Understand Passive Components in Minutes

The Definition of Passive Components

Passive components are the electronic components in a system which receive energy, and then either absorb, store or dissipate it. Passive elements do not use up electrical power for their operating, but modify it in some way.

Passive components work in conjunction with active components such as IC chips, memories and diodes etc. The three most common passive components are resistors, capacitors, and inductors and are often collectively referred to as the "three passive components.” They are widely used and are indispensable components in electronic products.

The Function of Passive Components

Resistor: Regulates current flow and voltage.

Inductor: Mainly filters noise in the current, prevents electromagnetic wave interference, and stabilizes the current.

Capacitor: Mainly stores electrical energy, and performs functions such as coupling and coordination.

Often there is cross-integration of resistors, capacitors, and inductors to form special functional components, called integrated components. These include filters, (integrated resistors, capacitors, and inductors, plus transistors or amplifiers) which function to filter signals, and couplers (LED plus resistor or diode) whose function is to distribute microwave power into several microwaves.

Among passive components, capacitors have the largest market size. Capacitors can be divided into ceramic capacitors (MLCCs), aluminum capacitors, and solid-state capacitors. Their function is to store electrical energy in circuits for coordination and coupling.

The Application of Passive Components

Benefiting from the strong demand for smartphones, electric vehicles and automotive electronics, the applications of passive components has expanded. In particular, with the complexity and diversification of product functions, the power consumption will also increase, so more passive components are required for voltage regulation, current regulation, noise filtering, etc., so as to maintain the normal operation of the terminal device.

Take a car as an example. In the past, a traditional car used about 1,000 to 2,000 passive components. With electric vehicles or autonomous driving vehicles, it is estimated that 5,000 to 10,000 passive components will be used, and the demand is continuously doubling.

Passive Component Industry Chain and Development

The upstream of the dynamic component industry is the material supplier for resistors, capacitors, inductors, filters and oscillators. The midstream is the manufacturer of resistors, capacitors, inductors, filters and oscillators, and the downstream is the production of various electronic products.

Upstream:

Taiwan's passive component industry-related manufacturers mainly focus on the production of passive components and rarely invest in the development of upstream materials. Currently, more than 70% of the materials required by Taiwan's passive component industry, such as interface ceramic powder, ceramic substrates, alumina substrates, quartz substrates, conductive adhesives, cathode foil, etc., are provided by Japanese manufacturers.

Midstream:

Midstream is mainly the manufacturers of resistors, capacitors, inductors, filters, and oscillators. The manufacturing of ceramic capacitors is a large portion of the passive component industry, because large numbers of capacitors are required, and ceramic is favored for its physical properties of high voltage and heat resistance, wide operating temperature range, and low energy loss rate. Capacitors used for high frequencies applications can be produced as chips to reduce volume. Because they are low priced and have high stability, they are very suitable for mass production.

In the first half of 2021, Taiwan's passive component industry benefitted from the increase in the penetration rate of 5G smartphones. In addition, the demand for electric vehicles (EV) and automotive electronics has been gradually increasing. 5G and automotive applications have led to strong demand for passive components. The demand for capacitors (MLCC) has increased significantly, and passive components were in short supply in the first half of 2021. In the second half of 2021, as a result of power cuts in China, there were long-term and short-term materials shortages, and passive component manufacturing generally cooled down after entering the fourth quarter. Passive components are currently in the inventory adjustment period, and the overall passive component supply is stable. The MLCC inventory was mostly digested in the first quarter of 2022. Going into the second half of the year, resistor products are also facing problems due to lack of chips, rising shipping costs, and disruptions in shipments by manufacturers. Due to rising cost to manufacturers, it is expected that there will be no room for the price to fall before the end of 2022. Aluminum capacitors remained bullish, the price of high-end MLCCs was stable, and the growth of MLCCs in 2021 was relatively moderate. The overall industry revenue in the first half of 2022 remained strong.

Benefiting from the growth trend of automotive and 5G, the world's five largest passive component MLCC manufacturers from Japan, South Korea and Taiwan have remained optimistic about the industry’s outlook. It is expected that with the development of 5G applications and increased automobile electrification, the demand for MLCC’s will increase greatly, and the market will maintain a growth trend through 2025. Although there will be chaos in the supply chain similar to the chip shortage in 2021, due to the popularization of 5G, the demand for servers, base station communication equipment, and 5G smartphones, coupled with the recovery of production of electric vehicles and the deployment of electric vehicle charging piles, the demand for electronic parts is expanding.