Capacitors

# Executive Summary * The capacitor industry is at an inflection point, driven by massive, long-term demand from the global transition to electrification and green energy, encompassing electric vehicles (EVs), wind, solar, and battery energy storage systems (BESS). * Simultaneously, the build-out of Artificial Intelligence (AI) and data center infrastructure is creating a powerful, immediate demand surge for high-performance power components. * These growth tailwinds are constrained by significant geopolitical risks and ongoing supply chain disruptions, forcing diversification and creating a competitive advantage for companies with domestic manufacturing capabilities. * In this environment, competitive advantage is shifting from scale to technological differentiation in specialized materials and designs, such as Silicon Carbide (SiC) and ultracapacitors, tailored for high-value applications. * Financial performance is diverging: focused specialists are achieving high margins, while broader-line players navigate cyclical inventory corrections and macroeconomic pressures. * Capital allocation reflects this dynamic, with companies aggressively investing in capacity for high-growth segments like EVs and BESS, while also returning capital to shareholders and divesting non-core assets to streamline operations. ## Key Trends & Outlook The primary long-term growth driver for the capacitor market is the global transition toward electrification and green energy. This secular trend is creating massive new markets in electric vehicles (EVs), renewable energy systems, and battery energy storage, with the energy storage market alone projected to grow at a 21% Compound Annual Growth Rate (CAGR) to $114 billion by 2032. This shift fundamentally increases demand for high-power, high-reliability capacitors, directly boosting revenue potential for manufacturers. Companies are actively innovating to capture this demand, such as Vishay's introduction of the industry's first Y1 rated surface-mount capacitors for EVs and Richardson Electronics' focus on ultracapacitor modules for wind turbines. A secondary, but equally powerful, tailwind is the accelerating demand from AI and data centers, which is fueling the need for advanced power components, directly benefiting companies like Vishay, which reported stronger demand in AI-related power in Q3 2025. The industry's growth is tempered by significant geopolitical risks and ongoing supply chain disruptions. Tariffs and trade restrictions increase costs and lead times, pressuring margins. In response, "security of supply" has become a key competitive differentiator, benefiting companies with domestic manufacturing capabilities. Knowles and Richardson Electronics are leveraging their U.S.-based manufacturing to mitigate these risks for customers, while Vishay acknowledges new tariffs as a key business risk. The greatest opportunity lies in developing differentiated, high-performance capacitor technologies, such as Silicon Carbide (SiC) and ultracapacitors, to gain share in the high-margin electrification and AI markets. The primary near-term risk is continued macroeconomic headwinds, including inventory corrections and pricing pressure, which can significantly impact profitability, as seen in Vishay's recent results, which reported a sharp decline in profitability in Q2 2025. ## Competitive Landscape The capacitor market is fragmented but contains players with highly concentrated positions in specific niches, such as Richardson Electronics' estimated 80% market share in power grid and microwave tubes. One distinct competitive model is broad-portfolio manufacturing for diverse end markets. Companies employing this strategy act as a "one-stop shop" by offering a wide range of discrete semiconductor and passive components to a vast array of customers in automotive, industrial, and consumer markets. This approach provides diversification across thousands of customers and multiple end markets, offering scale and resilience, along with the ability to bundle components and offer system solutions. However, it also exposes companies to broad cyclical downturns and inventory corrections, with intense competition in more commoditized product lines leading to significant margin pressure. Vishay Intertechnology, with its "Vishay 3.0" strategy, broad product catalog, and recent struggles with inventory digestion and margin compression, perfectly illustrates the pros and cons of this approach. In contrast, some companies pursue niche specialization in high-performance, custom-engineered components. Their core strategy involves focusing on designing and manufacturing proprietary, high-spec components for demanding, highly regulated markets like medtech, defense, and specialized industrial applications. This deep engineering expertise creates a strong competitive moat, leading to premium pricing power, industry-leading gross margins, and sticky customer relationships. Knowles Corporation, with its focus on "pulse power" specialty film capacitors for defibrillators and defense applications, along with its 45.7% gross margin in Q3 2025, is direct evidence of this model's success. A third distinct strategy is that of focused engineered solutions for high-growth verticals. These companies identify a major secular growth trend, such as green energy, and build a portfolio of value-added, engineered solutions, including patented components and integrated systems, to serve that specific market. This aligns the entire company with a high-growth tailwind, enabling market share leadership and double-digit revenue growth, with value-added services creating deeper customer integration. Richardson Electronics, with its strategic pivot to the Green Energy Solutions (GES) segment, its patented ultracapacitor Pitch Energy Modules (PEMs) for wind turbines, and its 80% market share in power grid tubes, demonstrates this focused strategy. Ultimately, the key competitive battleground in the capacitor industry is in developing the specialized technology required to win in the high-growth electrification and AI segments. ## Financial Performance Revenue growth in the capacitor industry is positive but divergent, reflecting different end-market exposures and strategic focuses. Recent quarterly year-over-year revenue growth has ranged from +2.8% to +9.5%. This divergence is primarily driven by strategic focus, with growth leadership coming from companies deeply embedded in high-growth verticals like green energy, while more diversified players are experiencing slower growth due to broader market cyclicality. Richardson Electronics' +9.5% year-over-year growth in Q4 FY25 exemplifies the success of its Green Energy focus, while Vishay's slower +2.8% growth in Q2 2025 reflects its broader exposure to the inventory correction cycle. {{chart_0}} A wide chasm in profitability exists across the industry, with gross margins showing extreme divergence, ranging from a guided 19.5% to a reported 45.7%. This margin gap is a direct result of competitive strategy and pricing power. Companies with proprietary technology in niche, high-value markets command premium margins, while those competing in more commoditized segments are susceptible to pricing pressure and manufacturing inefficiencies during downturns. Knowles' 45.7% gross margin in Q3 2025 is proof of the profitability of its high-performance, specialist model. In stark contrast, Vishay's guidance for a 19.5% gross margin in Q4 2025 highlights the pressures facing broad-line manufacturers during an inventory down-cycle. {{chart_1}} Capital allocation in the industry demonstrates a dual focus on investing heavily in future growth capacity while also returning capital to shareholders. Companies are aggressively funding capacity expansion for technologies like Silicon Carbide (SiC) and Battery Energy Storage Systems (BESS) to meet future demand from EVs and green energy, while using divestitures to focus resources and strengthen balance sheets. Vishay's plan to spend over $300 million in CapEx in 2025, primarily on capacity expansion, exemplifies the industry's heavy investment in growth. Richardson Electronics' $8.5 million investment in BESS production shows a more targeted, but equally strategic, investment. {{chart_2}} Financial health across the industry is generally solid but mixed, ranging from debt-free positions to facing near-term cash flow pressures. Balance sheet strength reflects a company's operating model and recent performance. Richardson Electronics stands out with a strong, debt-free balance sheet and consistent positive operating cash flow for the fifth consecutive quarter, providing it with significant operational flexibility.