Eric Rimkeit, director of marketing with Supplyframe, explains the reasons for an expected spike in pricing of capacitors, and what that means for electronics supply chains.

Capacitors, which perform basic functions of electronics products such as power stabilization and noise filtering, have traditionally been considered as “popcorn parts” — tiny devices costing around three cents apiece. But, as in the case of the proverbial missing “golden screw,” whose absence can shut down an automotive production line, capacitors are critical to a product’s operation.

Equally important to the greater electronics supply chain is their pricing. A new report from Supplyframe projects that demand for capacitors will rise by 14% quarter over quarter in Q2 of this year. As a result, buyers of electronics products can expect to pay more as the extra cost is passed down to them.

It’s artificial intelligence, however — in particular, the wave of new data centers supporting it — that’s the main reason for the price increase, Rimkeit says. Also being affected by the shifts in price and demand are aerospace and defense, medical products, and industrial “edge” AI, embedded into machines within factory walls.

Over the last year, Rimkeit says, capacitor pricing has fallen by an average of 31%. That’s the result of excessive inventories and design types that were built up during the COVID-19 pandemic. For AI data centers, however, the prospects are for higher prices, as demand for the particular types of components they require increases.

Capacitor manufacturers have sought to diversify their supply chains by moving operations away from China, but they continue to concentrate supply with a limited number of producers, Rimkeit says.