China boosts capability for passive chip components

by Cecile de Veyra (Managing Editor)

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.

Chinese manufacturers push on with miniaturization

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.

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.