Since the electronics industry is the largest consumer of tantalum, many who observe the market tend to focus on producers of the metal and data related to consumer electronics. That means capacitor manufacturers, an important segment of the supply chain, are often overlooked. These companies invest in both tantalum assets and technology and could be a worthy gauge for market participants.
Capacitors are components that store and provide charge for consumer items such as smartphones and laptops; they are also used for a range of other purposes, such as military and aerospace applications.
The Tantalum-Niobium International Study Center (TIC) gathers data from players in the tantalum industry. As capacitor manufacturers play a significant role in outlining trends in the market, they are among the companies that the TIC assesses.
The presence of capacitor manufacturers KEMET (NYSE:KEM) and AVX (NYSE:AVX) is increasingly being felt in the tantalum space. These companies have been active in a range of activities, from taking a stance on conflict minerals, to returning to the ailing tantalum industry in the Democratic Republic of the Congo (DRC) when most were shunning it, to making acquisition agreements.
In February, KEMET closed an $85-million deal to buy tantalum powder manufacturer Niotan. Niotan had been one of KEMET’s suppliers, so by buying it, KEMET set itself on the path toward vertical integration; Kemet also recently established a supply agreement with a DRC tantalum mine.
The company now claims to be unique in that it is the world’s only vertically integrated tantalum manufacturer of any appreciable size.
In addition to lowering costs, another benefit of vertical integration, according to KEMET, is that it allows technology to be developed based on market and customer needs.
KEMET recently revealed that its willingness to advance tantalum technology was more than just talk. At Electronica 2012 in Germany, the company took the opportunity to feature its latest innovations in tantalum capacitor technology, including the T550 Polymer Hermetic Seal Series, which has “very low ESR and improved capacitance retention at high frequency and low temperature.”
The company also put the T545 Energy Series in the spotlight.
“Quite simply, the T545 series can deliver the most energy of any tantalum capacitor offered today,” said Cristina Mota Caetano, KEMET technical product marketing director, Tantalum Business Group.
AVX claims to be the world’s leading tantalum capacitor supplier. Due to it partnership role in the Solutions for Hope tantalum-sourcing program, the company is able to list manufacturing the world’s first validated conflict-free tantalum capacitors among its achievements.
But the company’s drive for leadership in the industry does not end there. Last month, AVX announced that it agreed to pay about $86 million for Nichicon’s (TSE:6996) Tantalum Component division. The deal is expected to close by the end of the year or shortly thereafter.
Meanwhile, AXV has been busy developing new tantalum technology. Earlier this month, the company introduced two series of tantalum capacitors for the European aerospace industry.
“The new TES and TCH Series SMD chip capacitors provide the aerospace and other high-reliability applications with all of the benefits of AVX’s tantalum technology, which is a notable achievement because tantalum capacitors that have been designed and approved for use in these industries are fairly uncommon due to tantalum’s inherent sensitivity to the combination of humidity and high temperatures,” said Dan Lane, the company’s product marketing manager.
The company said the TCH series was specifically designed for a mission critical European Space Agency project that required both extremely high capacitance and low ESR.
AVX and KEMET have both displayed a willingness to innovate and invest in an environment of global uncertainty. Both have cited the importance of Asia to their plans and have provided insight into where the innovative interests in the market are. Add to that the key role of capacitor manufacturers in the supply chain, and it seems wise for market participants to take a cue from TIC and place this segment of the industry on their radar.
Securities Disclosure: I, Michelle Smith, do not hold equity interest in any of the companies mentioned in this article.