all merely an “inventory correction,” but rather an indication of “real growth.”

A monthly report from the Electronic Components Association (ECA) shows orders have been continually rising since last summer, which ECA President Bob Willis attributes to increased optimism in the market coupled with concerns over possible shortages. “Manufacturers are responding to current and future electronics growth and don’t want to slow momentum by getting caught short of inventory.”

A new industry research report on the global consumer electronic industry purports “phenomenal growth” is on the horizon with a compound annual growth rate of around 5 percent between 2010 and 2013. The report also notes that demand for consumer electronics from emerging economies like China and India plays a significant factor in this growth. Market analyst firm iSuppli says the demand from Asia led to a 22.7 percent hike in PC sales in the first quarter of 2010 over the previous year.

Singapore’s Ministry of Trade and Industry (MTI) recently reported a 32.9 percent rise in output from its manufacturing sector in the year to March including 157.6 percent between December and March. The surge in output was credited to growing global demand for electronics, which MTI attributes to rebounding US business spending on IT and increasing demand for consumer electronics in China.

Demand for Tantalum to Outpace Available Supply?

Tantalum is widely used in electronic products from cell phones to PCs and some of the biggest names in capacitor manufacturing, including AVX, Vishay Intertechnology, Rohm Semiconductor and MSI, have announced new tantalum capacitor products in the last month for use in wireless cards, smart meters, computers, weapons systems, radars, transponders, and power supplies.

Concerns are growing in the market over the ability of available supply to meet increasing demand. According to Alan Jermyn, vice president of marketing for Avnet Abacus, extended lead times on some tantalum capacitor products are already occurring due to a shortage of tantalum powder.

Several factors are currently impacting the supply/demand fundamentals of the tantalum market: one of the world’s biggest tantalum producers, Talison Minerals, still has yet to bring its Wodgina mine back into production; there is increasing pressure on capacitor manufacturers and the electronics industry to avoid minerals from the conflict-zone in the Democratic Republic of Congo (DRC); and very few currently producing mines exist outside of the region. Many in the tantalum and electronics industry expect the mounting effort to curtail the flow of conflict minerals from the region into electronic materials supply chains will lead to further supply shortages in the face of increasing demand.

US Government Working to Cut-off the Conflict-Mineral Trade

The electronics industry is the largest consumer of the minerals, including tantalum,  that are behind the ongoing war in the eastern provinces of the DRC that has led to the murder, torture, rape and enslavement of the region’s population.

US companies are coming under increasing pressure by the Obama administration to stop using materials originating from the conflict-zone in eastern DRC. A few weeks ago, representatives from the consumer electronics, automotive, jewelry and manufacturing industries met with government officials including Under Secretary of State for Economic, Energy and Agricultural Affairs Robert Hormats, Under Secretary of State for Democracy, and Global Affairs Maria Otero, and Assistant Secretary of State for African Affairs Johnnie Carson at the US State Department to discuss measures to ensure products do not contain DRC conflict minerals.

Secretary Hillary Clinton’s State Department and other US government agencies are pushing for due diligence guidelines for reducing conflict mineral use and promoting responsible material sourcing from the region. Officials are also calling for more supply chain transparency on the part of the industries involved.

“My staff is working closely with many offices in the Department to coordinate a comprehensive response. Two weeks ago, we sent a team to the DRC to gather facts on the ground. The team met with representatives from the mining industry, NGOs, the Congolese government, and the UN Mission in the Congo. This followed the visit of several assistance assessment teams in December and January. The input from these visits and the reporting from our embassy, the United Nations, and others on the ground, has helped guide our discussions with different stakeholders on this issue,” writes Under Secretary Hormats in a recent article on Huffington Post. “We are also meeting with the many local and international NGOs that have expertise in this area. Their guidance and cooperation will be helpful as we move towards a global framework for responsible extraction and trade of natural resources.”

According to Hormats, the State Department’s strategic action plan on conflict minerals includes: raising public awareness of the issue; enhancing diplomatic efforts in the region; encouraging responsibility in the minerals trade; supporting the UN in the DRC; building DRC Capacity; and protecting small-scale artisanal miners and the mining communities.

With help from Assistant Editor Vivien Diniz

1 Comment

Tweet