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Market Focus: Electrical/Electronics 19057

December 7, 1998

7 Min Read
Market Focus:  Electrical/Electronics

Categorizing the electrical/electronics market can be almost as frustrating as trying to describe an elephant by touch alone. One person feels the tusks, another the trunk, and yet another the legs. Similarly, there are many different aspects to this market, and each one represents a micro-industry all its own. For our purposes here, we have researched the markets for several key products as well as the overall E/E market for injection molding. Products include electrical components-connectors, switches, semiconductors, thermocouples, and others-as well as CDs and DVDs, printers, cellular phones, and other devices in which plastics enclose significant electronic content.

Molders and component suppliers looking to get a handle on market dynamics should start first with overall trends. Two independent market research firms offer a cautiously optimistic outlook for the use of engineered plastics in E/E devices. The Freedonia Group (Cleveland), for example, predicts that the amount of resins in these applications will increase to 768 million lb by 2001 in the U.S., a rise of almost 200 million lb over 1996 levels (Table 1, opposite). Most of these figures reflect injection molding applications; the only extruded products are jacketing for wire and cable, making up only 10 percent of the projected total.

Another view from The Repton Group (New York) predicts a 12 percent rise for 1998 in global E/E markets for injection molding. This will be tempered, says the firm, by sluggish semiconductor sales in Japan, the Americas, and Asia-Pacific.

Not surprisingly, demands on molding suppliers from their OEM customers remain much the same as last year's laundry list. Costs for small components, many of which are insert molded, need to be reduced as they become commodities, but doing so requires molders to use higher flow resins for thinner walls. Although the materials are costlier, the price per part must go down. So molders are becoming adept at lowering cycle times, optimizing designs, and pushing the limits on cavities per tool. Did we forget to mention minimizing post processing to eliminate flash by boosting processing precision and control?

One other challenge exists as a result of globalization at the OEM level. According to Jeff Viola, BASF Polystyrene's market manager for E/E, OEMs are pulling molds faster, depending on where the cost benefits are best. "Because the operations of major manufacturers are now worldwide, they may get a new tool trialed, send it to one molder, then transfer it to another molder near their overseas facility a month later," he reports. "As a result, U.S. molders are learning not to depend on one or two large OEMs, so when these switches happen, they aren't left in the lurch."

Polystyrene usage in the E/E market centers on small appliances, refrigeration liners, and printers, according to Viola. One trend he sees in these applications is the movement toward coloring materials at the press. "For polystyrene, the biggest growth is in the inkjet printer market, which is a good fit because of the cost pressures and fight for market share," he adds. "Laser printer components are going to PS for small panels and trays, and even PC bezels and swivel bases for monitors are switching from ABS to PS. The market has changed from our perspective because these applications have severe cost pressures."

Viola finds that OEMs want consistency in parts colored at the machine. "They may tell molders to deliver the same part at a lower price, but with natural resin colored at the machine rather than precolored. Molders must buy the equipment, including gravimetric blending systems, and rely on an expertise in processing colored material because rejects can go up threefold when switching from precolored."

Info Storage DynamicsCDs and DVDs are of special interest in the E/E market because of their striking growth rates. The Freedonia Group acknowledges more PCs now come with standard CD-Rom drives and forecasts more than 50 percent growth by 2001.

Bill Lutz, global technical leader for optical media polymers at Dow Plastics, says both media formats are due for rapid growth based on internal market research as well as data gathered from Understanding & Solutions (Dunstable, England). This market research firm that specializes in the replication industry projects stellar growth in both types of media (see charts, opposite). Now, CD-audio and CD-ROM are the largest portion of the market, but by 2001, U&S sees significant growth of CD-Rs (recordables) and DVDs.

Says David Millar, principal consultant at U&S, most DVD molding is captive due to the specialized nature of both the processing and equipment required. "This is changing, however, as more independent molders who specialize in CDs are investing in the equipment necessary for DVD molding," he adds. U&S figures show that at the end of 1997, there were 66 plants molding CDs in the U.S., and 20 of those were captives that also mold DVDs.

On the other hand, Lutz notes the CD-audio market, populated by OEMs such as Bertelsmann and Sonapress, employs custom molders. These music industry giants have a Christmas rush, running from July through December, when production may rise to 135 percent. This may offer overflow opportunities to custom molders not currently participating in this market.

"With disk prices as low as 36 cents, cycle time is king in this industry," Lutz says, "with many molders pushing the 7-second limit. Resin development is driven by this need to reduce molding cycles and the push for less distortion or birefringence with the same optical properties." Among other challenges, molders need high flow resin (80+ melt flow) as pit sizes decrease.

What does it take to become a CD-audio or CD-R molder? Lutz reports the industry has gone to automated workcells, so rather than needing a cleanroom, CDs can be molded in an area purified by Hepa filters. A total investment of around $2 million will suffice for an injection-compression press, an automated metallizer, lacquer coater, inspection unit, and ancillary equipment.

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Component TrendsResin performance is a major factor in the E/E market equation, one felt keenly by component suppliers. Requirements range from heat resistance for surface mounted devices and high-flow for thinner walls to dielectric strength and colorability. Nylon, PPS, and LCPs are big players here for products such as connectors, switch parts, plugs, and coil forms.

Nylon growth rates have been double digit for the past five years. Dick Sosville, Dow Plastics' global vice president for engineering plastics, expects the 14 percent growth rate to continue over the next few years. Dow recently announced a joint venture with Solutia that will allow Dow to compound, market, and sell Solutia's Vydyne (nylon 6/6). "Based on inputs from customers, consultants, and industry sources, we estimate the global market for nylon in E/E applications at 300 million lb/year," Sosville notes, "a growth rate of five to seven percent annually for the next three to five years."

Bob Yurachek, account manager for Ticona (Edison, NJ), explains that for connectors especially, demands are challenging. Insert-molded connectors need more contacts spaced closer together, which requires thinner walls and tighter tolerances. Surface mount technology presents soldering temperatures of 445 to 465F. Intense pressures to cut costs are met with miniaturization and thinner walls, both of which require higher-cost engineering resins. The good news is although the raw material costs are higher, the overall per part cost can be lowered through design and better yields.

A trend toward more contract manufacturing, where OEMs ask their molding suppliers to mold the connector and assemble it, is also well underway. "As the OEMs downsize, they are outsourcing more of the engineering and assembly work in this market," Yurachek adds.

OEM customers working with Dow are looking for low-cost solutions, which don't necessarily mean the lowest cost resin, but rather the total picture. "Life cycle costing is becoming much more common," says Sosville. "For our Questra customers, for example, SPS can cost more initially but then outperforms alternatives in processing and yields."

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