Korea: Small Sizes Create Technical Challenges,But Result in Big Margins

Reducing the form factor of chip resistors is a technical challenge, but higher profit margin is driving the search for smaller, more powerful resistors in Korea.



“Each time a chip resistor comes out in a smaller size, it poses challenging surface mounting work to test its chipset and board at end-product OEMs,” says an engineer at Rohm Electronics Korea (REK).



The primary driver for the shrinking size of chip resistors is the strong push from makers of portable digital convergence devices like MP3 players, portable gaming consoles, cellphones and digital cameras. As these makers search for smaller, more powerful products, component makers are compelled to shrink sizes while maintaining or boosting performance.



As a result, there is a shift of chip resistor size for handsets from 1005 (1.0mm, 0.5mm) to 0603 (0.6mm, 0.3mm), with even smaller chip resistor in size of 0402 (0.4mm, 0.2mm) in the development phase. “Prices of traditional chip resistors are constantly falling on the back of stiff competition from makers in Taiwan and mainland China. However, for the smaller form factors the margins are much better,” says Kim Wan-Joong, deputy manager at ABco Electronics, one of Korea’s leading chip resistor makers.



Only a handful of companies have the technical prowess to mass produce form factors below 1005. For most, 1005 remains the mainstream. Only three top companies—Matsushita, Samsung Electro-Mechanics and Rohm Electronics Korea—are able to lead the transition towards 0402 or 0201 chip resistors, say industry analysts.



“We expect the 0603 size to be common in handsets to be released in early 2006. Component makers have begun pilot production of the 0603 size and expect to get into volume production towards Q4 2005. The 0402 model is at the stage of STM testing at some of the major handset vendors,” says Lee Tae-Yon, a manager at REK.



REK is keen to produce the 0402 chip capacitor as the company expects a higher margin on this product. “The 0603 resistors are small enough to fit into a traditional handset PCBs. However, as these handsets evolve to become multimedia devices, 0603 is no longer small enough,” adds Chung Soon-Pil, an official at Rohm Korea, the marketing arm for REK.



REK expects demand for the 0402 resistor to pick up sometime in the first half of 2006, after a round of its sample testing is completed with about 100 units of free sample distribution. Commercial runs usually involve at least 15,000 units of chip resistors.



“Demand for resistors in sizes of 1 or 1.8 mm is falling, while demand for smaller ones is on the rise. Overall, we expect revenues to increase about 50 percent this year on year,” says Kim Wan-Joong, deputy general manager at ABco Electronics. ABco Electronics has a monthly production capacity of 500 million pieces.