Power Electronics

Data Points

Cabot Sues for Alleged Breach of Tantalum Supply Agreements

Cabot Corp., Boston, sued KEMET Corp. and Vishay Intertechnology Inc. in the Superior Court of the Commonwealth of Massachusetts (Suffolk Co. Civil Action No. 02-1585-BLS), alleging that KEMET and Vishay and/or their subsidiaries have breached agreements for the supply by Cabot to the two companies of tantalum powder and wire.

Cabot supplies tantalum to KEMET and Vishay for use in the manufacture of their tantalum capacitors. The December 2000 agreement between Cabot and KEMET requires the subsidiary to purchase and Cabot to sell certain specified amounts of tantalum powder and tantalum wire in the years 2001 through 2003 and tantalum ore in 2001 and 2002. The supply agreement specifies a variety of tantalum powder and wire products and their associated year-by-year prices per pound.

The July and November 2000 agreements between Cabot and Vishay require the subsidiary to purchase and Cabot to sell certain minimum amounts of tantalum powder and tantalum wire in the years 2001 through 2005. The July agreement specifies a variety of tantalum powder and wire products and their associated year-by-year prices per pound, while the November agreement does not identify the particular product mix but does specify an average price per pound for all purchases.

Kennett F. Burnes, Cabot's chairman and CEO, commented that the company tried to resolve “certain issues under supply contracts with two of our tantalum customers. To date, we have been unable to reach mutual resolution with them and, accordingly, in early April we filed legal actions to enforce the contracts.” He went on to say, “Cabot's tantalum business earned $14 million in operating profit this quarter, which was $12 million less than the same quarter last year. This decline essentially resulted from the failure of two customers to buy under the contracts at issue in the lawsuits.”

Commenting on the complaint, Dr. Felix Zandman, Vishay's chairman and CEO, stated: “Vishay believes that its subsidiary that is a party to the Cabot agreements has sound defenses to all of the claims raised in the complaint and has complied fully with its obligations under the agreements, as Vishay believes they should be properly interpreted. Accordingly, the Vishay parties to the litigation intend to vigorously contest the action and to explore all rights and remedies available to them under the agreements and by law.”

Also commenting on the complaint, David E. Maguire, KEMET's chairman, president, and CEO stated, “KEMET denies any liability under the supply agreement and intends to defend itself vigorously. KEMET will exercise all of its rights and remedies afforded by law.”

To learn more about the case, visit www.cabot-corp.com, www.vishay.com, and www.kemet.com.

ICC Charges with Texas Instruments

As consumer demand increases for battery-powered tools, appliances, and devices, pressure increases on manufacturers to improve the charging capabilities of these products. To help manufacturers meet this demand, International Components Corp. (ICC of Chicago) has formally announced it is working with Texas Instruments (TI) to develop and manufacture battery management solutions for OEMs of rechargeable products. ICC's product line falls into three areas: fuel gauges, which inform users of the charge status of NiMH, NiCD, lead acid, and Li-ion battery packs; charge control modules which, when coupled with a power supply, create an efficient, complete charging solution; and safety circuits, which protect Li-ion battery packs from charge abuse that shortens battery life and degrades performance.

These products help maximize performance and battery life on notebook/laptop computers, cell phones, bar code scanners, power tools, personal digital assistants, and many more portable devices.

Electronic Component Orders Continue Rebound

Although the monthly index of the Electronic Components, Assemblies & Materials Association (ECA) shows a 50% increase in orders over last year at this time, manufacturers are still waiting to reap bottom-line benefits.

“Much of the current demand is in response to customers replenishing diminished inventories,” says Bob Willis, ECA president. “The question for the second quarter is whether this demand continues because of customer requirements or lessens as inventories are brought back to normal levels.

“Our weekly reports support the growth patterns shown on the 12-month moving average of the index, which turned positive in February,” says Willis. “Our studies and other economic data suggest a recovery, but electronic component manufacturers must first regain the footing they had prior to the downturn before revenues turn into profits.”

Visit www.ec-central.org for more information.

Automotive Electronics Continue Growth

The North American original equipment (OEM) market for automotive electronic products is expected to increase nearly 7% annually through 2006 to $31.6 billion. Advances will result from consumer demand for safer vehicles, which will create opportunities for products such as side air bags and tire pressure monitors. Gains will also benefit from improved light vehicle production. Growth will be somewhat limited by the relative maturity of many electronics products, particularly in the engine and drivetrain category. In addition, pricing will remain a major concern for automotive electronics suppliers, as OEMs continue seeking maximum profitability through cost reductions. Nevertheless, opportunities will exist for electronics suppliers to firm pricing by partnering with OEMs in product development. These and other trends are presented in OEM Automotive Electronics in North America, a new study from The Freedonia Group Inc.

The best growth potential remains with advanced electronic products such as ITS-compatible navigation devices. These products represent the first wave of telematics, which are automotive electronics that connect a motor vehicle to outside services such as the Internet.

Due to its massive level of light vehicle production, the United States will continue to dominate North American automotive electronics demand. However, the Mexican market will post a faster growth than the U.S. market, due to healthy gains in light vehicle production and a rapidly rising electronics content per unit ratio. Canadian demand is also expected to outpace that of the United States, due to its more favorable outlook for light vehicle production growth. Visit www.freedoniagroup.com for more information.

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