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PAUMANOK PUBLICATIONS, INC.

EEStor Capacitor Technology: Opportunities in The Global Capacitor Market: 2014 Written For ZENN MOTOR COMPANY/EEStor, INC.

©2014 Paumanok Publications, Inc. Proprietary Information - Treat as Confidential

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“In the view of Paumanok Publications, Inc., the unique combination of both high capacitance and high voltage characteristics evident in the EEStor capacitor layers are unique and should be considered particularly disruptive to the $6 billion electrolytic segment of the worldwide capacitor industry today.”




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Table of Contents

EESTOR CAPACITOR TECHNOLOGY: MARKETS & OPPORTUNITIES: 2014 .............................................................................................................. 10

ABOUT THE AUTHOR: .............................................................................................................................................................................................. 11

EXECUTIVE SUMMARY: ............................................................................................................................................................................................ 11

PRODUCT ADVANTAGES THAT DICTATE WHERE EESTOR TECHNOLOGY WILL BE DISRUPTIVE: ............................................................................. 12

EESTOR SPECIFIC MARKET OPPORTUNITIES: .......................................................................................................................................................... 15

THE ATTRIBUTES OF THE EESTOR CAPACITOR TECHNOLOGY THAT WILL DRIVE MARKET DEMAND: ................................................................... 15

HOW TO GO TO MARKET WITH EESTOR CAPACITORS: ............................................................................................................................................. 16

SPECIAL NOTE: THE IMPLANTABLE DEFIBRILLATOR CAPACITOR MARKET: 2014 .................................................................................................. 17

GLOBAL CAPACITOR MARKET OVERVIEW AND SPECIFIC EESTOR ADVANTAGES WITHIN EACH MARKET OPPORTUNITY: 2014 ............................ 18

FIGURE 1: GLOBAL MARKET VALUE, VOLUME AND AVERAGE UNIT PRICING FOR CAPACITORS: FY 2007-2015 ................................................. 19

FIXED CAPACITORS AND THEIR RESPECTIVE SUB-CATEGORIES: FY 2014 ............................................................................................................. 20

FIGURE 2: GLOBAL FIXED CAPACITOR MARKET BREAKDOWN BY SUB-CATEGORY: FY 2014 ............................................................................ 20

VALUE SHIPMENT UPDATE: FY 2014 ....................................................................................................................................................................... 21

GLOBAL CONSUMPTION VALUE FOR CAPACITORS: FY 2007-2015: ........................................................................................................................ 21

FIGURE 3: GLOBAL CONSUMPTION VALUE FOR CAPACITORS: FY 2007-2014 ........................................................................................................ 22

GLOBAL CAPACITOR VALUE DEMAND BY TYPE (DIELECTRIC): FY 2014 AND HISTORICAL 10 YEAR MARKET GROWTH .................................... 23

FIGURE 4: CHANGES IN GLOBAL VALUE OF DEMAND FOR CAPACITORS BY DIELECTRIC:

FY 2003-FY 2014 AND PERCENT CHANGE IN DEMAND FOR FY 2014 .................................................................................................................... 23 Ceramic Capacitor Markets: FY 2014 .............................................................................................................................................................................................................. 24

EESTOR OPPORTUNITIES IN THE CERAMIC CAPACITOR MARKET: .......................................................................................................................... 24 Tantalum Capacitor Markets: FY 2014 ............................................................................................................................................................................................................ 24

EESTOR OPPORTUNITIES IN THE TANTALUM CAPACITOR MARKET: ....................................................................................................................... 25 Aluminum Electrolytic Capacitors: FY 2014 ................................................................................................................................................................................................... 25




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EESTOR OPPORTUNITIES IN THE ALUMINUM ELECTROLYTIC CAPACITOR MARKET: ............................................................................................. 26 DC Film Capacitor Markets: FY 2014 .............................................................................................................................................................................................................. 26

EESTOR OPPORTUNITIES IN THE DC FILM CAPACITOR MARKET: ........................................................................................................................... 26 AC Power Film Capacitors: FY 2014 ............................................................................................................................................................................................................... 27

EESTOR OPPORTUNITIES IN THE AC FILM CAPACITOR MARKET: ........................................................................................................................... 27

EESTOR OPPORTUNITIES IN THE GLOBAL CERAMIC DIELECTRIC MATERIALS MARKET:

(SEE APPENDIX L FOR A FULL BREAKDOWN OF THE EXISTING GLOBAL DIELECTRIC MARKET) .............................................................................. 28

UNIQUE ATTRIBUTES OF THE EESTOR CERAMIC DIELECTRIC MATERIALS PRODUCTION PROCESS ....................................................................... 28

SPECIFIC SEGMENTS OF THE CAPACITOR MARKET WHERE EESTOR TECHNOLOGY SHOULD PROSPER: ................................................................. 30

HIGH VOLTAGE CAPACITORS: INTRODUCTION AND DEFINITIONS: 2014 ................................................................................................................. 30

HIGH VOLTAGE PLASTIC FILM CAPACITORS: ................................................................................................................................................. 30

HIGH VOLTAGE CERAMIC CAPACITORS: ........................................................................................................................................................ 31

HIGH VOLTAGE ALUMINUM ELECTROLYTIC CAPACITORS: ........................................................................................................................... 31

OTHER HIGH VOLTAGE CAPACITORS: ............................................................................................................................................................ 31 Tantalum Wet Slug Capacitors: ................................................................................................................................................................................................ 31 Mica Paper Capacitors: ............................................................................................................................................................................................................. 31 Glass Capacitors: ........................................................................................................................................................................................................................ 32 Diamond Like Capacitors: ......................................................................................................................................................................................................... 32

APPENDIX A....................................................................................................................................................................................................... 34

Global Value of Capacitor Consumption by World Region: FY 2014 ................................................................................................................. 34

EESTOR MARKET OPPORTUNITIES BY WORLD REGION: ......................................................................................................................................... 34 Capacitor Markets in China and SE Asia by Capacitor Type (Dielectric): FY 2014 .................................................................................................................................... 38 Capacitor Markets in Japan by Capacitor Type (Dielectric): FY 2014......................................................................................................................................................... 38 Capacitor Markets in Europe by Capacitor Type (Dielectric): FY 2014 ...................................................................................................................................................... 38 Capacitor Markets in the Americas by Capacitor Type (Dielectric): FY 2014 ............................................................................................................................................. 39

Benchmarking: Capacitor Revenues by Major Vendor and World Region: FY 2014 .......................................................................................... 41

FY 2015 Forecasts for Capacitor Consumption by World Region: ..................................................................................................................... 42




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2020 Forecast Update: Consumption by World Region: ..................................................................................................................................... 42

APPENDIX B ........................................................................................................................................................................................................... 44

SUMMARY OF CHANGES IN CAPACITOR SHIPMENT VALUE BY DIELECTRIC: FY 2013 TO FY 2015 ........................................................................ 44

FIGURE 14: CHANGES IN CAPACITOR CONSUMPTION VALUE BY DIELECTRIC: FY 2013 TO FY 2015 .................................................................... 44

APPENDIX C ........................................................................................................................................................................................................... 46

REGIONAL DEMAND: CAPACITOR CONSUMPTION BY WORLD REGION: FY 2007-FY 2014 .................................................................................... 46 China and SE Asia: FY 2007-2014: Historical Shifts in Global Consumption ................................................................................................................................................. 46 Japan: FY 2007-2014: Historical Shifts in Global Consumption ...................................................................................................................................................................... 46 Europe: FY 2007-2014: Historical Shifts in Global Consumption ................................................................................................................................................................... 46 Americas: FY 2007-2014: Historical Shifts in Global Consumption................................................................................................................................................................ 47

APPENDIX D .......................................................................................................................................................................................................... 48

END-USE MARKET UPDATE: FY 2014 ..................................................................................................................................................................... 48 Capacitor Consumption by End-Use Market Segment: 2014 FY Ending March Forecast and Update ............................................................................................................ 48

EESTOR OPPORTUNITIES BY END-USE MARKET SEGMENT: ................................................................................................................................... 48

End-Use Market Segments & Capacitor Consumption Correlation: ................................................................................................................... 48

Capacitor Sales by End-Use Market Segment for the Top Vendors of Capacitors: FY 2014 .............................................................................. 51 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Telecommunications Markets: ....................................................................................................... 53 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Consumer AV Markets: ................................................................................................................. 53 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Computer Markets:......................................................................................................................... 53 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts to the Automotive Market ........................................................................................................................... 55 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts to the Power, Industrial and Infrastructure Markets .................................................................................... 55 FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Specialty Markets: .......................................................................................................................... 55

Profitable End-Markets in the Capacitor Industry: 2014 .................................................................................................................................... 57

APPENDIX E ........................................................................................................................................................................................................... 59

HIGH VOLTAGE PLASTIC FILM CAPACITORS: TECHNOLOGY OVERVIEW ................................................................................................................ 59

AC Polypropylene Power Film Capacitors: ......................................................................................................................................................... 59




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AC Power Film Capacitor Types: ....................................................................................................................................................................................... 59

AC Power Film Capacitor Configurations: ......................................................................................................................................................................... 59

Introduction to the High Voltage Plastic Film Capacitor Market: ...................................................................................................................................... 59

Power Factor Correction (PFC): ......................................................................................................................................................................................... 60

PFC Capacitor Applications: ................................................................................................................................................................................................................... 60 Transmission & Distribution Class PFC Plastic Film Capacitor Markets .......................................................................................................... 61

Motor Run PFC Plastic Film Capacitor Markets: ............................................................................................................................................... 63

Industrial Power Factor Correction Plastic Film Capacitor Markets: ................................................................................................................ 66

LIGHTING BALLAST (PFC) PLASTIC FILM CAPACITOR MARKETS: FY 2014 ............................................................................................................. 67

Microwave Oven (Pulse) Capacitor Markets: ...................................................................................................................................................... 69

Power Film Capacitors (Pulse & Other) Markets: .............................................................................................................................................. 70

AC & Pulse Film Capacitor Markets ................................................................................................................................................................... 73

APPENDIX F ........................................................................................................................................................................................................... 74

HIGH VOLTAGE CERAMIC CAPACITORS MARKETS .................................................................................................................................................. 74

Multilayered Ceramic Capacitors: ....................................................................................................................................................................... 74

Single Layered Ceramic Capacitors: ................................................................................................................................................................... 74

APPENDIX G .......................................................................................................................................................................................................... 76

HIGH VOLTAGE ALUMINUM ELECTROLYTIC CAPACITOR OVERVIEW ..................................................................................................................... 76

Snap-In/Snap-Mount Aluminum Capacitors: ................................................................................................................................................ 77

Computer Grade/Screw Terminal {Large Can} ............................................................................................................................................ 78

MOTOR START (LARGE CAN) ....................................................................................................................................................................... 78

APPENDIX H .......................................................................................................................................................................................................... 79

OTHER HIGH VOLTAGE CAPACITORS: TECHNOLOGY OVERVIEW ........................................................................................................................... 79

High Voltage Wet-Slug Tantalum Capacitors: ..................................................................................................................................................... 79




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High Voltage Reconstituted Mica Capacitors: Technology & Market Overview: ............................................................................................... 79

High Voltage Glass Capacitors: Technology & Market Overview: ..................................................................................................................... 80

High Voltage Diamond-Like (DLC) Capacitors: Technology & Market Overview: ............................................................................................ 80

APPENDIX I ............................................................................................................................................................................................................ 83

CAPACITORS BY TYPE, SUB-CATEGORY AND VOLTAGE RATING: 2014 .................................................................................................................. 83

Global Consumption Value for High Voltage Capacitors by World Region: 2014 .............................................................................................. 86

APPENDIX J ............................................................................................................................................................................................................ 88

GLOBAL CONSUMPTION VALUE FOR HIGH VOLTAGE CAPACITORS BY DIELECTRIC TYPE AND WORLD REGION .................................................. 88

High Voltage Capacitors: Demand by End-Use Market Segment: 2014 ............................................................................................................. 88

High Voltage Capacitors: Demand by Capacitor Dielectric and End-Use Market Segment: 2014 .................................................................... 90

Competitive Environment in High Voltage Capacitors: 2014 .............................................................................................................................. 91

Global Sales & Market Shares for High Voltage Ceramic Capacitors by Type: 2014 ........................................................................................ 93

APPENDIX K .......................................................................................................................................................................................................... 95

EESTOR COMPETITION AND POTENTIAL PARTNERS: 2014 ...................................................................................................................................... 95

CAPACITOR VENDORS: GLOBAL SALES & MARKET SHARES: FY 2013-2014 ......................................................................................................... 95 Capacitors: Overall Market Share Data and Vendor Strategy: FY 2014 .......................................................................................................................................................... 95

Forecasted Change in Capacitor Market Shares: FY 2013-FY 2014 ................................................................................................................ 100

COMPETITIVE ENVIRONMENT IN CERAMIC CAPACITORS: FY 2014 ....................................................................................................................... 103

CERAMIC CAPACITOR MANUFACTURERS: FY 2014 SALES & MARKET SHARES ................................................................................................... 103

COMPETITIVE ENVIRONMENT IN TANTALUM CAPACITORS: FY 2014 ................................................................................................................... 105

TANTALUM CAPACITOR MANUFACTURERS: FY 2014 SALES & MARKET SHARES ............................................................................................... 105

COMPETITIVE ENVIRONMENT IN ALUMINUM CAPACITORS: FY 2014 ................................................................................................................... 107

ALUMINUM CAPACITOR MANUFACTURERS: FY 2014 SALES & MARKET SHARES ............................................................................................... 107

COMPETITIVE ENVIRONMENT IN PLASTIC FILM CAPACITORS: FY 2014 ............................................................................................................... 109




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PLASTIC FILM CAPACITOR MANUFACTURERS: FY 2014 SALES & MARKET SHARES ........................................................................................... 110

APPENDIX L ......................................................................................................................................................................................................... 111

INTRODUCTION TO CERAMIC DIELECTRIC MATERIALS MARKETS ........................................................................................................................ 111

Scientific Maxim #1: Capacitance & Surface Area: .......................................................................................................................................... 111

Why Ceramic Capacitors Are So Economical: ................................................................................................................................................... 111

Global Market Size and Five Year Forecasts: .................................................................................................................................................... 112

Average Price per Ton for Ceramic Dielectric Materials: FY 1999-FY 2012 (In USD): .................................................................................. 113

Captive versus Merchant Markets: Description: ................................................................................................................................................ 113

Captive Market for Ceramic Dielectric Materials: 2014 ................................................................................................................................... 114

Captive Market: A Description Of Ceramic Dielectric Materials Produced: .................................................................................................... 114

Why Companies Produce Ceramic Dielectric Materials Captively: .................................................................................................................. 114

Captive Market: Barium Titanate: ..................................................................................................................................................................... 115

Captive Market: Formulations: .......................................................................................................................................................................... 115

Captive Market: Additives: ................................................................................................................................................................................. 115

Captive Market for Ceramic Dielectric Materials: Production Volumes: ......................................................................................................... 115

MERCHANT MARKET FOR CERAMIC DIELECTRIC MATERIALS: 2014 .................................................................................................................... 116

Merchant Market: A Description Of Ceramic Dielectric Materials Produced: ................................................................................................. 116

Merchant Market: Barium Titanate: .................................................................................................................................................................. 116

Merchant Market: Formulations: ....................................................................................................................................................................... 116

Merchant Market: Additives: .............................................................................................................................................................................. 117

Merchant Market Reliance; and Captive Production of Ceramic Dielectric Materials by Ceramic Component Manufacturer: 2012 FY ...... 118

Ceramic Dielectric Material Consumption by Capacitor Manufacturer: Merchant versus Captive: FY 2014 Estimates ................................ 118

Regional Consumption of Ceramic Dielectric Materials: FY 2014 (In Tons): .................................................................................................. 119

GLOBAL MERCHANT MARKET FOR CERAMIC DIELECTRIC MATERIALS BY TYPE (BARIUM TITANATE, FORMULATIONS AND ADDITIVES): FY

2014 ........................................................................................................................................................................................................................ 120

PROFITABILITY INDEX BY SEGMENT (BARIUM TITANATE, FORMULATIONS, ADDITIVES): ................................................................................... 122




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Additives Business Segment: ............................................................................................................................................................................... 122

Formulations Business Segment: ........................................................................................................................................................................ 122

Barium Titanate Business Segment: ................................................................................................................................................................... 122

Competitive Environment in Ceramic Dielectric Materials: FY 2014 ............................................................................................................... 123

Ceramic Dielectric Material Vendors: Overall 2014 Sales & Market Shares ................................................................................................... 125

Ceramic Dielectric Materials: Market Shares: 2014 ......................................................................................................................................... 125

CERAMIC DIELECTRIC FORMULATIONS: GLOBAL MARKET OVERVIEW: FY 2014 ................................................................................................ 127

Definitions: ......................................................................................................................................................................................................... 127

Captive Consumption of BT In Formulations: ................................................................................................................................................... 127

The X7R/X5R Formulations Market: .................................................................................................................................................................. 128

The COG Formulations Market: FY 2014 .......................................................................................................................................................... 128

The Y5V Formulations Market: FY 2014 ........................................................................................................................................................... 129

Ceramic Dielectric Formulation Suppliers to the Global Merchant Market: FY 2014 Estimated Market Shares Worldwide .......................... 130




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EEStor Capacitor Technology: Markets & Opportunities: 2014 The following report offers the reader a global market perspective on capacitors, and outlines the opportunities for the new EEStor

ceramic-based capacitor technology by various markets and world regions.

The report is organized to provide the reader with a synopsis of the distinguishing characteristics of the EEStor technology, as

ascertained by the author following in-depth analysis of the Intertek Report dated December 16, 2014 and extensive discussions with

EEStor and ZENN personnel and advisors and a thorough tour of EEStor’s facilities in Cedar Park Texas.

The report then takes the reader through the specific “low hanging fruit” markets where the EEStor capacitor technology can have

immediate impact, and the value of those markets. In addition, an overview of the current global capacitor market follows and

highlights where the EEStor capacitor technology could have significant impact and provide for disruptive change within the many

specific capacitor types and markets globally.

Following the global capacitor overview section we focus on the specific global dielectric markets. EEStor’s dielectric powders

exhibit some extremely relevant qualities and benefits that are explored in detail in this section. We direct the reader to the X-ray

diffraction report provided by H&M Laboratories with an opinion provided by A. Safari PhD of Rutgers University.

Following the global overview, EEStor impact and dielectric sections we have provided additional reading in a series of appendices

that afford the reader a deeper insight and understanding of the specific nuances of the global capacitor market and industry.




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About The Author:

Dennis M. Zogbi is the CEO and Founder of Paumanok Publications, Inc. He is the author of more than 260 market research reports on

the worldwide electronic components industry. Specializing in capacitors, resistors, inductors and circuit protection component markets,

technologies & opportunities; electronic materials including tantalum, ceramics, aluminum, plastics; palladium, ruthenium, nickel,

copper, barium, titanium, activated carbon, conductive polymers. He is also an expert on the end-use markets into which components

are sold, including telecommunications, computers, consumer audio and video, automotive, power, industrial and lighting; medical

electronics, oil & gas electronics, mining electronics, defense electronics and renewable energy.

[email protected]

(919) 468-0384

mailto:[email protected]




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Executive Summary:

The basis of this report and recommendations is built upon the credibility of the testing conducted by Intertek.

The current status of EEStor’s technology indicates that the initial commercial targets, in order of priority, should be:

o High Voltage Aluminum Electrolytic and Tantalum capacitors (combined total 2014 market value of USD $6 billion.

See Figure 4 for all market segment values)

o The power film capacitor segment (combined total 2014 market value of USD $1.3 billion)

o The direct sale of the composition modified barium titanate powders manufactured at EEStor to a myriad of capacitor

manufacturer customers worldwide (total 2014 market value of USD $83 million)

The reader will note that this report suggests specific interest in the $2.8 billion high voltage segment of the market (part of the

USD $6 billion Aluminum Electrolytic and Tantalum capacitor market) which is perfect for EEStor capacitors to target for

growth and disruption. Throughout the report we continue to reiterate that the combination of high voltage and high capacitance

in a dry type design with low costs to produce are disruptive to the industry and that the electrochemical capacitor segment

should be targeted with emphasis upon segments of the market where the profitability is highest.




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Product Advantages that dictate where EEStor Technology will be disruptive:

Based upon the technical report provided by Intertek, coupled with discussions and technical data provided by the senior staff at EEStor,

and consultants working for ZENN Motor Company, the following is a list of advantages that current EEStor layers have over other

capacitors.

EEStor has a higher voltage capability

o EEStor has demonstrated stable capacitors to 1500 Vdc, (with hi-pot testing at significantly greater voltages) which is

much higher than the standard limitation on aluminum electrolytic capacitors, which is about 450 Vdc, and 125 Vdc for

tantalum capacitors. This is important because the EEStor technology can extend the capacitance value and the voltage

rating well above 1500 Vdc (as tested by Intertek). This is an extremely disruptive development in the capacitor supply

chain.

EEStor layers demonstrate the same capacitance over a wide range of frequencies.

o Aluminum electrolytic capacitors have widely varying capacitance at various frequencies and, particularly at higher

frequencies, the capacitance of aluminum electrolytic capacitors can drop to almost zero.

EEStor Capacitance layers have low comparable Costs To Produce

o Because the EEStor capacitor technology is based upon low cost ceramic dielectric materials, they have a lower

inherent cost structure when compared to electrochemical technology, which relies on expensive anode and cathode

foils technology, or tantalum powder and wire, which is much more expensive than ceramic dielectric materials.

EEStor technology allows fast charge and discharge capability

o The time it takes for a capacitor to charge and discharge is critical for capacitors consumed in burst power applications,

such as implantable defibrillator capacitors, strobe capacitors, radar pulse forming network capacitors, and railgun

capacitors, for example. EEStor capacitors were charged and discharged by Intertek at electronic speeds without

degradation.




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EEStor layers have long term energy storage capabilities

o If certain large can capacitors, such as aluminum electrolytic capacitors and power film capacitors are stored for a long

period they will degrade and fail because they require a liquid electrolyte to achieve the high voltages at which they

operate. This liquid electrolyte is also toxic; and has a tendency to generate catastrophic failures of the printed circuit

board if the electrolyte outgasses and spills. Widespread failures of aluminum electrolytic capacitors (AEL), especially

in the desktop computer industry, have been well documented over the years. The EEStor product line offers a

competitive advantage over aluminum capacitors and power film capacitors that contain liquid electrolytes because the

EEStor layers are electrostatic in nature and require no liquid electrolyte. (The proper term for EEStor layers are “dry

type” capacitors)




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EEStor Specific Market Opportunities:

”The Low Hanging Fruit”

The attributes of the EEStor Capacitor Technology that will Drive Market Demand: While the above mentioned criteria are considered “Icing on the Cake” there are some key technical attributes to the technology that

will generate market “buzz” and are primary motivating factors behind EEStor’s “Technical Economics.” These are the unique

combination of high capacitance and high voltage performance characteristics in an electrostatic capacitor design; the lower comparable

costs to produce the EEStor capacitor when compared to aluminum electrolytic, tantalum electrolytic and power film capacitors; and

the captive production of raw materials by EEStor.

The Combination of high capacitance and high voltage: In the view of Paumanok Publications, Inc. the author of this report, the unique combination of high capacitance and high voltage

characteristics of the EEStor capacitor technology in one electrostatic capacitor package are unique and should be considered particularly

disruptive to the $6 billion electrolytic segment of the worldwide capacitor industry. The technology can operate in high voltage

environments and at high capacitance. This is typically an area reserved for electrochemical capacitors, especially aluminum electrolytic

and a small part of the tantalum electrolytic market segment. The benefit of the EEStor technology is its cost structure. Since the

ceramic dielectric is based upon barium and titanium feedstocks, which should be about $8.00 a pound when processed, the cost structure

would be much better than that of aluminum anode etched foil and etched cathode foil which average about $20.00 USD per pound, and

that of tantalum metal powder which averages about $200.00 USD per pound. Since capacitor pricing is based upon the operating

voltage and the capacitance value, all things being equal, the profitability of the EEStor capacitors should be much higher than the

operating margins of aluminum and tantalum capacitors, which average about 15%. But also keep in mind that this is a ceramic capacitor

process based upon HTBT (HTBT is defined as Hydrothermal Barium Titanate, which is the process used to produce the powders at

EEStor) NPO dielectrics (NPO ceramic dielectric compositions are defined as “Negative Positive Zero” or no change of capacitance

with temperature ceramic powders which are in turn used to manufacture NPO type ceramic capacitors), which means that the value-




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added and application specific ceramic capacitor market is also open for competition. The author includes this because the market is

very large and extremely profitable for those who currently compete in the space. Another area of interest is in the power film capacitor

market because this market is almost exclusively high voltage. Therefore, opportunities for the EEStor technology exist within each

dielectric segment of the global capacitor market, and the opportunity for the EEStor technology to be successful is based upon its

unique qualities that include low costs to produce, high voltage attributes, high capacitance attributes and quality performance with

respect to minor technical variations- such as ripple current and insulation resistance.

How to go to market with EEStor Capacitors:

TAM and SAM: This report shows that The EEStor technology is scalable and therefore the actual TAM (Total Available Market) is the entire $18 BB

USD worldwide capacitor industry. We can see that there is direct opportunities in competing against the electrochemical portion of

the industry (which is the $6 billion aluminum and tantalum capacitor markets combined), as well as interest from the power film

capacitor segment, which is an additional $1.3 Billion USD. However, it was realized during the Paumanok factory tour and discussions

with the senior staff that EEStor technology also demonstrates NPO type characteristics (its ceramic dielectric is in fact NPO type

materials) which are an additional $3 billion part of the industry. Therefore the SAM (Serviceable Available Market) is about $10.3

billion USD worldwide.

This report suggests that the $2.8 billion high voltage segment of the market is perfect for EEStor capacitors to target for growth and

disruption. We continue to reiterate that the combination of high voltage and high capacitance in a dry type design with low costs to

produce are disruptive to the industry and the electrochemical capacitor segment should be targeted with emphasis upon segments of

the market where the profitability is highest.




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Special Note: The Implantable Defibrillator Capacitor Market: 2014 One niche segment of the global high voltage capacitor market that we feel the EEStor technology will be readily accepted and generate

significant revenues for the company is in the lucrative market for implantable defibrillator capacitors. An implantable defibrillator

continually monitors the heart and delivers therapy when an abnormal heart rhythm, such as tachyarrhythmia, or rapid heart rhythm,

occurs and leads to sudden cardiac arrest. The implantable defibrillator shocks the human heart into normal performance by using one

or two specialty capacitors. Therefore we highly recommend that EEStor constructs a 390 volt 200 microfarad or 400 microfarad

capacitor; or a 700 volt 400 microfarad or 200 microfarad capacitor with the intention of enticing partnership and licensing with the

medical device manufacturers, especially the medical implant manufacturers which include Medtronics , St Jude’s Medical, Inc.,

Guidant/CPI and/or Soren in France. The possibility for partnership with Wilson Greatbatch, Inc. (or Greatbatch), should not be

overlooked because they are manufacturing the implantable defibrillator capacitors using tantalum wet technology today (they also make

the defibrillator batteries).

We strongly recommend that EEStor, Inc. should proceed under the auspices that they intend on manufacturing implantable defibrillator

capacitors for the merchant market using the EEStor ceramic technology. This is because the process can be employed to manufacture

capacitors with the unique combination of both high voltage and high capacitance in a volumetrically efficient package. The EEStor

technology fits the unique parameters required for an implantable defibrillator (high voltage, and high capacitance) but also because the

process allows for asymmetrical capacitors to be produced from the technology. Moving forward to manufacturing the part will certainly

entice companies who make implantable defibrillators to take notice of EEStor, to take them seriously and to maximize potential return

on investment should they wish to pursue the opportunity to a licensing agreement.

Paumanok has determined that approximately 400,000 implantable defibrillators will be consumed worldwide with a market value of

approximately $10 billion USD (Paumanok estimate), and that the capacitors required will be 600,000 units with a market value of about

$75 million USD worldwide (but mostly in the USA). Average unit prices for implantable defibrillator capacitors are in the $125 USD

range per unit, with considerable margins. It is an excellent opportunity for EEStor.




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Global Capacitor Market Overview and specific EEStor advantages within each market opportunity: 2014

The overall capacitor market is broken down into two main sub-segments and multiple individual product lines. The two main sub-

segments are (1) Electrostatic, and (2) Electrolytic capacitors. Electrostatic capacitors include ceramic capacitors, including the

ubiquitous Multi-layered ceramic chip capacitors (MLCC) and plastic film capacitors; while electrolytic capacitors include both

aluminum electrolytic and tantalum electrolytic capacitors.

In FY 2014 we estimate the global capacitor market grew by 13% in value to $18,251 million USD, up from the estimated $16,170

million USD for the 2013 Fiscal Year. As we have noted, all the growth was consolidated in revenues reported by Japanese vendors,

which inflated when converted into US dollars because of the 20% year-over-year depreciation in the value of the yen. Unit shipments

of capacitors will total an estimated 1.589 trillion pieces worldwide in FY 2013, up 17.5% from the 1.352 trillion pieces shipped in FY

2013, the majority of which are MLCC going to the wireless handset segment, but also many end-customers taking advantage of the

yen depreciation to stockpile components. Global pricing for capacitors declined by an estimated 4% year-over-year in FY 2014 to

$0.011490. Capacitor pricing fluctuates based upon changes in product mix, and downward price pressure from customers.




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Figure 1: Global Market Value, Volume and Average Unit Pricing for Capacitors: FY 2007-2015 (In millions of USD. In millions of pieces. Average price per unit in USD.)

Table Note: All data presented in this report is on a Fiscal Year Basis Ending March 31 of the year. Therefore the annual measurement

of value, volume and pricing runs from April 1 to March 31 of each respective year. We report in this fashion because the majority of

the world’s capacitor manufacturers report on the same fiscal year basis. Capacitors Include Ceramic, Aluminum, Tantalum, DC

Film, AC Film, Niobium and Carbon Dielectrics. Source: Paumanok Publications, Inc. All Rights Reserved




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Fixed Capacitors and Their Respective Sub-Categories: FY 2014

Figure 2: GLOBAL Fixed Capacitor Market Breakdown by Sub-Category: FY 2014

Source: Paumanok Estimates- “Other Capacitors” Including Carbon, Niobium and Glass Capacitors account for an additional $620 MM USD in Global Revenues in FY 2014.

Capacitors= $18.25 BB

USD

Ceramic = $9.6 BB USD

Tantalum: $1.9 BB USD

AC Film: $1.2 BB USD

Aluminum: $4.1 BB USD

DC Film: $0.85 BB

USD




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Value Shipment Update: FY 2014

Global Consumption Value for Capacitors: FY 2007-2015:

The global market for capacitors will total an estimated $18,251 million USD in FY 2014 (FY ending 3/11), up 13% from $16,170

million USD in revenues in FY 2013. After achieving the banner year revenues of $19,362 million USD in FY 2011, the market declined

by 4% in value in FY 2012, and again by 13% in FY 2013. Even though capacitor demand is relatively strong in smartphones, tablet

computers, automotive electronics and medical devices, it is being offset by poor demand from desktop computers, notebook computers,

consumer AV equipment and industrial electronics. The depreciation of the yen in FY 2014 caused all growth in the capacitor market

to be consolidated in Japan.




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Figure 3: Global Consumption Value for Capacitors: FY 2007-2014

Source: Paumanok Publications, Inc. In Millions of USD

2003 2004 2005 2006 2007 2008r 2009 2010 2011 2012 2013 2014 2015e

Total $12,873 $13,773 $15,616 $16,737 $17,473 $18,900 $15,897 $16,078 $19,362 $18,625 $16,170 $18,251 $18,814

$0

$5,000

$10,000

$15,000

$20,000

$25,000

In M

illi

on

s o

f U

S D

oll

ars

Worldwide Dollar Value Shipments for Capacitors: 2007-2014; 2015 Forecast




23

Global Capacitor Value Demand by Type (Dielectric): FY 2014 and Historical 10 Year Market Growth The following table illustrates changes in the global capacitor markets by dielectric. For FY 2014 we show the global market for

capacitors up by 12.9% in value to $18,251 million USD lead by revenue increases in ceramic capacitors, which increased in overall

revenues by 20.3% for the year.

Figure 4: Changes in Global Value of Demand for Capacitors by Dielectric: FY 2003-FY 2014 and Percent Change in Demand for FY 2014

% Change: 2014 to 2015 Forecasts Source: Paumanok Publications, Inc. In Millions of USD

Ceramic Capacitors: 6.6%

Tantalum Capacitors: -1.6%

Aluminum Capacitors: 0.7%

DC Film Capacitors: -1.3%

AC Film Capacitors: 1.2%

EDLC & Other Capacitors: -10.1%

Grand Total: 3.1%




24

Ceramic Capacitor Markets: FY 2014

The global ceramic capacitor market grew by an estimated 20.33% in dollar value in FY 2014 to $9,572 million USD from the prior

year’s $7,955 million USD in revenues. Due to the fact that the top vendors of ceramic chip capacitors- Murata, TDK, and Taiyo Yuden

are located in Japan and also represent the largest vendors of all capacitors worldwide, their 20% growth rate in US dollars, given the

depreciation of the yen to US dollar in FY 2014 was not surprising. Customers around the glove stocked up on MLCC at what can be

considered a 20% price drop in yen valuation. Demand was strong from the wireless handset markets and from tablet computer markets,

especially for high capacitance MLCC, which also continued to make inroads against alternative capacitor dielectrics, including molded

tantalum chip capacitors and solid polymer aluminum capacitors. This offset losses in other markets, such as consumer AV and

industrial electronics. Ceramic capacitors were the only capacitor market segment to show any signs of growth for the year, and

moreover, demand increases were limited to only a few vendors- Murata, Samsung EMCO and Taiyo Yuden. Other vendors of ceramic

capacitors lost money for FY 2013.

EEStor Opportunities in the Ceramic Capacitor Market:

The EEStor Technology is based upon ceramic dielectric materials and has affinities with the ceramic capacitor market, especially the

$3 billion NPO type MLCC market (NPO ceramic dielectric compositions are defined as “Negative Positive Zero” or no change of

capacitance with temperature ceramic powders which are in turn used to manufacture NPO type ceramic capacitors); however EEStor’s

performance is more akin to that of aluminum electrolytic and tantalum capacitors with respect to the unique combination of high

voltage AND high capacitance. Therefore, the common value proposition throughout this report is that the low cost EEStor technology

will be disruptive to the higher cost aluminum electrolytic and tantalum capacitor markets.

Tantalum Capacitor Markets: FY 2014

Tantalum capacitor markets saw only a slight recovery in FY 2014 in dollar value, with global revenue increases of approximately 5%

to $1,895 million USD for the year; up from $1,805 million USD in FY 2013, and $2,040 million in FY 2012 and $2,307 million USD

in FY 2011. The tantalum capacitor market continues to be the focused subject of scrutiny by the entire high tech supply chain as its

raw material- tantalite is considered by the United Nations and named in the Dodd-Frank Act of the United States as a “conflict mineral”,




25

making the market environment unique and the supply chain subject to rapid fluctuations in pricing and material availability. KEMET’s

acquisition of NEC-Tokin in FY 2014 will have a significant impact on vendor market shares in the tantalum dielectric, and AVX’s

acquisition of Nichicon’s tantalum operations in China and Japan will also adjust vendor market shares accordingly. Tantalum is under

pressure from ceramic chip capacitors, which continue to improve their performance and challenge tantalum capacitors in key end-

markets, especially computers and handsets. However, tantalum has known reliability and will continue to be used in electronic systems

because of its 40 years of operational data as a dielectric. Market growth will be limited due to encroachment, but it will remain a multi-

billion market. The strategy of western vendors is to increase share of this valuable product line through acquisition as other vendors

look at tantalum as a liability. Tantalum remains an opportunity for those who understand the nature of challenges in global markets.

EEStor Opportunities in the Tantalum Capacitor Market: Tantalum capacitors are vulnerable to be disrupted by the EEStor technology, because the supply chain for tantalum capacitors is under

so much scrutiny that design engineers actively seek alternative dielectrics. To date, Japanese vendors of high capacitance MLCC have

benefited from the need for design engineers to displace tantalum, and EEStor technology will benefit from this as well.

Aluminum Electrolytic Capacitors: FY 2014

The global aluminum capacitor market increased by an estimated 4.9% in dollar value in FY 2014 to $4,118 million USD from the

prior year’s $3,926 million USD in revenues. The market for aluminum electrolytic capacitors was difficult in FY 2013 due to a sluggish

market environment in TV set and home theatre equipment, as well as in the desktop and computer markets. Also, additional declines

were realized in the industrial end use market segments, especially for large can screw terminal and snap-in aluminum capacitors

consumed in inverters in renewable energy systems in Europe. New Feed In Tariff structures in Germany and Italy are now curtailing

overall growth in renewable energy systems in its largest regional market. Automotive electronics remains a bright spot for sales of

aluminum capacitors, although this is a small piece of the overall demand chart for aluminum capacitors by end-use market segment.

The smartphone is also making some key consumer electronics products that would consume aluminum capacitors redundant (i.e. the

camera and GPS markets) and the movement to tablets is also impacting aluminum capacitors, which are used primarily in desktop and

notebook systems, which are suffering as consumers consume lower cost tablet devices. The exciting segment of the aluminum capacitor




26

market remains the molded chip conductive polymer aluminum capacitor for surface mount applications designed to compete against

tantalum chips, and large can aluminum capacitors for use in power inverter smoothing for renewable energy systems. The long-term

goals of multiple nations regarding the future reliance on wind, solar and geothermal energy suggests excellent growth rates for large

can electrolytic (screw terminal and snap-mount) aluminum capacitors.

EEStor Opportunities in the Aluminum Electrolytic Capacitor Market: Aluminum electrolytic capacitors are a prime area of market encroachment for the EEStor capacitor technology. The Intertek report

emphasized the superior performance of the EEStor capacitor layers when compared to that of traditional aluminum electrolytic

capacitors. The added fact that the EEStor technology has an inherently lower cost structure when compared to aluminum capacitors

makes the EEStor technology particularly disruptive to the global aluminum capacitor establishment. EEStor capacitor technology will

initially be the most disruptive in the 450V+ aluminum capacitor market, which is delineated in Appendix J. Aluminum capacitors are

consumed in large volumes in TV sets, computers, automobiles, medical equipment and power supplies on a global basis.

DC Film Capacitor Markets: FY 2014

The global market for DC plastic film capacitors grew by an estimated 3.8% in FY 2014 to $856 million USD, up from $825 million

USD from the prior year. Growth in DC film capacitors was primarily related to the conversion of yen to the US dollar for the purpose

of this study. Major and minor vendors in Japan, including Panasonic and Nichicon, reported increased revenues in US dollars due to

the yen depreciation while Western vendors, such as Vishay, EPCOS and KEMET reported stagnant sales or slight declines in overall

revenues. DC film capacitors are used primarily in power supplies and lighting ballasts as well as in audio circuits and in line voltage

equipment such as smoke detectors and thermostats.

EEStor Opportunities in the DC Film Capacitor Market: The NPO type performance of the EEStor capacitor technology can be used to displace the expensive DC film capacitors manufactured

from metallized PET plastic film. The current trend is for ceramic dielectric capacitors, based upon NPO type materials to displace the




27

5mm PET film capacitors consumed in power supplies, DC/DC converters and lighting ballasts worldwide. EEStor can benefit from

this trend as well.

AC Power Film Capacitors: FY 2014

AC power film capacitor demand increased by an overall rate of 3.9% in FY 2014 to $1,115 million USD, up from $1,073 million USD

in FY 2013. The increase in revenues can be traced to conventional power transmission and distribution capacitor sales at major vendors

such as ABB and Nissin. We expect power film capacitors should begin to show some real growth over the next five years as these

large can polypropylene capacitors are critical components in wind and solar inverters and for enhanced power factor correction and

improvement of existing power transmission and distribution lines – which are critical components in “smart grid” systems. Also, power

film capacitors for DC link circuit market for polypropylene capacitors for hybrid electric vehicles, windmills and for ocean wave power

generators seem extremely promising over the next five years.

EEStor Opportunities in the AC Film Capacitor Market:

Paumanok noted from the meeting at EEStor that there has been early interest in the EEStor capacitor technology from value-added

resellers of power transmission and distribution capacitor assemblies. Traditional power film capacitors employ liquid electrolytes and

large volumes of polypropylene to achieve the required voltage characteristics. They are also bulky designs that are stacked and rack

mounted in series and parallel to achieve the required voltage and capacitance of large power and renewable energy grids. The EEStor

technology is of particular interest here because of its long shelf life, low cost structure, very high voltage tolerance and volumetric

efficiency when compared to power film capacitor designs.




28

EEStor Opportunities in the Global Ceramic Dielectric Materials Market: (See Appendix L for a full breakdown of the existing global dielectric market) It should be noted that the EEStor plant, as it exists right now, could venture into production of NPO type HTBT powders for the

merchant market almost immediately (NPO ceramic dielectric compositions are defined as “Negative Positive Zero” or no change of

capacitance with temperature ceramic powders which are in turn used to manufacture NPO type ceramic capacitors.) This market

segment represents $83 MM USD in global market value with respect to merchant market sales of ceramic dielectric materials. NPO

ceramic capacitors are extremely precise capacitors used in clock circuits in telecommunications equipment, computers and a variety of

other professional electronic devices. HTBT is defined as Hydrothermal Barium Titanate, which is the process used to produce the

powders at EEStor. Basically, it could be viable to sell the composition modified barium titanate powders manufactured at EEStor to a

myriad of customers worldwide, including, but not limited to: Murata, TDK, Taiyo Yuden, Kyocera, AVX, KEMET, Vishay, and

Samsung. So the reader should consider that this is a possible (and immediate) path for the company to begin its movement into

commercialization

Unique Attributes of the EEStor Ceramic Dielectric Materials Production Process The EEStor factory, as it exists right now, is primarily a pilot ceramic dielectric materials facility that reminded Paumanok Publications,

Inc. of similar barium titanate plants that they have toured in the past including the Ferro Transelco plant in Penn Yan, NY USA; The

MRA Labs plant in N. Adams, MA USA and the former hydrothermal barium titanate plant of Cabot Supermetals in Boyertown, PA

USA. The EEStor plant also reminds Paumanok of the captive barium titanate plants at factories such as Vishay-Vitramon; Kemet

Corporation and AVX Corporation. However there are some significant differences- primarily the cleanliness of the EEStor plant; and

some of the equipment, including the extended dryer and the stainless collection chamber used in the hydrothermal process differ from

other plants actively supplying the marketplace with materials today. Traditionally barium titanate factories are buried in various

powders that are in the air, on the machinery and on the floor; and because of their nano-particle size are difficult to clean up- however

there was no evidence of this at the EEStor plant, which is impressive and will go a long way toward high yield ratios in powder and

component production in the future.




29

Most companies that Paumanok visits, especially throughout Asia, who manufacture capacitors from titanate ceramics do so from

merchant powders purchased from companies such as Ferro and MRA and pay a premium for those powders because they cannot

manufacture the powders themselves. In the case of EEStor, the powder factory has been constructed first, and the capacitor factory is

now scaling up. In fact we would argue that the difficult portion of the process has been completed (i.e. powder production) and the

easier portion of the task (capacitor production) is now just taking shape.

The EEStor factory also had a significant quantity of advanced “batch” equipment and the method by which each segment was

compartmentalized with an eye on safety was noted by the author and considered excellent.

The EEStor Composition Modified Barium Titanate (CMBT) powders are unique in the industry in that they have been shown to be in

the paraelectric cubic phase. This is very significant in the manufacturing of capacitors in that these CMBT powders allow for the

manufacturing of capacitors with the following qualities, as verified in the Intertek report:

higher resistance

constant capacitance over wide voltage and frequency ranges

very fast charge and discharge cycles (milliseconds)

completely reversible polarity

performance stability when sealed in polypropylene

The final takeaway from the factory tour was that the scene was reminiscent of other barium titanate factories that Paumanok has toured,

but significantly cleaner; however in terms of scale, the EEStor factory was similar in size to the $20 million MRA Labs facility in North

Adams MA.




30

Specific Segments of the Capacitor Market Where EEStor Technology should prosper: As we have noted, the higher voltage range of the existing capacitor markets, where the value-added and application specific capacitor

markets are situated, is where we recommend that EEStor pursue their market and sales channels. This section summarizes the

opportunities in the $2.8 billion high voltage segment of the global capacitor market

High Voltage Capacitors: Introduction and Definitions: 2014 This section of the report covers the global market for high voltage capacitors where we believe EEStor should begin its quest for market

disruption. The reader should understand that within each dielectric, high voltage has a different definition. To summarize for the new

reader, the overwhelming majority of capacitors consumed for high voltage applications are plastic film capacitors, and even then there

is a focus on polypropylene film capacitor dielectrics only. These polypropylene capacitors are applicable to the hundreds of thousands

of volts (up to about 800 kV) and are truly separate from other dielectrics in that respect. Ceramic capacitors, are also electrostatic, and

can also be manufactured to withstand up to 100,000 volts. Aluminum electrolytic capacitors are also included in this report, and they

are electrolytic in nature; but they cannot be manufactured for applications above 500 volts; however, their snap-in and screw terminal

versions should be considered high voltage because they are consumed in many of the same industrial applications where we find high

voltage electrostatic capacitors. Tantalum capacitors are excluded, because only a very small fraction of the tantalum capacitor market

qualifies as a high voltage capacitor (i.e. those that are consumed in implantable defibrillators).

High Voltage Plastic Film Capacitors: High voltage plastic film capacitors include a variety of sub-categories that are largely defined by their application, and include power

transmission and distribution capacitors; motor run capacitors; industrial power factor correction capacitors; microwave oven capacitors;

magnetic ballast capacitors and specialty power film capacitors for commutation, filtering, snubbing and burst power. These capacitors

are available from 300 VAC to 1,000,000 VAC (1,000 kV) and represent the broadest product offering for line voltage equipment in the

world. The primary dielectric material consumed in the construction of high voltage film capacitors is polypropylene, which may be

rolled by itself, or with Kraft paper or with aluminum or tin foil to create the finished high voltage capacitor. In addition to the standard

large and small can capacitors previously mentioned, there also board level components manufactured from polypropylene that are




31

considered offshoots of the power film capacitor market and includes the AC & Pulse Capacitor markets, for applications in CRT TV

set degaussing circuits and in power supplies. Another product of note is the PTFE plastic film capacitor which is consumed in 200

degree C applications and also at high voltage from 300 volts to 1 kV.

High Voltage Ceramic Capacitors: In the area of high voltage ceramic capacitors, we include only those capacitors 500 volts and above. This is a true representation of the

high voltage ceramic capacitor markets and includes the high voltage multilayered ceramic capacitors, the high voltage single layer

ceramic capacitors and the high voltage ceramic doorknob capacitors. High voltage ceramic capacitors are generally applicable from

500 volts to 100,000 volts.

High Voltage Aluminum Electrolytic Capacitors: A small portion of the global aluminum electrolytic capacitor market can be considered high voltage. This includes the snap-mount

and screw terminal aluminum electrolytic capacitors which are applicable from about 100 to 500 volts.

Other High Voltage Capacitors:

Tantalum Wet Slug Capacitors:

To be fair to other dielectrics, we note that some products can also be considered high voltage and should not be entirely

excluded and mentioned here. Tantalum wet slug capacitors consumed in medical implants and produced by Wilson

Greatbtach are applicable to from 600 to 1 kV.

Mica Paper Capacitors:

Reconstituted mica paper capacitors are also a small market; but their unique construction offers the consumer two specific

attributes- high temperature operations to 200 degrees C and high voltage operation from 1 kV to 30 kV. Mica capacitors are

consumed almost exclusively in defense electronic applications for detonation circuits and in jet engine ignition circuits.




32

Glass Capacitors:

AVX produces specialty glass capacitors to military specifications- Qualified to MIL-C-11272. These glass capacitors are

rated at 500 volts and are used in both defense applications and for downhole pump applications.

Diamond Like Capacitors:

Diamond Like Capacitors are produced by K Systems (WPAFB) and offer the end-use high energy density at high voltages to

1.2 kV. Applications are almost exclusively defense related.

Figure 5: High Voltage Capacitor by Dielectric and Applicable Voltage Range: 2014

Author’s Note: EEStor technology would be applicable at its current tested levels up to 1500 Volts, but it is believed that it can

extend this voltage handling capability to much higher voltage levels in the future, as indicted by Intertek hi-pot test results.

Source: Paumanok Publications, Inc. Compiled From Company Literature




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Figure 6: Global High Voltage Capacitor Markets By Dielectric: FY 2014

Source: Paumanok Publications, Inc.

Total Market = $2,812 Million USD in FY 2014

Plastic Film56%

$1,585 MM USDAluminum25%

$687 MM USD

Ceramic18%

$510 MM USD

Other1%

$30 MM USD




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APPENDIX A

Global Value of Capacitor Consumption by World Region: FY 2014

EEStor Market Opportunities by World Region:

The data in the regional market section below illustrates how the majority of capacitor demand on a global basis (74%) is in the Asia-

Pacific region; while the remaining 26% is in the West. This is especially true for aluminum electrolytic capacitors, which are consumed

in consumer audio and video imaging devices, computers and power supplies in large quantities and these devices are largely

manufactured in Asia and likewise, their consumption of capacitors follows suit and is also in Asia. Still, however, demand for aluminum

capacitors in the West is also a large market, but more in tune with end-use markets in the automotive, telecommunications infrastructure,

power & industrial, lighting ballast, medical, oil & gas, mining and defense end-use segments. It is also important to note that the

aluminum capacitor market is dominated by Asian based vendors- Nippon Chemi-Con, Nichicon, Rubycon and Panasonic.

The same is true for the tantalum capacitor market; however, higher comparable percentages of demand exist in the West for tantalum

capacitors, and the tantalum capacitor market is controlled by Western vendors (i.e. Kemet, AVX and Vishay). Tantalum capacitors are

consumed in automotive electronics, medical devices, telecommunications infrastructure equipment, defense electronics (and in Asia

tantalum capacitors are consumed in computers and wireless handsets).

The primary message for the reader with respect to EEStor’s regional opportunities is that specific markets for these capacitors exist in

the West, but the larger opportunity is in Asia, with emphasis upon China, Japan, and Korea and any plans for priority market execution

should take the regional demand aspects for the EEStor products into account.




35

Figure 7: Capacitor Consumption Value by World Region: FY 2014

Graph Note: The majority of capacitor consumption continues to be in the Far East. The Far East will continue to be a growth region to 2019. China, Taiwan and Korea will be the major areas of continued growth for handset, TV set and computer. √ The Reader Needs to Know… Asia has traditionally been the largest market for capacitors, but since 2000 the Asian markets, with emphasis upon China, have grown at the expense of consumption in the Americas and Europe. This trend will continue.

China & SE Asia60%Japan

14%

Europe15%

Americas & ROW12%




36

Figure 8: Capacitor Consumption Value Trend By World Region and Percentage Change for FY 2007-2013 and FY 2014

Estimates

(In Millions of USD)





37

Figure 9: Historical Shifts in Capacitor Consumption Value by World Region over time: FY 2007-2014


FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

Americas & ROW 15% 13% 12% 12% 14% 12% 12% 12%

Europe 18% 17% 15% 15% 16% 16% 16% 15%

Japan 18% 17% 16% 16% 13% 13% 15% 14%

China & SE Asia 49% 53% 57% 57% 57% 59% 57% 60%

0%

20%

40%

60%

80%

100%

120%




38

The chart below illustrates the value of capacitor consumption by dielectric type and world region for FY 2014. The reader will note

that regardless of dielectric, that the overwhelming majority of demand for capacitors is centered in SE Asia, with emphasis upon Greater

China (PRC, Hong Kong, Taiwan); however, the smaller Asian countries, including Korea, Philippines, Singapore, Malaysia and

Thailand are also considerable markets. Europe, the Americas and Japan are smaller markets when compared to China and the SE Asia

Region.

Capacitor Markets in China and SE Asia by Capacitor Type (Dielectric): FY 2014

As we have noted, the China and SE Asian markets for capacitors is estimated at $10,860 million USD for FY 2014. About 56% of

consumption value is for ceramic capacitors; 23% is for aluminum capacitors, 9% is for tantalum; 9% is for plastic film and 3% is for

EDLC and other capacitors. Murata, Samsung and TDK dominate the capacitor markets in China and SE Asia, primarily through sales

of MLCC; however, other vendors, such as Taiyo Yuden, Kyocera/AVX, NCC, Nichicon, KEMET, Yageo and Walsin are major players

in the region as well.

Capacitor Markets in Japan by Capacitor Type (Dielectric): FY 2014

The Japanese market for capacitors is estimated at $2,519 million USD for FY 2014. About 50% of consumption value is for ceramic

capacitors; 23% is for aluminum capacitors, 13% is for tantalum; 10% is for plastic film and 4% is for EDLC and other capacitors.

Murata, Kyocera and Nichicon count Japan as a major end-market for their capacitors, while Taiyo Yuden, Nichicon and TDK also

count Japan as important source of revenue.

Capacitor Markets in Europe by Capacitor Type (Dielectric): FY 2014

The European market for capacitors is estimated at $2,719 million USD for FY 2014. About 43% of consumption value is for ceramic


Murata, Kyocera and KEMET count Europe as a major end-market for their capacitors, while Samsung, TDK and Vishay also are

extremely active in the region.




39

Capacitor Markets in the Americas by Capacitor Type (Dielectric): FY 2014

The American market for capacitors is estimated at $2,153 million USD for FY 2014. About 47% of consumption value is for ceramic


KEMET and Kyocera/AVX are the major vendors to the region; while Murata, Samsung, TDK and Vishay also count the Americas as

an important market.




40

Figure 10: Global Capacitor Consumption by Dielectric Type and World Region: FY 2014 (In Millions of US Dollars)

Source: Paumanok Estimates; In Millions of USD: Please note that the data in the chart above is for FY 2014, the latest date that this granular data is available.




41

Benchmarking: Capacitor Revenues by Major Vendor and World Region: FY 2014

Figure 11: Capacitor Revenues BY Vendor and World Region: FY 2014

Source: Paumanok Publications, Inc. Estimates Based Upon Public Financial Data and Corporate Presentations. (In Millions of US Dollars)




42

FY 2015 Forecasts for Capacitor Consumption by World Region:

As we have noted, we expect a 7.3% growth rate in the worldwide capacitor industry for FY 2015, with revenues increasing from

$18,251 million in FY 2013 to $19,584 million in FY 2015. We anticipate a 9.5% growth rate in China and SE Asia; 3.5% growth rate

in Japan, 2.5% growth rate in Europe and a 5.1% growth rate in the Americas. We do not believe that currency translation will have a

major impact on the market as it did in FY 2014.

Figure 12: Global Consumption Value for Capacitors by World Region: FY 2015 Outlook

Source: Paumanok Publications, Inc. In Millions of US Dollars

2020 Forecast Update: Consumption by World Region:

Paumanok now anticipates that global consumption of capacitors will continue to shift in favor of China and SE Asia at the expense of

other world regions. Thus by 2020 we expect China and Asia to rise to 63% of consumption; followed by Europe at 14%; Americas at

11% and Japan at 13%. We anticipate that the global capacitor market will grow from the current level of $18,251 million in value to

$24,151 million in value by 2020.




43

Figure 13: Capacitor Consumption Value Forecasts by World Region for FY 2020

Source: Paumanok Publications, Inc. In Millions of US Dollars

$9,061 $10,860 $11,266

$15,070

$2,543

$2,519 $2,610

$3,115

$2,385

$2,719 $2,724

$3,381

$1,908

$2,153 $2,214

$2,585

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

FY 2009 FY 2014 FY 2015 FY 2020

China & SE Asia Japan Europe Americas & ROW




44

APPENDIX B

Summary of Changes in Capacitor Shipment Value by Dielectric: FY 2013 to FY 2015

Clearly in the chart below it is apparent that the major growth area in capacitors continues to be in ceramic capacitors, with emphasis

upon the high capacitance MLCC, which is the capacitor of choice for rapid growth products such as smartphones, tablets and automotive

electronic subassemblies, and is also experiencing design wins against alternative dielectrics such as molded tantalum chip capacitors

in increasingly higher capacitance values.

Figure 14: Changes in Capacitor Consumption Value by Dielectric: FY 2013 to FY 2015





45

FOR 26 YEARS OF CONTINUOUS RESEARCH WE NOTE THAT NONE OF THE PRIMARY DIELECTRICS HAS CHANGED; BASICALLY, THERE

HAS BEEN NO INNOVATIVE TECHNOLOGY THAT HAS DETHRONED ANY OF THE KEY CAPACITOR DIELECTRICS. THIS IS IMPORTANT AS

IT SUPPORTS THE CONTENTION THAT THIS WILL NOT CHANGE OVER THE NEXT 20 YEARS EITHER. THE ONLY CONSTANT IS THAT

CERAMIC CAPACITORS HAVE OBTAINED A LARGER OVERALL PERCENTAGE OF THE DOLLARS ASSOCIATED WITH CAPACITOR SPENDING

WORLDWIDE, RISING FROM 38% IN 1988 TO 52% IN 2014.




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APPENDIX C

Regional Demand: Capacitor Consumption by World Region: FY 2007-FY 2014

China and SE Asia: FY 2007-2014: Historical Shifts in Global Consumption

Between FY 2007 and FY 2014, capacitor consumption in China & SE Asia increased by 27% to $10,860 million USD. In fiscal year

2014 consumption is estimated to increase by 16.8% primarily as a result of demand from Smartphones and tablets, but most

emphatically as a result of converting exports to the region from Japan from yen into US dollars. China and the Asian region outside of

Japan, with emphasis upon Korea, Singapore, Malaysia, Philippines and Thailand accounted for an estimated 60% of global capacitor

consumption value for FY 2014.

Japan: FY 2007-2014: Historical Shifts in Global Consumption

Between FY 2007 and FY 2014 Japanese consumption of capacitors decreased by 20% to $2,093 million USD as a strategy of moving

electronics goods production to non-yen based manufacturing sites offshore. FY 2012 was also severely impacted by the great Tohoku

quake, which occurred right at the end of the 2011 fiscal year and beginning of the 2012 fiscal year and significantly impacted multiple

electronic goods supply chains. For FY 2014 Japanese consumption value for capacitors increased by an estimated 7% to $2,519 million,

up from $2,355 million one year before. Increases in Japanese consumption value for capacitors can be attributed to converting capacitor

consumption value in yen into US dollars, which is inflated due to the deprivation of the yen in FY 2014. Japan accounted for an

estimated 14% of global consumption value for capacitors in FY 2014.

Europe: FY 2007-2014: Historical Shifts in Global Consumption

Between FY 2007 and FY 2014, European consumption value for capacitors decreased by 13% to $2,719 million USD. The European

market lost a substantial amount of value in FY 2012 and FY 2013 due to the economic crisis and subsequent austerity in the region.

However, in FY 2014 due to currency conversion of yen into US dollars, we note that consumption in Europe increased by 8.2% for FY

2014, going from $2,512 million in consumption value in FY 2013 to $2,719 million in FY 2014. Europe accounted for an estimated




47

15% of global consumption value for capacitors in FY 2014. Germany is half the market in Europe, while smaller markets include

Holland, UK, France and Italy. There is also an active Eastern European market.

Americas: FY 2007-2014: Historical Shifts in Global Consumption

Between FY 2007 and FY 2014, American consumption value for capacitors decreased by 18% to $2,153 million USD as manufacturers

relocated end-markets to China. For FY 2014, capacitor consumption in the Americas increased by 7.3% for the year. The Americas,

lead by the USA and Mexico, account for an estimated 12% of global consumption value for capacitors for FY 2014.




48

APPENDIX D

End-Use Market Update: FY 2014

Capacitor Consumption by End-Use Market Segment: 2014 FY Ending March Forecast and Update

EEStor Opportunities by End-Use Market Segment: As we have noted, EEStor technology can be applied to multiple end-use market segments because of its scalability and unique attributes.

We believe that the best place to enter the market is to compete against electrolytic capacitor technology with emphasis upon aluminum

and tantalum end-use market segments. In the coming section, we outline where the best places to enter the market for EEStor are and

emphasize the combination of high voltage and high capacitance as the key attributes that will create disruption in the capacitor supply

chain.

End-Use Market Segments & Capacitor Consumption Correlation:

The following chart illustrates the relationships between capacitors by dielectric and end-use market segment and highlights the strengths

and weaknesses of each dielectric in terms of the revenue generated by each capacitor type within each end-use market segment for FY

2014. Ceramic capacitors, for example, are derive the majority of their market value from the Consumer, telecom and computer

segments; while aluminum capacitors derive most of their value from consumer, computer and power related end-use markets. Tantalum

is found largely in the telecom and computer segments; while DC film and AC film capacitors are found in the consumer and power

segments respectively. The reader will note that many vendors of raw materials to the capacitor industry are keenly interested in what

end-use markets ultimately drive demand for the powders, films and pastes that they sell, and this table below, and the following graphs

illustrate this concept in fine detail.




49

Figure 15: Capacitor Consumption by Type and End-Use Market Segment (Strengths and Weaknesses by Dielectric)

\





50

Figure 16: Global Consumption Value for Capacitors by End-Use Market Segment: FY 2014


Telecom33%

$6.0 Billion USD

Computers20%

$3.65 Billion USD

Consumer AV17%

$3.1 Billion USD

Automotive15%

$2.74 Billion USD

Power & Industrial

11%$2.0 billion USD

Specialty & Other

4%$0.73 Billion

USD




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Figure 17: Competitive Environment for Capacitors by End-Use Market Segment: FY 2014


Capacitor Sales by End-Use Market Segment for the Top Vendors of Capacitors: FY 2014

The following table illustrates revenues for the top vendors of capacitors by end-use market segment. We only use vendor data that has

been supplied to us via presentations, 10-K or annual reports, or through primary data provided by the company. This chart largely

justifies our estimates for capacitor consumption by end-use market segment. This methodology also supports the decade long trend of

telecom becoming more important, at the expense of consumer AV and computers.




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Figure 18: Revenues by End-Use Market Segment for the World's Top Capacitor Manufacturers: FY 2014 Estimates





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FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Telecommunications Markets:

The short term outlook for capacitor sales to the telecommunications segment are solid, and expected to grow by 16.1% in FY 2015 to

$6.99 Billion USD, up from $6.0 billion USD in FY 2013. The long-term outlook for handsets to 2019 remains robust, although we

expect the value of shipments to slow down post 2016. This is because the transition from traditional handsets to smartphones will be

almost completely encompassing during this time period, and elevate demand for MLCC and ultra-small case size tantalum chip

capacitors to satisfy the resulting demand. Simply put, the content of capacitors in smartphones far exceeds that of traditional handsets.

However, over the next five years smartphone production will dwarf legacy phone production and eventually unit demand for capacitors

will begin to slow down and level off. We anticipate that by FY 2019 that capacitor shipments to the telecommunications segment will

increase by 38% over FY 2014 shipments and reach $8,340 million USD, the majority of which will go to the ceramic capacitor market.

FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Consumer AV Markets:

For FY 2015 we expect that capacitor demand for the consumer AV markets will continue to decline by an estimated 1.6% to $3.0

billion USD. For the long-term outlook to 2019 we anticipate a recovery in the flat panel display markets. The primary reason for the

slide in TV set demand in FY 2012, FY 2013 and FY 2014 has been the European economic crisis, which has severely impacted new

TV set sales in that region, and related production revenue in China and the Far East. Once this crisis subsides, we expect a surge in

TV set demand; and a revival in demand from emerging economies (Brazil, Russia, India and China; Malaysia, Indonesia, Nigeria and

Turkey) whose primary electronic gadgets of first choice are handsets, TV sets, refrigerators, air conditioners and automobiles.

Paumanok expects the market in 2019 to have grown by 10% in value from the FY 2014 estimates.

FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Computer Markets:

For FY 2015 we estimate that demand from the computer market for capacitors will grow by only 2.7% to $3,750 million USD. The

longer-term outlook for capacitor consumption in computers continues to remain strong. Tablets will continue to grow to 2019 and

beyond, and demand for notebooks and desktops will also grow in accordance with improvements in the European and global economies.

Many businesses worldwide have held back on upgrading their computers, and the added boost expected with new versions of Windows




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did not come about, so we expect a recovery in the traditional desktop and notebook computers markets over time. By 2019 we expect

the value of capacitor shipments to the computer market segment to have increased by 18% to $4,300 million USD.




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FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts to the Automotive Market

The largest increase in the value of demand will come from the DC link capacitor used in the hybrid electric vehicle. Additionally, a

large portion of demand over the next five years for automobiles will come from emerging economies, especially in China, India, Russia

and Brazil. Many of these new cars will be small and lack much of the high end electronic content found on the Mercedes, BMW,

Cadillac, Lexus and Acura models. Truly high-end cars that require the largest electronic content and the greatest quantity of supporting

capacitors will remain in the 3.2 to 3.5 million-unit range worldwide between 2014 and 2019. For FY 2015 we expect the capacitor

shipments to the computer market to grow by 6.5% to $2,920 million USD and by 2019 we expect the market to grow by a combined

17% to $3,200 million USD.

FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts to the Power, Industrial and Infrastructure Markets

The long-term outlook for capacitor consumption value in the power, industrial and infrastructure markets is for the market to grow.

Most of the growth will be for smart grid development and renewable energy systems; as well as for new motor and drive technology

and power film capacitors for AC filtering and burst power. The key areas of growth will be in the inverters for both wind and solar

power for emerging markets in the USA and China. For FY 2015 we expect demand for capacitors from the industrial segment to grow

4.6% to $2,100 Million USD and by 2019 to grow to $2,300 million USD or a collective 15%.

FY 2015 and FY 2019 Long Term Capacitor Demand Forecasts To The Specialty Markets:

The outlook in this segment for FY 2014 to 2019 is forecasted by Paumanok to show continued growth, primarily for medical electronics

and oilwell electronics. Demand from the defense sector is uncertain. While cuts in the US defense budget seem imminent, they will

most certainly involve personnel and overhead, and probably be overcome through investments in technology. Still however, certain

key defense platforms slated for the future will be cut, so the overall affect on component demand may be one of stagnation.




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Figure 19: Capacitor Consumption by End-Use Market Segment: FY 2015 to FY 2020

Source: Paumanok Estimates in Millions of USD




57

Profitable End-Markets in the Capacitor Industry: 2014

Certain end-markets in the capacitor industry are considered value-added and application specific and therefore have much higher

operating margins when compared to markets that demand large volumes of products. Since the EEStor technology demonstrates

superior performance characteristics in various environments and conditions, we recommend that the company begin to market its

capacitor technology into these high-profit, low volume markets in the West and then work their way toward the mass merchandise

markets in Asia.

The following graph illustrates the high profit margin end-use segments compared to the low margin segments.




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Figure 20: Operating Margins and Value-Added Ceramic Capacitor Markets: FY 2014


Higher Margins

Medical Implants

Oil & Gas Electronics

Defense Electronics

Aerospace

Telecom Infrastructure

Mining Electronics

Rail Electronics

Renewable Energy

Power Infrastructure

Auto Under The Hood

Lower Margins

TV Sets

Stereos

Wireless Handsets

Computers

Other Consumer Electronics

Auto Beyond The Firewall




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APPENDIX E

High Voltage Plastic Film Capacitors: Technology Overview

AC Polypropylene Power Film Capacitors:

AC Power Film Capacitor Types:

AC film capacitors are used primarily for power factor correction in line voltage systems and electronics. They are also used for pulse

discharge and motor run applications as well. AC film capacitors use metallized polypropylene film as their primary dielectric.

Sometimes the film is used in conjunction with metallized paper and/or metallized foils to achieve extremely high voltage. In many

instances an AC film capacitor will contain a liquid electrolyte and in some instances, the designs are dry.

AC Power Film Capacitor Configurations:

AC film capacitors are produced in large can configurations and consume large volumes of bi-axially oriented polypropylene film in

their constructions. They are found in power transmission and power distribution circuits. They are also used for industrial power factor

correction, as well as pulse discharge for microwave ovens and for external defibrillators. New applications for AC film capacitors is

for the DC link capacitor used in hybrid electric vehicle designs, which could grow the market substantially.

Introduction to the High Voltage Plastic Film Capacitor Market:

This section of the report discusses the $1.384 billion global market for AC Film Capacitors (FY 2014 Estimate), which employ

polypropylene film as the primary dielectric material. AC & Pulse Film Capacitors add an additional $201 Million in high voltage

capacitor revenues for 2014 to the overall “High Voltage Capacitor Market segment.” Therefore, the total high voltage plastic film

capacitor market is worth an estimated $1,585 million USD.




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Our detailed analysis has revealed that AC Film capacitors fall into two basic categories-

• Power Factor Correction Capacitors

• Pulse Discharge Capacitors

Within each of these categories there are multiple sub-categories, which we now illustrate:

Power Factor Correction (PFC):

Power factor correction accounts for 80% of global consumption value for AC film capacitors globally in 2014. And this makes them

very important for the future, in a world that is becoming increasingly concerned about being energy efficient. Applications requiring

power factor correction in AC line voltage applications include:

▪ Power Transmission & Distribution PFC Capacitors

▪ Industrial PFC Capacitors

▪ Motor Run PFC Capacitors

▪ Lighting Ballast PFC Capacitors

PFC Capacitor Applications:

High voltage PFC capacitors are used in utility grade power transmission and distribution applications, where they are applied directly

to the power grid to increase the efficiency by which power is transmitted and distributed.




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Transmission & Distribution Class PFC Plastic Film Capacitor Markets

AC film capacitors used for power T&D applications are generally employed in circuits from between 3 kV to 1000 kV. Distribution

class capacitors are generally pole-mounted, outside plant applications from 3 to 15 kilovolts, while transmission class capacitors operate

in both series and parallel to be used in power transmission systems to 1,000 kilovolts.

Customers for Power Factor Correction Transmission and Distribution Capacitors:

Customers for power transmission and distribution class capacitors are public, private and government owned power utility companies

that supply power for residences and businesses globally.

Global Trends in the Power Factor Correction Transmission and Distribution Capacitor Market Sector:

Market demand from public utilities is dependent upon a nation’s need for power and energy, therefore, from 2000 to 2014 China

remained the dominant area of new growth for vendors of power generation, transmission and distribution equipment.

However, demand for power related equipment and devices, including capacitors, remains robust in developing nations as well,

including Brazil, India and Russia; but also in new emerging economies- Viet Nam, Turkey, Paraguay and The Middle East.




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Major Manufacturers of Power Factor Correction Transmission and Distribution Capacitors:

Manufacturers of AC film capacitors for power transmission and distribution applications are primarily divisions of much larger power

equipment manufacturers, who supply their capacitors as a line item for larger turnkey operations that require everything from reactors

to cable to transformers to arresters to capacitors. Such manufacturers include Asea Brown Boveri, General Electric (Shreem), Nissin

Electric Japan and Cooper Power Systems.

Minor Manufacturers of Power Factor Correction Transmission and Distribution Capacitors:

Smaller vendors in this space have caught the attention of many institutional investors because of global economic stimulus packages

which include stimulus money for power factor correction (Smart Grid), and for renewable energy systems (DC link circuits). Smaller

manufacturers of power transmission and distribution capacitors. Smaller vendors include such companies as ZEZ Silko (Czech

Republic), Franke GMKP Energy (Germany) EMEK Elektrik (Turkey) and Power Capacitors Limited (UK).

Global Market Value for Power Factor Correction Transmission and Distribution Capacitors

Global demand for high voltage power factor correction capacitors in 2014 will be an estimated $490 million USD worldwide, or 35%

of total AC capacitor consumption value globally.




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Motor Run PFC Plastic Film Capacitor Markets:

Applications:

Motor run capacitors are consumed in the global AC electric motor markets worldwide. The types of motors that consume motor run

capacitors are called split-capacitor motors, and the application of the capacitor is for power factor correction of the motor.

Split Capacitor Motor Markets:

Split capacitor motors are used in air conditioner compressor motors, refrigerator compressor motors and ceiling fans, and the annual

success of the AC film capacitor market is generally tied to the annual success of the compressor motor market on an annual basis,

which in turn is tied to new housing development globally.

Large Volume Polypropylene Capacitor Business: 2014

This market accounts for the largest volume of individual AC OPP film capacitors sold, and is therefore considered to be of prime

importance to the suppliers of polypropylene materials to the marketplace.




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Global Motor Run Capacitor Market: 2014

Motor run capacitors will account for about $330 million USD in global revenues in 2014, and represented 24% of all AC capacitors

consumed with respect to global market value. The motor run capacitor market will continue to grow primarily in accordance with

new home building globally, which traditionally drive sales of large home appliances, such as air conditioning equipment and

refrigerators. The market rebound in AC power film capacitor consumption in 2014 was NOT robust for the motor run capacitor

business segment due to a slow recovery in housing; however, in China we saw an uptick in demand due to government incentive

programs for more energy efficient appliances in the countryside.

Motor Run Capacitor Vendors: 2014

The market is fragmented when it comes to suppliers, but the major producers include Shizuki Electric Japan (Including ASC

Capacitors), Arcotronics Italia Limited (produced in Bulgaria- a Kemet subsidiary), Regal-Beloit (formerly General Electric Capacitor

Operations in Juarez, Mexico /and El Paso, Texas) and EPCOS of Munich, Germany; Aerovox, Inc. of the USA and many others.

Pricing Pressure on Vendors in the Motor Run Capacitor Market Segment: 2014

The motor run capacitor market has been susceptible globally to price competition; which has been driven into the space by low price

competition from South Korea, and more recently - India, where costs for raw materials - with emphasis upon metallized polypropylene

film is about $1.00 per kilogram lower in price than vendors in the West.

Lawsuits in Europe and the United States involving accusations of price “dumping” against Korean firms has been well documented

over the past decade.

In more recent years, vendors in India, have also begun to expand their production of OPP Film Capacitors for global consumption in

the United States, Europe and Asia. This has placed even greater pressure on price. The bottom line here is that the motor run capacitor

market is crowded with vendors worldwide; and this places great pressure on pricing and represents a segment of the market that

demonstrates increasingly smaller profit margins for vendors.




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Motor run capacitor technology is as old as the motor, and operations such as Aerovox for example would have been operational for

more than 100 years. The leaders in this market segment represent the old school capacitor companies that began production of

polypropylene film capacitors in the early 1900s for DC motors. These capacitor operations also became vital to the development of

AM radios, building both capacitors and vacuum tubes at many of the older plants worldwide (Aerovox, GE, Arcotronics, Shizuki,

EPCOS).

Thus, the general perception is that equipment used to produce OPP Motor Run film capacitors is old, and modernization could lend

itself to lower cost production of these high dollar per unit OPP cans. This makes the market susceptible to encroachment by

modernization, especially in emerging markets, such as China, India and Vietnam where personal business relationships will not stand

in the way of lower pricing.

Market Drivers: Split Capacitor Motors

The worldwide market for electric motors is estimated in excess of $25 billion. The overall US market for electric motors is estimated

at $9 billion annually, although we estimate the sectors in which OPP Motor Run film capacitors primarily compete, commercial and

industrial electric motors and HVAC/refrigeration motors, to be approximately a $5.0 billion segment of the overall domestic market.

Customers for Motor Run Capacitors: 2014

We believe approximately 60% of all electricity generated in the U.S. runs through electric motors. Major producers of electric motors

and major customers for motor run capacitors include Marathon Electric, Lincoln Motors, LEESON Electric, GE Commercial AC and

HVAC Motors (all four of these brands are owned by Regal-Beloit, which, we believe, is among the largest producers of commercial

and industrial motors and the largest producer of HVAC motors in the world.

Other major motor producers include Baldor Electric, U.S. Electric Motors (a division of Emerson Electric Co.), Reliance Electric

Company (a division of Rockwell International), A. O. Smith Corporation and Newage (a division of Cummins, Inc). Major

foreign DC Motor vendors include Siemens AG, Toshiba Corporation, Weg S.A., Leroy-Somer, Inc. and ABB Ltd




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Compressor Motor Manufacturers: 2014

Major customers for motor run capacitors who produce residential and commercial heating, ventilation and air conditioning (HVAC)

equipment, include:

Carrier, Lennox, Trane, Rheem, York, General Electric and Nordyne.

The Movement toward ECM Motors:

The trend in the compressor motor market for HVAC equipment is the movement toward Enhanced Circulating Motors, which enable

air conditioning equipment to operate more quietly and efficiently than traditional DC motors, and operate up to 30% more efficiently

than standard DC motors. About 70% of the compressor motor markets are for aftermarket replacement of existing motors with more

efficient designs, and 30% of sales are for new equipment.

Industrial Power Factor Correction Plastic Film Capacitor Markets:

Global Market Description and Size: 2014

This market is considered an extension of the high voltage power factor correction capacitor market worldwide, and is estimated by

Paumanok Publications, Inc. to be worth about $135 million USD worldwide for 2014, or 10% of total AC capacitor consumption value

worldwide.




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Utility Grade Capacitor Configurations: 2014

Capacitors consumed in low voltage power factor correction applications are generally rack or wall mounted systems that contain large

can polypropylene capacitors in series.

Market Drivers for Industrial PFC Capacitor Racks: 2014

The market driver to this segment of the industry is that some electric utilities offer incentives to manufacturers who demonstrate

efficient power consumption.

Vendors of Industrial PFC Capacitors: 2014

Industrial PFC capacitors are sold by multiple vendors worldwide, including, but not limited to the same manufacturers who produce

high voltage power transmission and distribution capacitors. Major vendors include Shizuki Electric Japan, ZEZ Silko, Franke, Facon

and many others.

This segment of the AC film capacitor market was hit hard by the global economic downturn in 2009 as capital spending for industrial

capacity expansion declined substantially, resulting in a substantial decline in global requirements for correcting the industrial power

factor. However, in 2011 the market has rebounded nicely- mostly for retrofit operations (not new construction).

Lighting Ballast (PFC) Plastic Film Capacitor Markets: FY 2014




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Magnetic and HID Lighting Ballast Markets:

AC film capacitors have been historically consumed in two separate markets in the lighting ballast industry- the PFC magnetic ballast

business, and in the High Intensity Discharge Lighting Business.

Declining Magnetic Ballast Markets:

AC capacitors consumed in magnetic ballasts are a rapidly declining business because magnetic ballasts are considered to be inferior to

electronic ballasts, which consume no AC film capacitors for power factor correction (although plenty of high-value DC film capacitors,

including interference suppression, AC & Pulse and SMD film chip capacitors). In the United States, government regulations are

actually mandating the displacement of magnetic ballasts with more efficient lighting ballasts.

Healthy High Intensity Discharge Lighting Markets:

HID ballasts that require power factor correction are generally consumed in outside lighting applications. The AC capacitors consumed

in HID ballasts are seven times more expensive per unit when compared to AC capacitors consumed for similar applications in magnetic

ballasts.

The HID ballasts are considered to be a safe haven for AC lighting capacitors because their displacement in the ballast will take longer

than traditional magnetic ballasts.

Major Vendors of AC Film Capacitors for Magnetic and HID Lighting:

Major global manufacturers of lighting ballast capacitors include Aerovox, General Electric, Shizuki Electric, AmRad-American

Radionic and CDE-York).

Global Market Size for AC Film Capacitors for Lighting:

AC film capacitors consumed in HID and magnetic ballasts accounted for $59 million in revenues for 2014 or 4% of AC film capacitor

consumption value.




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Microwave Oven (Pulse) Capacitor Markets:

Paumanok tends to include the microwave oven capacitors in the power capacitor segment; however many suppliers view the microwave

oven capacitor market as a market by itself due to its distribution channel into residential home appliance markets. The capacitor

application in a microwave oven, however, is pulse discharge in nature and extremely high voltage, which qualifies it as a traditional

pulse discharge capacitor.

Microwave Oven Capacitor Customers:

Microwave oven capacitor markets are dominated by companies in the Far East as that is where the majority of these devices are

manufactured, with emphasis upon

Galanz of China

Sharp of Japan,

Samsung of Korea,

Matsushita of Japan, and

LG Electronics of Korea

as the dominant microwave oven manufacturers.

We note that many of the microwave ovens consume AC film capacitors from Kum Kang in Korea (formerly a Samsung capacitor




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operation), although Aerovox (Buckingham) has also historically competed here as well.

The Microwave oven capacitor market accounted for an estimated $55 million in capacitor sales in 2014, or 4% of global consumption

value for all AC film capacitors for FY 2014.

Power Film Capacitors (Pulse & Other) Markets:

This is the fastest growth businesses for AC film capacitors over the next five years, and has exhibited the largest amount of growth by

end-use market segment over the former five years. It is generally considered a basket category for a variety of AC film capacitor

products that are finding good growth opportunities, primarily in external defibrillators, variable speed drives for wind generation,

welding capacitors, furnace capacitors, and traction capacitors for electric rail.

Snubber, Commutation and AC/Pulse Applications:

Power film capacitors generally are used for one of three applications- snubber, commutation or pulse discharge (which is why

microwave oven capacitors are considered an offshoot of this segment). The most important aspect of this market to understand is that

the applications are unique and not considered to be power factor correction, but used primarily for actuated boost power.

Outside of microwave oven pulse discharge applications, the major market here is for variable speed drives, which are consumed in

wind generation equipment and in electric trains- two growth markets worldwide.




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True Power Film Capacitor Markets:

Paumanok estimates the power film capacitor market to be $315 million USD worldwide for FY2014, or 23% of global AC film

capacitor consumption (this market has grown substantially since 2008).

Power Film Capacitor Manufacturers:

Major suppliers include EPCOS in Germany, Frako in Germany, Franke in Germany, Electronicon in Germany, ICAR Spa in Italy and

Electronic Concepts in the United States. The market is quite fragmented with many vendors.

Variable Speed Drive Capacitors:

Power film capacitors consumed in variable speed drives make up the largest portion of the true power film capacitor marketplace

worldwide. It is within the power film capacitor subset that is dedicated to variable speed drives where we find the best prospects for

future growth in the AC film capacitor business. AC power film capacitors are used for protection of IGBT semiconductors (snubbing)

in the following applications-

Wind Turbine Capacitors:

Traction capacitors: Electric Trains:

Industrial Conveyer Capacitors:

Furnace capacitors: Induction Heating

Welding Capacitors: AAT

Pulsed Power Capacitors:

Pulse/Discharge capacitors are DC circuit capacitors that absorb or supply strong current surges. They are charged sporadically and

briefly discharged in relation to the charge time or vice versa. Discharge capacitors are subjected to high loads; high field strength

corresponding to the required high energy density; large peak currents because of the fast discharge, generating considerable mechanical

forces in large capacitors; and high AC voltages on inductive loads as a result of overshoot.




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Pulse capacitors find their niche in various forms of research & development for generating string magnetic fields; for high energy light

flashes; high temperature and high pulses of electrical energy.

Laser (Industrial & Medical)

Defibrillator (external only)

X-RayMachines (Pulsed)

Ultrasonics (Pulse Welders, Cleaners)

Airport Runway Strobes (Pulse Forming Networks)

Water Purification

Pulse Forming Networks (Radar)

Missile Power Up

Food Sterilization

Marx Generators

Power Smoothing Capacitors:

Smoothing capacitors are used to reduce the AC component of pulsating DC voltage in measurement devices, control equipment and

telecommunications infrastructure equipment, high voltage test instruments and cascade circuitry. These capacitors are predominantly

DC in nature. Power supplies are used in a variety of applications and are predominantly AC/DC converters (70%) and DC/DC

converters (30%).

Power Supplies/Inverters/Converters/UPS

Telecom Infrastructure

Battery Chargers (auto, industrial, railroad)

Ignition Speed Controllers




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Amplifiers

Magnetizing Equipment

Motor Drives

Inverters

Electric Vehicle Power Conversion (DC Link)

Windmill Conversion (DC Link)

Class 7 and 8 Mining and Framing Machines (DC Link for EV versions)

Wave Water Power Generation Equipment (DC Link)

AC & Pulse Film Capacitor Markets AC & Pulse film capacitors are used in high voltage applications where extremely low dissipation factors; very small inherent

temperature increases; high pulse environment and resistance to corona are required. The environments in which AC & pulse capacitors

are required include Television deflection circuits, including the important flyback and S-correction (hold) circuits; electronic ballasts;

switch mode power supplies (SMPS) and other applications where high current and high frequency are factors of the electronic system.

AC & Pulse capacitors require high voltages and comparably low capacitance values. Typical voltages are in the 250 to 2000 Vdc (or

160 to 600 VAC) with capacitance values from 0.001 to 3.3 µF. Because of the high voltage requirements, dielectrics of polypropylene

are used. Moreover, since high voltages and low capacitance values are required in the applications where AC & pulse capacitors are

used; dielectric selection is limited to the electrostatic capacitors, such as film and ceramic. Film is preferred in television set, ballast

and SMPS applications because of its “self-healing” properties. AC & Pulse film capacitors are almost exclusively radial leaded, box

type capacitors with variations in dielectric and lead type. Dielectrics are typically metallized polypropylene; double metallized

polypropylene; or film/foil constructions; where the film is polypropylene and the foil is predominantly tin, copper or aluminum. AC

& Pulse Film Capacitors add an additional $201 Million in high voltage capacitor revenues for 2014 to the overall “High Voltage

Capacitor Market segment.”




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APPENDIX F

High Voltage Ceramic Capacitors Markets

There are two basic constructions for ceramic capacitors- multilayered and single layered. Multilayered capacitors are produced using

an alternate stack process, which builds layers of ceramic dielectric material on top of layers of metallized electrode.

Multilayered Ceramic Capacitors:

Multilayered ceramic capacitors are available in both surface mount and leaded designs. The Multilayered Ceramic Chip Capacitor is

referred to in this report as the MLCC and represents the preferred choice for the global design engineer for bypass, decoupling and

filtering circuits. An estimated 1.5 trillion MLCC were sold in 2014, and accounted for 90% of all capacitor UNIT sales worldwide.

All other capacitors can be considered niche when viewed on scale with global consumption volume of MLCC. A very small portion

of the MLCC (chip) business is for applications that are considered high voltage and are applicable from 500 volts to 5,000 volts. These

MLCC are produced for specialty power supply applications and for defense, oil & gas and medical electronics applications. Also there

are multilayered ceramic axial and radial leaded capacitors that are also consumed in high voltage applications that are applicable from

500 volts to 15,000 volts.

Single Layered Ceramic Capacitors:

Single layer ceramic capacitors are composed of pressed ceramic materials with a single layer of thick ceramic, covered with a layer of

silver metallized electrode. Single layer ceramic capacitors are produced in Japan, Taiwan and China and are used primarily in the high

voltage television flyback transformer markets. More advanced single layer designs are used in extremely high voltage applications and

are considered value-added products used primarily in specialty power supplies for defense electronics.




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In a tubular ceramic capacitor, the inner and outer surfaces of a ceramic tube are painted with silver ink or palladium ink, leaded and

coated; and the tube acts as the single ceramic layer. These tubes replaced discs to conserve PC board space and for the purpose of

automated PC board mounting; however, with the overwhelming acceptance of the multilayered chip form, all multilayered ceramic

capacitors, other than chips, will now dwindle to small, niche and replacement markets over the next decade. Tubular ceramics have

now shrunk to specialty markets; however they are still produced, and in fact, we are told, consume great quantities of both silver and

palladium for electrodes according to primary suppliers.

There are also specialty single layered ceramic capacitor markets that extend the ceramic capacitor market to 100,000 volts. The disc

market is usually applicable to 40 kV, but the doorknob capacitor market is applicable to 100 kV.

MLCC MLC Radial Leaded SLC Disc




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APPENDIX G

High Voltage Aluminum Electrolytic Capacitor Overview

Aluminum electrolytic capacitors are constructed from two conducting aluminum foils, one of which is coated with an insulating

oxide layer, and a paper spacer soaked in electrolyte. The foil insulated by the oxide layer is the anode while the liquid electrolyte and

the second foil acts as the cathode. This stack is then rolled up, fitted with pin connectors and placed in a cylindrical aluminum casing.

The two most popular geometries are axial leads coming from the center of each circular face of the cylinder, or two radial leads or

lugs on one of the circular faces. The electrolyte is usually boric acid or sodium borate in aqueous solution, together with various

sugars or ethylene glycol which are added to retard evaporation.

http://en.wikipedia.org/wiki/Oxide

http://en.wikipedia.org/wiki/Electrolyte

http://en.wikipedia.org/wiki/Anode

http://en.wikipedia.org/wiki/Liquid

http://en.wikipedia.org/wiki/Cathode

http://en.wikipedia.org/wiki/Boric_acid

http://en.wikipedia.org/wiki/Sodium_borate

http://en.wikipedia.org/wiki/Ethylene_glycol




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Snap-In/Snap-Mount Aluminum Capacitors:

These designs are physically large, have large amounts of capacitance, and high voltages. They are used in the output filters of power

supplies. The snap-in models are easy to mount and are replacing older, screw terminal products. This sector faces some encroachment

by SMT designs, but their large size and application specific nature makes them somewhat immune to encroachment. Thus, these

markets will continue to play an important role going forward.




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Computer Grade/Screw Terminal {Large Can}

These large cans are also used in DC-to-DC converters and switch mode power supplies. Their large designs also find a way into a

variety of additional industrial electronic applications. The screw terminals are considered older technology because they are

cumbersome to mount. These devices are being replaced by plug-in type aluminum capacitors, although like the axial leaded devices,

there are still companies that use these designs.

Motor Start (Large Can)

Aluminum Electrolytic Capacitors for starting split capacitor motors.




79

APPENDIX H

Other High Voltage Capacitors: Technology Overview

High Voltage Wet-Slug Tantalum Capacitors:

Wet slug tantalum capacitors use a highly conductive liquid, primarily sulfuric acid, and are considered the most reliable of all

capacitors, and therefore find applications in critical timing circuits where leakage currents must be kept very low.

Sprague Electric, the Vishay Intertechnology subsidiary, and their sister company, Sprague-France, maintain market leadership on the

$85 million wet/foil and wet/slug market worldwide. Vishay’s purchase of Kemet’s Tantalum Wet facility in 2008 further solidified

Vishay’s leadership position in wet-slug tantalum capacitors. Only a very small portion of the market is high voltage, and is

dominated by Wilson Greatbatch and their wet electrolytic design for implantable defibrillators.

High Voltage Reconstituted Mica Capacitors: Technology & Market Overview:

Mica capacitors are a unique and specialized segment of the capacitor industry worldwide. The market is extremely small overall, but

a major portion of what is sold is for high temperature applications >175 degrees C. Cornell-Dubilier had been the major vendor of

these products, but they sold their mica capacitor line to Custom Electronics, Inc. who we now believe to be the world’s largest vendor

of specialized mica capacitors for applications in high temperature electronics. Made-to-order mica paper capacitors are available for a

variety of high temperature / high voltage applications. These types of capacitors can be rated up to 260°C for a variety of applications

that include, but are not limited to, down-hole oil and gas exploration and drilling, jet engine ignition systems, etc. This type of high

reliability capacitor can be packaged with a variety of materials to meet specific high temperature / high voltage requirements. Mica

capacitors are available in Single Section or Multi-Section capacitor designs; as well as Multiple Mica Capacitor Assemblies. The Mica

capacitors are able to operate in high temperatures because of the nature of their dielectric material coupled with the assembly procedure,

which employs housing the capacitor in a plastic case and filling the case with silicone, polyester, polyamide/fiberglass and wrap and

fill Kapton® Tape. In terms of capacitance voltage, mica paper capacitors also resemble the electrostatic performance characteristics of




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ceramic and plastic film capacitors. They have low capacitance values in the picofarad range to the low microfarad range and are

available in high voltage designs to 15 kV. Paumanok estimates that the total market for high temperature capacitors manufactured

from reconstituted mica dielectric at about $6 million USD. The two major vendors are Eurofarad (Exxelia) and Custom Electronics,

Inc.

High Voltage Glass Capacitors: Technology & Market Overview:

Glass capacitors are unique designs consumed almost entirely for defense markets. AVX (Raleigh) dominates this market globally. We

estimate that glass capacitors represent about $4 to $5 million in worldwide sales. Glass capacitors are very difficult to manufacture and

require a unique production process that utilizes a unique flexible glass substrate that can be rolled onto a mandrel to create a unique

axial leaded capacitor design. AVX also manufactures the specialty multilayered glass capacitors that include the specialized ETR series

(Elevated temperature high reliability) that are operational from -75 degrees C to 200 degrees C. The configurations for the elevated

temperature ML glass capacitors are axial and radial leaded. The axial line is radiation hardened. Capacitance values range from 0.5

pf to 2400 pf. These are rugged designs with simple construction. AVX Glass dielectric capacitors can handle large Radio Frequency

(RF) currents over a wide frequency range. Glass dielectric capacitors have a high Q factor and a low dissipation factor that changes

little with frequency and temperature excursions. This coupled with a low, retraceable, extended range temperature coefficient ensures

repeatable, reliable performance – regardless of the capacitor’s environment. The large RF currents that glass dielectric capacitors can

handle make them ideal for use in modulators, filters, and linear amplifiers.

High Voltage Diamond-Like (DLC) Capacitors: Technology & Market Overview:

K Systems, Inc. offers the diamond like capacitor which has been developed and available now for many years. The technology was

developed by K Systems under agreements with the United States Air Force. This product line is also applicable for >175 degree

applications. It remains a small and custom type market. The compact, high temperature and high energy density Diamond-Like Carbon

Capacitors with high reliability have a myriad of uses in both commercial and military applications. These include applications such as

in domestic utilities and appliances, oil well drilling equipment, power supplies, aircraft, trains, automobiles and medical devices. The




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high energy density capabilities of these will enable electrically driven aircraft accessories, such as engine mounted actuators, sensors

and mounted flight control for the Air Force's more electronic aircraft. High energy density capacitors are also greatly needed for Air

Force, Army and Navy pulse power applications, and for NASA filter applications. According to K Systems, a need exists for high

energy density capacitors that can tolerate high voltage excursions under prolonged high temperature conditions. Many of the current

avionic aerospace and high performance power conditioning systems used in the distribution, control, sensor and actuation applications

require high performance capacitors which can operate at elevated temperatures. Diamond-like carbon (DLC) possesses the unique

properties of high dielectric strength, high resistivity, low loss, high decomposition temperature, and chemical inertness. The developed

DLC films are one of the best known dielectric materials to date, with material energy densities of >19.2 J/cc, dielectric constant of 4.6,

breakdown strength of >970V/μm, and an operating temperature range of -65°C to 300°C. A new prototype manufacturing technology

for high energy density and high temperature DLC capacitors has been demonstrated. This work investigates two different capacitor

designs manufactured by direct ion beam deposition of high quality DLC dielectrics: (1) Packaged rolled capacitors, and (2) Stacked

multilayer capacitors. Several packaged DLC capacitors were successfully manufactured by rolling a pair of the DLC coated double-

metallized polymer films, and several multilayer DLC capacitors were also manufactured by depositing alternating layers of DLC and

aluminum films on a rigid silicon substrate.

For oil-impregnated DLC capacitors, the capacitance value (25°C) was found to increase from 7.7 μF (dry DLC capacitor) to 12.3 μF

(oil impregnated DLC capacitor); a 60.5% increase. This increase is due to removal of the air gap inside the wound capacitor by using

oil. This air gap may also be further reduced by using tighter winding tension in the future.

Also, It is clearly demonstrated that the capacitance of DLC stacked capacitors do not change with temperature from -65 degrees C to

200 degrees C to within ± 3%. The dissipation factor is lower at low temperature, and increases with temperature. This may be due to

the current packaging technique as well as the oxidation of the aluminum wire connector at high temperatures.




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One of the best dielectric materials known to date is high quality diamond-like carbon films: high energy density 19.2 J/cc materials

only, dielectric constant of 4.6, breakdown strength of >970 V/μm, operating temperature range of -65°C to 300°C, dissipation factor

of 0.1%, ∆C/C vs. frequency of <8 % .

DLC films are amorphous and excellent adhesion on metals and polymer film, self- healing, and flexible for wound capacitor or can be

stacked in multiple layers construction.

Stacked DLC capacitors provide very high energy density, and can be operated over a wide temperature range of -65 degrees C to +200

degrees C.




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APPENDIX I

Capacitors by Type, Sub-Category and Voltage Rating: 2014

Author’s Note: EEStor technology would be applicable at its current tested levels up to 1500 Volts, but it is believed that it can extend this voltage

handling capability to much higher voltage levels in the future, as demonstrated in Intertek’s hi-pot testing.


The following chart breaks down the individual capacitor sub-markets by the dielectric type and the voltage range in which they perform.

Polypropylene capacitors have the largest breadth of product offering at high voltages, and ceramics also have impressive coverage.

Aluminum capacitors max out at 500 Vdc, but represent large markets in their screw terminal and snap-in configurations. High voltage

ceramic capacitors, especially the MLCC and the MLC axial and radial designs are also large markets in their high voltage iterations.




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Figure 21: Global High Voltage Capacitor Consumption Value By Dielectric and Voltage Rating: 2014

Author’s Note: EEStor technology would be applicable at its current tested levels up to 1500 Volts, but it is believed that it can extend this voltage

handling capability to much higher voltage levels in the future, as demonstrated in Intertek’s hi-pot testing.

Source: Paumanok Estimates- In Millions of USD also see figure next page.

Figure 22: Global High Voltage Capacitor Consumption Value By Sub-Category (Type and Configuration): 2014




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Source: Paumanok Publications, Inc. Estimates

Snap-In Aluminum Capacitor

13%

Motor Run Capacitors

12%

Screw Terminal Aluminum Capacitor

11%

Power Film Capacitors

11%Power Transmission

Capacitors11%

MLCC HV Chips10%

AC & Pulse Capacitor

7%

Power Distribution Capacitors

7%

MLC Leaded HV Radial & Axial

5%

Industrial PFC Capacitors

5%

Other High Voltage Capacitors

8%




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Global Consumption Value for High Voltage Capacitors by World Region: 2014

The following chart illustrates the high voltage capacitor market by world region for 2014. According to our estimates, the market is

48% in favor of the Asia-Pacific region; 29% in favor of Europe and 23% in favor of The Americas.

Figure 23: Global Consumption Value for High Voltage Capacitors by World Region: 2014

Source: Paumanok Publications, Inc. Estimates

AMERICAS23%

$658 MM USD

EUROPE29%

$803 MM USD

ASIA-PAC48%

$1,351 MM USD




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The reader will note that the high voltage segment of the market, where we suggest that EEStor should enter, has a much higher market

opportunity in the West when compared to the capacitor market as a whole. Significant market opportunities exist in the high voltage

segment of the global capacitor market in the West, as is shown in the chart above.




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APPENDIX J

Global Consumption Value for High Voltage Capacitors by Dielectric Type and World Region

The following chart further breaks out the market for high voltage capacitors not only by world region, but by dielectric as well. The

American region (NAFTA) is known for its high voltage capacitor markets for power transmission and distribution; motor run; as well

as for specialty end-markets in defense, medical and oil & gas electronics. Europe is known for its industrial segment, including key

markets for power film capacitors and large can electrolytic capacitors for inverter and drive assemblies for windmills and other

renewable energy systems. The Asia-Pac region is known primarily for consumption of high voltage plastic film capacitors for

applications in TV degaussing circuits; in motors, in power supplies (Taiwan), in microwave ovens; and in power transmission and

distribution systems.

Figure 24: Global Consumption Value for High Voltage Capacitors by Dielectric Type and World Region: 2014


High Voltage Capacitors: Demand by End-Use Market Segment: 2014

The following chart illustrates consumption of high voltage capacitors by end-use market segment. In this chart we illustrate the

aggregated consumption of capacitors, regardless of dielectric. The reader should note that many of these end markets consume more




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than one type of high voltage capacitor. The key end markets are power supplies; utility grade power transmission and distribution;

industrial drives and inverters, motors, defense electronics, industrial PFC and other line voltage markets.

Figure 25: High Voltage Capacitor Consumption Value by End-Use Market Segment: 2014

Source: Paumanok Estimates- As previously noted, many of these end market segments are ideal for EEStor to compete

Power Supplies22%

Power Transmission & Distribution

17%

Drives & Inverters17%

Motors13%

Defense Electronics5%

Industrial Power Factor Correction

5%

TV Sets (Deguassing)5%

Telecom Infrastructure4%

Oil & Gas Electronics

3%

Medical Electronics2%

Microwave Ovens2%

Lighting Ballasts2%

Semiconductor Manufacturing

1%

Other2%




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High Voltage Capacitors: Demand by Capacitor Dielectric and End-Use Market Segment: 2014

The following chart further breaks out global consumption for high voltage capacitors by dielectric (capacitor type) and end-use market

segment. The reader will not how various forms of high voltage power supplies require multiple dielectrics to operate for the input and

output filters. Other large markets include the polypropylene film capacitor consumption in power transmission and distribution systems

for power factor correction; the large market for both polypropylene film capacitors and large can electrolytic capacitors in drives and

inverters; and the large motor run capacitor markets.

Figure 26: Global Consumption Value for High Voltage Capacitors by Capacitor Type and End-Use Market Segment: 2014

Source: Paumanok Estimates- In Millions of USD




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Competitive Environment in High Voltage Capacitors: 2014

The following chart illustrates the aggregated market share estimates for high voltage capacitor manufacturers worldwide for 2012. The

major vendors have multiple dielectrics within the high voltage range. TDK-EPCOS would be a great example of this. The company

has high voltage ceramic capacitors (TDK) as well as high voltage power film capacitors and high voltage large-can aluminum capacitors

(EPCOS). Other companies with positions in multiple high voltage dielectrics include Vishay Intertechnology and Kemet Electronics.

Other companies with strong positions in single high voltage dielectrics include Nippon Chemi-Con and Nichicon, each of which has

substantial share in large can aluminum electrolytics and minor positions in power film capacitors. AVX Corporation maintains a major

share in the high voltage ceramic capacitor market as well as a minor share in the power film capacitor segment and a major share of

the high voltage glass capacitor market. Shizuki Corp., Nissin Electric, and Panasonic are also major vendors to the high voltage

capacitor segment of the marketplace in 2014.




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Figure 27: Global Market Shares in High Voltage Capacitors: 2014

Dover has spun off their capacitor division into “Knowles Capacitor Group” Source: Paumanok Estimates

TDK-EPC7%

NIPPON CHEMICON6%

AVX6%

NICHICON5%

SHIZUKI5%

PANASONIC5%

VISHAY5%

KEMET4%

NISSIN3%

RUBYCON3%

DOVER3%

ABB CAPACITOR3%

MURATA3%

GE INDUSTRIAL3%

REGAL BELOIT2%

CORNELL DUBILIER/YORK2%

TAIYO-YUDEN2%

OTHER33%




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Global Sales & Market Shares for High Voltage Ceramic Capacitors by Type: 2014

The following chart illustrates our estimates for market shares in high voltage capacitors by vendor and individual dielectric for 2014




94

Figure 28: Global Sales & Market Share Estimates for High Voltage Capacitors by Type: 2014

$2,812 MM USD Market Worldwide - Source: Paumanok Estimates




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APPENDIX K

EEStor Competition and Potential Partners: 2014

The following section of the report illustrates the global competitive environment in the capacitor industry. The reader should note

that capacitor vendors can be large entities with considerable resources. This section is included to provide the reader with guidance

related to prioritizing potential licensing and manufacturing partners for EEStor.

Capacitor Vendors: Global Sales & Market Shares: FY 2013-2014 Paumanok estimates there are 300 individual companies involved in the manufacturing of capacitors worldwide in FY 2014. The

relationship between dielectric revenues and the number of suppliers by dielectric is interesting and implies barriers to entry. There are

more suppliers of film capacitors and aluminum capacitors because the manufacturing technology is based upon winding of dielectrics,

and equipment is readily available at comparatively low cost. Multi-layered ceramic capacitor suppliers are fewer in number because

the technology requires stacking of dielectric and metallization and firing. There are even fewer tantalum suppliers because this is

difficult technology to master effectively, and involved the unique creation of tantalum anodes that require cathode baths or

impregnation, which is a difficult process to master effectively.

Capacitors: Overall Market Share Data and Vendor Strategy: FY 2014

The major global suppliers of each dielectric are listed below. The reader will note that some companies like Kyocera/AVX, Vishay

and EPCOS (now owned by TDK) have broad product portfolios, while other companies such as Murata, TDK and Taiyo Yuden excel

at one single dielectric (it can be argued that they excel at multilayered technology platforms, which is why they also produce chip

inductors and multilayered varistors).

Also, the reader will note that ceramic and aluminum capacitor production is based primarily in the Far East. Plastic film capacitor

production is a Japanese and European phenomenon, and tantalum production is primarily in the USA, Europe and Israel.




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Due to the large number of capacitor vendors worldwide (300) the top suppliers market shares hover around 10% to 15%.

The two top suppliers are Murata and Samsung EMCO, both involved in ceramic capacitor production.

TDK and their purchase of EPCOS AG expanding their capacitor product line into plastic film capacitors and aluminum

capacitors.

Kyocera/AVX with market status in ceramic, tantalum and DC film capacitors;

Panasonic, which has an odd position in the capacitor market, as they had begun to divest themselves of their tantalum and

MLCC lines (sold to Nichicon and Murata respectively), but then expanded their capacitor line through their purchase of Sanyo

(back into tantalum). Now Panasonic has major share position in plastic film capacitors, aluminum electrolytic capacitors and

tantalum capacitors, with technology leadership positions in cutting edge conductive polymer capacitor technology and DC film

chip capacitor technology.

Vishay, with lead market share positions in tantalum (Sprague, Tansitor, Mallory brands), aluminum (BCC Brand), DC film

(Roederstein and BCC brands) and minor positioning in ceramics (Vitramon, Ceramite brands).

Nippon Chemi-Con, which has the largest global share position in aluminum electrolytic capacitors.

Nichicon, with positions in aluminum, tantalum and DC film capacitors.

Taiyo Yuden, which specializes in high CV/g ceramic capacitors.




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Rubycon, which specializes in aluminum capacitors and DC film capacitors.

KEMET, with the number one position in tantalum capacitors and a minor position in ceramics, aluminum and plastic film. In

March 2012, Kemet announced the purchase of NEC –Tokin, which will increase their capacitor revenues by $200-300 million

when the deal is complete in FY 2014, and expand their presence into electromagnetic compatibility components (EMC) and

PZT Components (Piezoelectric) and EDLC supercapacitors, as well as other components and devices.




98

Figure and Graph 29: Top 13 Vendors of Capacitors: FY 2014 Capacitor Revenues & Market Shares




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Murata Capacitors14%

SEMCO Capacitors10%

TDK-EPC Capacitors7%

Kyocera/AVX Capacitors

6%Taiyo Yuden Capacitors

6%NCC Capacitors5%

Nichicon Capacitors5%

KEMET Capacitors5%

Rubycon Capacitors

4%Panasonic/Sanyo

4%

Vishay Capacitors2%

Yageo Capacitors2%

Walsin Capacitors1%

Others29%




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Forecasted Change in Capacitor Market Shares: FY 2013-FY 2014

As we have previously noted, the revenues of the world’s top manufacturers of capacitors have been impacted by the yen to dollar

conversion in FY 2014. The value of the yen depreciated by 20% to the US dollar in FY 2014 (on average), which created a significant

increase in revenues for Japanese capacitor manufacturers, while other major manufacturers in the United States, Korea and China saw

little growth at all. Murata’s capacitor revenues for example, increased by an estimated 20.4% to $2,639 million USD for FY 2014, in

what Murata described as one of the best year’s in the company’s history. Samsung EMCO on the other hand, reported the first decline

in capacitor sales the company has experienced on many years; and what’s more is that both Murata and Samsung EMCO sell the same

exact type of capacitors, which further emphasizes the impact the yen value manipulation had on the passive component industry in FY

2014. Other vendors reporting significant capacitor revenues in FY 2014 was TDK, Taiyo Yuden, Nippon Chemi-Con, and Nichicon,

while Western Vendors, such as KEMET, Vishay and AVX reported stagnant market conditions.




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Figure and Graph 30: Forecasted Change in Capacitor Market Shares by Vendor: FY 2012-FY 2013




102

Source: Paumanok Publications, Inc. March 2014; Yen depreciation impacts market shares




103

Competitive Environment in Ceramic Capacitors: FY 2014 This table illustrates the large number of ceramic manufacturers competing in the global markets in FY 2014. Paumanok has identified

21 key vendors of ceramic capacitors that include the mass producers and those that focus specifically on value-added and application

specific markets. It is one primary conclusion of this research project that companies at the top of this list, are targeting companies at

the bottom of the list for either merger, acquisition or for aggressively pursuing market share. In FY 2014, ceramic capacitors were the

only area where we noted any market growth, with the major vendors of high capacitance MLCC increasing their overall market share

compared with vendors of other dielectrics. However, in 2014, we see a significant shift in favor of sales from the Japanese ceramic

capacitor vendors- Murata, TDK, Taiyo Yuden, who show 20% growth rates in MLCC sales due to the depreciation of the yen to the

US dollar, while Samsung EMCO shows a slight decline in revenues in MLCC sales due primarily as a result of the decline in yen

valuation, which is equivalent to customers getting a 20% price reduction on MLCC sales.

Ceramic Capacitor Manufacturers: FY 2014 Sales & Market Shares The figure below illustrates the large number of ceramic capacitor manufacturers competing in the global markets in 2014. Ceramic

capacitors include MLCC, MLC Axial, MLC Radial, Single Layered Discs, and exotic configurations such as doorknob capacitors,

MLC arrays and low inductance LICA chips. The figure below illustrates ceramic capacitor market shares for 9 ceramic capacitor

manufacturers, and includes the mass producers and those that focus specifically on value-added and application specific markets.

Murata is by far the largest ceramic capacitor manufacturer with 29% revenue share for FY 2014; followed by SEMCO with an 18%

share; TDK with 14% share; Taiyo Yuden with 11% share, Kyocera/AVX with 7% share; Yageo, Walsin, Kemet and Vishay round out

the top nine vendors.




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Figure 31: Ceramic Capacitor Manufacturers: FY 2014 Market Shares


Murata29%

Samsung18%TDK

14%

Taiyo Yuden11%

Kyocera/AVX7%

Yageo4%

Walsin3%

KEMET2%

Vishay2%

Others10%




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Competitive Environment in Tantalum Capacitors: FY 2014 In tantalum capacitors, the top suppliers are primarily from the West, and include KEMET Electronics (production in the USA and

Mexico), AVX (production in the Czech Republic, UK and El Salvador; and recent acquirer of Nichicon’s tantalum capacitor production

facilities in Japan and China), Vishay (production in Israel, and the USA; Vishay owns the Sprague, Tansitor, NACC Mallory,

Arcotronics Towcester and Philips Palm Beach Tantalum capacitor brands; Vishay dominates the value added and application specific

tantalum capacitor market segment). Other major suppliers include Tokin Corp (NEC) with plants in Japan and Thailand (currently

being acquired by KEMET); and Hitachi AIC with production in Japan (Hitachi AIC Tantalum and Niobium Capacitors were purchased

by Holystone of Taiwan in 2010). Other smaller suppliers include Matsuo Electric, Wilson Greatbatch Limited, Samsung EMCO, Rohm

Company Limited, Pure Material Laboratories, Elna Capacitor Corporation/Asahi Glass, Partsnic (DaeWoo), Firadec SA and Xingri

Ningxia Electronics. Tantalum capacitors are available in molded and coated chips; molded axial and molded radial leaded; dipped

radial; metal case and specialty wet designs. Further breakdown is made by cathode system, which can be either manganese or

conductive polymer and this is translated to the speed by which the capacitor releases its charge (ESR).

Tantalum Capacitor Manufacturers: FY 2014 Sales & Market Shares Market shares in tantalum capacitors are in a state of transition. KEMET is acquiring NEC-Tokin, which will solidify their number one

share position in the segment; followed by AVX Corporation which has purchased the Nichicon tantalum operations and effectively

increasing their market share. KEMET and AVX remain the two major vendors of tantalum capacitors with 35% and 26% share post

acquisition; followed now by Vishay with 11% share; Sanyo (owned by Panasonic) with a 10% share, AIC, Rohm, Samsung and many

smaller companies worldwide.




106

Figure 32: Tantalum Capacitor Manufacturers: FY 2014 Market Shares

Source: Paumanok Estimates




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Competitive Environment in Aluminum Capacitors: FY 2014 The top suppliers of aluminum capacitors include Nippon Chemi-Con, Nichicon and Rubycon Corporation, all based out of Japan, but

with production facilities scattered around SE Asia. Nippon Chemi-Con also has a production plant in North America. Matsushita is

also a major supplier and also has plants in Japan, Asia and in North America. Elna, Sanyo, Sun, Samwha, TDK-EP, Nantong Jianghai

and Vishay/BC round out the top suppliers in this dielectric. Chinese vendors continue to increase share in the global market and

affecting overall market shares of the top three suppliers. Panasonic, Sanyo and Nippon Chemi-Con are increasing share because of

investments on solid polymer aluminum capacitors for TV sets, computers and game consoles. Other Suppliers Include Cornell Dubilier,

Nippon Industries, Luxon, Kaimei, Teapo, Partsnic, Lelon, and Kemet/Evox-Rifa. This market is broken into the following sub-

categories- radial leaded; axial leaded, V-chip surface mount, conductive polymer molded chip; screw terminal, snap-mount and

specialty.

Aluminum Capacitor Manufacturers: FY 2014 Sales & Market Shares The aluminum capacitor market is also unique in FY 2014 because its top four manufacturers who control 52% of global production

value, are all Japanese and report in yen. Since the yen to dollar ratio changed so drastically, it had a direct impact on the valuation of

aluminum capacitors included in this report. We have therefore had to adjust our numbers accordingly. The top vendors of aluminum

electrolytic capacitors are Nippon Chemi-Con with 19% share, Nichicon with 16% share, Rubycon with 13% share, Panasonic/Sanyo

with 8% share, and then smaller vendors in Korea and China (SamYoung, Man Yue, SamWha, Aishi and others).




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Figure 33: Aluminum Electrolytic Capacitor Vendors: FY 2014 Market Shares


Nippon Chemi-Con19%

Nichicon16%

Rubycon13%Panasonic

8%

SamYoung7%

ManYue5%

SamWha4%

Aihua (Aishi)

4%

Jianghai4%

Lelon3%

Capxcon3%

Elna3%

Chinsan3%

Others8%




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Competitive Environment in Plastic Film Capacitors: FY 2014 The top suppliers of DC film capacitors (primarily polyester dielectric) include Panasonic of Japan, Kemet-Arcotronics in Italy, Vishay

(with their Roederstein operations and new BCC operations combined), TDK-EPCOS with facilities in Spain and Brazil; WIMA in

Germany, Shinyei-Kaisha in Japan, and Okaya of Japan, but with production facilities in China. In 2008 the full weight of KEMET’s

acquisition of both Arcotronics (Italy) and Evox-Rifa (Finland) materialized in a major share of the global DC film capacitor market

worldwide. Other Major Suppliers Include: Pilkor Electronics, Rubycon, Nichicon and Xiamen Faratronics.

The AC film capacitor market is diverse and fragmented with many global suppliers of small and large can AC film capacitors. The

largest suppliers are involved in power transmission and distribution capacitors for power utility applications and industrial

manufacturing applications for power factor correction. The major suppliers include ABB Capacitor, GE Capacitor and Nissin Electric.

Other important suppliers include Shizuki Electric (Japan), Aerovox, Iskra from Slovenia, Kemet-Arcotronics from Italy, TDK-EPCOS

and Nichicon. Other Major suppliers include Wuxi Power, Zuzhou Power, Frako, Electronicon, Commonwealth-Sprague, Seika Electric,

Franke, Samwha, Myron Zucker, ICAR, Han Sung and many more. A diverse and fragmented market with a substantial amount of

private label agreements between brandname companies and offshore production in India.

For 2013 we combined our market share data for DC and AC film capacitors for this report as is shown below.




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Plastic Film Capacitor Manufacturers: FY 2014 Sales & Market Shares

Figure 34: Plastic Film Capacitor Manufacturers: FY 2014 Market Shares (Includes both AC and DC film capacitors)

Source: Paumanok Publications, Inc. THE PLASTIC FILM CAPACITOR MARKET IS VERY FRAGMENTED DUE TO EASE OF MARKET ENTRY (I.E. WINDING MACHINES ARE VERY INEXPENSIVE COMPARED TO PRODUCTION MACHINES FOR OTHER DIELECTRICS) AND THEREFORE THERE ARE MANY SMALL VENDORS IN ALL REGIONS OF THE WORLD.

Panasonic9%

KEMET8%

TDK-EPC7%

Vishay5%

ABB Capacitor

4%

Shizuki Electric

3%

AVX3%

Cooper Power3%

Hua Jung (HJC)2%

Others56%




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APPENDIX L

Introduction to Ceramic Dielectric Materials Markets

Ceramic dielectric materials are used primarily in ceramic capacitors, including multi-layered ceramic chip capacitors (MLCC), radial

leaded ceramic capacitors, axial leaded ceramic capacitors and single layered disc ceramic capacitors. Additional ceramic dielectric

material markets include ceramic PTC thermistors, high frequency ceramic filters and LTCC components and substrates.

Ceramic dielectrics encompass the dielectric layer that forms capacitance in a ceramic chip capacitor. The dielectric layer is either

stacked (MLCC), rolled (MLC Leaded), or pressed (Single layered ceramic), but 90% of all ceramic dielectric materials go into the

1500 billion piece global MLCC market (1.5 Trillion Pieces).

Scientific Maxim #1: Capacitance & Surface Area:

One primary scientific maxim associated with electronics is that capacitance is equivalent to the physical size of the finished product or

the total available surface area of the dielectric material. Ceramic capacitors accomplish this through stacking dielectric layers; tantalum

capacitors, which are the primary target of high capacitance ceramics (a significant topic within this study) accomplish this by creating

a porous tantalum anode; aluminum capacitor manufacturers accomplish this by rolling up sheets of etched foil (whereby the surface

area is actually roughed into the foil through the electrolytic process), and DC film capacitor manufacturers accomplish this by rolling

up metallized film.

Why Ceramic Capacitors Are So Economical:

Ceramic capacitors have the lowest cost of goods sold when compared to the other types of capacitors mentioned above because the

primary cost of goods sold- the ceramic dielectric material is much lower in price per pound in comparison. This is accomplished by

employing low cost precursors (i.e. barium compounds and titanium dioxide) and massive economies of scale (i.e. ceramic capacitors




112

account for about 93% of all capacitor units produced worldwide by type: and this massive volume is one of the largest piecework

projects known to man, rivaled only by medicine (i.e. pills) and nails, nuts and bolts combined. All capacitor types other than ceramic

are considered niche.

Thus, demand for barium titanate ceramic is enormous and is sourced from either the merchant market, or produced captively by the

ceramic capacitor manufacturers from barium compounds and titanium dioxide, or similarly low cost ceramic precursors and additives

such as calcium, zirconium, yttrium and neodymium.

Thus any increases in capacitor technology will come in the form of a change in the manipulation or engineering of the respective

ceramic, tantalum, aluminum or film dielectrics. In terms of technology spending and research and development in the industry, the

largest amounts of dollars being expended are in ceramic dielectric materials. The driving force is the value added global market for

capacitors between 1 and 1,000 µF, where there are fewer components on the board, but represent the components with the greatest

average unit pricing, and the best profit margins (ceramic capacitors are applicable up to 100 microfarads, although ceramic capacitor

manufacturers in Japan have suggested that higher capacitance products in the 220 microfarad, 330, microfarad and even 470 microfarad

are possible in the future).

The financial attraction of the technical advancement of capacitance is as follows-As the capacitor manufacturer excels in technology

by increasing capacitance value per cm3 of dielectric material, it limits the initial competition and can reap huge benefits for a company

over an extended period of time.

Global Market Size and Five Year Forecasts:

The global market for ceramic dielectric materials was an estimated 50,338 tons for 2014 FY. The market has grown from 15,170 tons

in 1999. The total value of consumption for ceramic dielectric materials was $1,045 million in FY 2014. The value of shipments reflects

supply from the merchant market and captive production of ceramic dielectric materials, including barium titanate and formulations.




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Average Price per Ton for Ceramic Dielectric Materials: FY 1999-FY 2012 (In USD):

Pricing for ceramic dielectric materials was in the $20,000 per ton range from 1999 to 2005 as erosion of price in the solid state dielectric

materials business was offset by higher priced materials for high capacitance ceramic chip capacitors which were manufactured using

expensive oxalate, hydrothermal or sol-gel processes. However, the advances in oxalate technology enabled this process to be more

readily used in higher capacitance applications, which eroded price. Also, the ability to create consistent nano-particles became easier

and the yields improved, further driving down prices. The price per ton in 2014 is an average of $22,060.

Captive versus Merchant Markets: Description:

The following paragraphs describe the difference between captive and merchant markets for ceramic dielectric materials. The end-

result of both markets is a ready-to use ceramic formulation that can be loaded into the production cycle to produce ceramic capacitors.

The building blocks required for ceramic dielectric materials are the barites and titanium feedstocks which are converted into high purity

barium carbonate and titanium dioxide. This is where the path separates into captive and merchant supply and the supply chain becomes

intertwined with various players. The high purity barium carbonate and titanium dioxide is sold to third party barium titanate producers,

or directly to the capacitor manufacturers who mix their own barium titanate in-house (captive). In most instances however, the ceramic

capacitor manufacturers only have the capability to manufacture basic “solid state “barium titanate and do not possess the investment in

nano-technology particle precipitation available from the merchant vendors (Murata is an exception to this as they have an advanced in-

house process to produce most of their own barium titanate) which is required to produce high capacitance MLCC. The merchant

vendors who produce their own barium titanate have also vertically integrated into chemistry to produce their own ceramic formulations

to be sold to the capacitor manufacturers. Still in other instances, ceramic capacitor manufacturers purchase barium titanate and then

buy additives to produce their own formulations in house. Each step is another layer of economic value for the supply chain, and the

capacitor manufacturer tries to balance out costs to produce with the best technology available on the market. The following is a more

detailed explanation of the various intertwining levels of the ceramic dielectric material supply chain.




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Captive Market for Ceramic Dielectric Materials: 2014

The captive market is of great importance as well, as the world’s largest MLCC manufacturer, Murata Manufacturing of Japan, produces

their own ceramic dielectric materials from purchased high purity barium carbonate and titanium dioxide from the high purity vendors

of those key feedstock materials. In fact, almost all of the major manufacturers of ceramic capacitors produce a percentage of their

ceramic dielectric materials captively. Thus the merchant market suppliers (Ferro, Sakai, Nippon Chemical, MRA Labs) compete

against each other and against the continued movement of their customers away from merchant market supply to captive capabilities.

However, as our research has shown that even though both the merchant and captive markets for ceramic dielectric materials has grown

since 2008 due to the massive increase in demand for ceramic capacitors, that the merchant market is growing faster than the captive

market. This is because as more vendors of capacitors begin to produce higher capacitance MLCC in larger volumes they must outsource

more ceramic dielectric materials from the merchant market because of the merchant market capability to produce advanced nan-particle

barium titanate. Thus in 2014 the captive market is about 30% of the ceramic dielectric materials market and the merchant market is

about 70% of the global market.

Captive Market: A Description Of Ceramic Dielectric Materials Produced:

The captive market for ceramic dielectric materials is ultimately 100% formulation material (X7R dielectric, COG Dielectric, X5R

Dielectric, Y5V Dielectric, and a variety of miscellaneous dielectrics) before it is turned into green tape for production of capacitors and

related components.

Why Companies Produce Ceramic Dielectric Materials Captively:

There are multiple reasons why ceramic capacitor manufacturers produce their own ceramic dielectric materials captively. The primary

reason however is cost savings. The capacitor manufacturer who does not have to pay the merchant vendor markup on their raw material

purchases has a competitive advantage over the competition. Technology is also an important factor. Some manufacturers believe that

their ability to mix their own formulations or make their own barium titanate to their specifications results in a higher quality product

on a consistent basis. However, it is important to note from the data in this study that in the processing of barium titanate that many

merchant vendors have more advanced nano-material processes than the ceramic capacitor manufacturers do captively. Therefore, for




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high capacitance ceramic chip capacitors, many capacitor manufacturers source such companies as Sakai or Nippon Chemical Industrial

who employ the Hydrothermal, Oxalate or sol-gel processes when producing their powder.

Captive Market: Barium Titanate:

The captive capabilities of manufacturers of ceramic components to produce their own powders differs. Many have the capability to

produce their own barium titanate from purchased barium carbonate and titanium dioxide. Invariably, the same customers who have

the ability to produce their own barium titanate also have the ability to mix their own formulations through purchased additives. Thus,

Murata Manufacturing would produce their own barium titanate from their captive, state-of-the-art oxalate process and then put additives

into the mix to produce their own formulations.

Captive Market: Formulations:

Ceramic capacitor manufacturers and PTC thermistor manufacturers who have the capability to produce their own barium titanate, also

have on-staff scientists who can produce formulations (as noted above- X7R, X5R, Y5V, COG, etc.,) from purchased additive materials.

Captive Market: Additives:

Additive materials are typically purchased by the ceramic component manufacturers directly from the merchant market. The additives

business is where companies like Ferro Corporation maintain total access to the market including sales to the merchant vendors of

formulations and the ceramic capacitor manufacturers themselves. The additives business, which includes most of the rare earth

additives (i.e. neodymium, etc.) has the largest potential number of customers and the greatest potential for profitability of all the ceramic

dielectric materials. These are low volume, high value additives.

Captive Market for Ceramic Dielectric Materials: Production Volumes:

Paumanok estimates that captive production capabilities for ceramic dielectric materials will be approximately 14,180 tons (avoirdupois

weight) in FY 2014. This represents about 30% of the market. What this means is that about 14,180 tons of barium titanate is produced

captively by the ceramic capacitor manufacturers from purchased barium carbonate and titanium dioxide and then converted into a

formulation before being manufactured into a capacitor body. Murata is the largest captive producer of barium titanate. Many of the




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other captive producers employ a solid state process for low picofarad type ceramic capacitors, while purchasing their nano-particle

barium titanate from the merchant market for their high capacitance ceramic chip capacitors, which require greater surface area and

therefore smaller, more precisely controlled particle sizes. The corresponding merchant market value of this material is approximately

$335 million USD, so the cost savings can be significant.

Merchant Market for Ceramic Dielectric Materials: 2014

The merchant market for ceramic dielectric materials will account for an estimated 33,185 tons of material sold in 2014, or 70% of the

total volume of material sold to manufacturers of ceramic capacitors and PTC thermistors.

Merchant Market: A Description Of Ceramic Dielectric Materials Produced:

The merchant market includes sales of barium titanate, formulations and additives and is a key focus of this study.

Merchant Market: Barium Titanate:

The barium titanate portion of the merchant market for ceramic dielectric materials has grown in accordance with demand for nano-

powders produced using oxalate, alkoxide, hydrothermal or sol-gel advanced processes. Traditionally, the merchant market has been

based solely on solid-state type barium titanate, but the need for high capacitance ceramics caused the merchant market to grow. Barium

titanate purchased by the ceramic capacitor manufacturers is further mixed with additives to produced formulations captively.

Merchant Market: Formulations:

Formulations sold from the merchant market directly to the captive manufacturers include X7R, X5R, Y5V and NPO/COG type

formulated materials. Merchant vendors such as Ferro Corporation continue to enjoy a substantial share of sales of formulations to the

global ceramic capacitor industry. In many instances, formulations are sold because the customer cannot produce these powders

captively, or because the technology associated with the merchant market formulation is better than can be produced captively. The

majority of formulations sold are NPO type materials using solid-state technology.




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Merchant Market: Additives:

Additives are sold from the merchant market to 100% of the ceramic capacitor manufacturers, because even additives are required to

produce final formulations. This is a key access point for merchant market vendors of ceramic dielectric materials such as Ferro

Corporation, who have historically dominated the global additives business for ceramic dielectric materials.

Figure 35: Merchant versus Captive Market For Ceramic Dielectric Materials: FY 2012


Merchant Market

70%33,185 Tons

Captive Market

30%14,180 Tons




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Merchant Market Reliance; and Captive Production of Ceramic Dielectric Materials by Ceramic Component Manufacturer:

2012 FY

The following table illustrates the major customers for ceramic dielectric materials and the respective outsourcing to the merchant

market. Primarily the materials purchased from the merchant market are for advanced barium titanate, formulations and additives.

Products produced captively include barium titanate (mostly solid state materials, except in the case of Murata, who produces their own

advanced BT powders in-house (captive).

Ceramic Dielectric Material Consumption by Capacitor Manufacturer: Merchant versus Captive: FY 2014 Estimates

The following table is an estimation based upon primary research of ceramic dielectric material consumption by major ceramic

capacitor producer in both the merchant and captive markets.




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Figure 36: Ceramic Dielectric Material Consumption by Capacitor Manufacturer: Merchant versus Captive: FY 2012 (In

Tons)


Regional Consumption of Ceramic Dielectric Materials: FY 2014 (In Tons):

The following chart illustrates our estimation of ceramic dielectric material consumption by world region. This table illustrates point of

sale for the ceramic dielectric materials, not the point of consumption. For example, ceramic dielectric materials will be sold to a

centralized point in Japan before it is distributed to the satellite ceramic capacitor factories in Philippines, Singapore, Thailand, etc.,




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Figure 37: Ceramic Dielectric Material Consumption by World Region: FY 2014


Global Merchant Market for Ceramic Dielectric Materials by Type (Barium Titanate, Formulations and Additives): FY 2014

The global merchant market for ceramic dielectric materials in FY 2014 was worth an estimated $710 million USD, with barium titanate

material sales accounting for $374 million, or 53% of consumption, formulations (X7R, NPO, Y5V, Z5U, etc.,) accounting for $277

million USD worldwide, or 39% of consumption value, and additives, with a market value of $59 million, or 8% of total consumption

value in FY 2014.




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Figure 38: Merchant Market Supply of Ceramic Dielectric Materials by Type: (Barium Titanate, Formulations and Additives:

FY 2014

*Formulations are also called Compositions in this report and include “ready-to-go” ceramic dielectric materials in many various types of dielectrics depending on the purpose and application of the components. NPO (Precision/Telecom); X7R (General Purpose Professional); Y5V (Consumer); and then variations, such as X5R for high capacitance; and X8 series for high temperature (Auto).

Barium Titanate

53%$374 MM USD

Formulations (COG, X7R, X5R, Y5V*)

39%$277 MM USD

Additives8%

$59 MM USD




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Profitability Index by Segment (Barium Titanate, Formulations, Additives):

Additives Business Segment:

It is important for the reader to remember that the greatest profits are found in the lowest volume products, and these include the additives

business. This is where Ferro Corporation makes the majority of its profits, based upon Paumanok estimations and interviews. Volumes

are exceedingly small, but profitability is substantial because of minimum purchase requirements. This is important to understand for

sales persons of materials. Paumanok estimates that Ferro maintains an 18% share in this segment and has experienced significant

pressure from indigenous Chinese sources in the market as well. Solvay Chemicals is also a key supplier of strontium materials into the

market; and KCM Corporation, Fujia Titanium and Toho Titanium also supply additives into this segment. Additives are purchased by

both the ceramic capacitor manufacturers and the formulation producers.

Formulations Business Segment:

Formulations are obviously the other area of extreme interest because this is where the combination of value and volume combine. This

is the level where the market is created so knowledge for vendors and consumers is critical. Successful formulations, such as TAM and

Transelco brands have been used by many different vendors throughout the world for many years, which enhances the Ferro brand

image in the factory location. The Toho specialty titanium dioxide line is included here because it is a specially engineered titanium

material for high capacitance MLCC and is a directed product line. Other major vendors of formulations include prosperity Dielectrics

(PDC) which is owned by Walsin Technology Corp., Fuji Titanium, MRA Labs, SinoCera and others.

Barium Titanate Business Segment:

Barium Titanate markets are the least profitable, unless of course you produce nano-materials for high capacitance MLCC development

and expansion, then you compete against technology platforms defined by oxalate (JCI), or hydrothermal precipitation of ceramic

spheres (coated or uncoated for better dispersion). Solid state barium titanate is a market of the past, unless it is formulated specifically

for high voltage or ultra-high frequency precursors. Sakai Chemical and Nippon Chemical Industrial dominate the barium titanate

business worldwide. Each company does well in selling specialty formulated barium titanate for consumption in high capacitance




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ceramics. Other barium titanate vendors are small in comparison and include KCM Corporation, Fuji Titanium, Ferro Corporation,

SinoCera, PDC and Others.

Competitive Environment in Ceramic Dielectric Materials: FY 2014

The following chart illustrates some of the top players in the ceramic dielectric material supply chain and what parts of the fragmented

market they compete in. Many companies compete just in barium titanate, but also compete in formulations and additives; while others

just compete in barium titanate and are not vertically integrated into the production of formulations.




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Figure 39: Competitive Environment in Ceramic Dielectric Materials by Type: FY 2014

Source: Paumanok




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Ceramic Dielectric Material Vendors: Overall 2014 Sales & Market Shares

Ceramic Dielectric Materials: Market Shares: 2014

The three primary vendors of ceramic dielectric materials to the global electronics industry in terms of dollar value revenues are Sakai

Chemical (27% share); Ferro Corporation (17% share), TOHO Titanium (12% share) Nippon Chemical Industrial (10%) share and KCM

Corp (Kyoritsu-10% Share). The other major vendors include Fuji Titanium, Prosperity Dielectrics, SinoCera, MRA Labs and

Sukygung AT.

These manufacturers supply ceramic dielectric materials for the ceramic capacitor and PTC thermistor markets and operate in the

merchant market sector only. The reader will note that the market is disjointed. Sakai and JCI largely supply barium titanate which is

mixed into formulations at the capacitor manufacturer. Ferro Corp. largely supplies formulations to the ceramic capacitor market from

captively produced barium titanate. TOHO Titanium is the odd man out because they supply a unique titanium formulation for use with

high capacitance MLCC. Prosperity supplies barium titanate to the merchant market but also consumes their own barium titanate to

make formulations. SinoCera also follows the same business model. MRA on the other hand only produced formulations. The market

is highly fragmented and there is overlap between tiers.




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Figure 40: Ceramic Dielectric Material Vendors: FY 2014 Global Market Shares (All Materials Combined)

Source: Paumanok Publications, Inc. Based upon company reports and Paumanok’s internal estimates. (Based upon Revenues in Millions of USD}

Sakai Chemical27%

Ferro Corp.17%

TOHO Titanium12%

Nippon Chemical Industrial

10%

KCM Corporation (Kyoritsu)

10%

Fuji Titanium7%

Prosperity Dielectrics

6%

Sinocera3%

MRA Labs2%

Sukgyung AT1%

Others5%




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Ceramic Dielectric Formulations: Global Market Overview: FY 2014

Definitions:

Formulations, or “compositions” of ceramic dielectric material are the final step in the conversion of barium titanate into a usable

product for the capacitor and thermistor manufacturers to consume. Formulations are available in a myriad of chemical recipes, but

the most popular are the X7R, X5R, COG, Y5V, Z5U and X8R. These terms also comply with the terminology for the finished

capacitor and ultimately determine the capacitor performance level with respect to capacitance change with temperature.

Captive Consumption of BT In Formulations:

Barium-titanate is manufactured in the merchant market (Ferro) for consumption internally in formulated NPO, X7R, Z5U and Y5V

dielectric materials and variations thereof (such as X5R and X8R for example). Ferro Corporation dominates the global merchant market

for formulated dielectric materials, and is also the world’s largest supplier of additives to their MLCC customers who wish to produce

their own formulations in house.

Ferro manufacturers its own barium titanate, of which, about 85% is consumed captively in their production of formulations. Thus,

Ferro has been successful at converting their barium titanate into formulations and selling the formulations to major MLCC

manufacturers across the globe. In each instance an MLCC manufacturer views the Ferro formulated dielectric material as either

superior to their own, or that provides an added benefit not found in the dielectric materials produced captively by the MLCC company.

Other major producers of formulations include Fuji Titanium, KCM Corp., Toho Titanium and Nippon Chemical Industrial. But

Ferro dominates the merchant market for formulations. It is not uncommon for Ferro Corporation to supply 100% of all formulation

material requirements to smaller MLCC customers in Taiwan and China who have limited access to quality materials, or the captive

capability to manufacture their own materials to produce MLCC with required specifications for the local high-tech economy in Asia.

Throughout Taiwan, Korea and China there are symbols of Ferro materials in almost every single MLCC manufacturer, and Ferro is




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credited with building the South East Asian MLCC business. Formulations have a 100% to 150% mark-up over solid-state barium

titanate, which is a good rule of thumb for mark-ups within the raw material sector.

The X7R/X5R Formulations Market:

The merchant market for X7R and related materials (X5R for high capacitance MLCC versions) is the larger global market, and where

most interest among Asian suppliers in China, Taiwan and Korea have the largest interest. Paumanok estimates the global merchant

market for X7R and related formulations at $122 million USD worldwide in FY 2014. Paumanok estimates Ferro’s global market share

in X7R formulations at 60% worldwide, a position that was boosted by their acquisition of DMC2. MRA Labs is also a significant

player in this segment of the market, supplying primarily under direction of the large North American dielectric material suppliers

(Kemet and AVX). MRA has also made significant inroads into Asia by acquiring key personalities in the industry who have access

to global accounts through their long- term relationship with the industry. Sales and success in the entire supply chain for passive

components is about whom you know, and whom you have access to. Technology and quality is therefore assumed in the product,

because the personality or individual representing the powder is in good standing. Paumanok estimates that relationships account for

70% of worldwide sales for all materials and components in the passive component industry with the remainder representing sales to

distribution, where direct access is lost in a myriad of Internet sales and local distribution networks and representatives.

The COG Formulations Market: FY 2014

The merchant market for the COG portion of the formulations business (which correlates with the NPO MLCC Business) is worth $83

million worldwide for FY 2014, of which Ferro dominates about 75% market share globally (their market share increased slightly with

their purchase of DMC2). Fuji Titanium also makes an excellent NPO formulation, as does MRA Laboratories. And they would

account for the remainder of the market. NPO formulations are an area where the Korean chemical suppliers can attain markets share,

especially SFC (Samsung Fine Chemical), and Han Wha; both of whom are active in the dielectric materials business since 2003.

This is where both Ferro and MRA have also introduced Ultra-Low Fire dielectric NPO formulations. The technical-economics of the

marketplace warrant a market for materials that can be used in low layer count NPO dielectrics, where nickel electrodes are not practical,

and palladium+silver electrodes are still used in large quantities (300,000 Toz Pd estimated). The ULF NPO market has caught the eye




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of many MLCC suppliers, with emphasis upon Vishay-Vitramon; AVX Corporation, ATC. and Johanson, among others. ULF NPO

materials is a growth business, and will respond to increases in palladium prices, which are historically valuable metal with respect to

price per Toz.

The Y5V Formulations Market: FY 2014

Merchant market sales of Y5V formulations are almost exclusively an Asian business in terms of point-of-sale. Y5V capacitors have

high capacitance, and were the area where the Japanese focused their efforts to displace palladium back in 1993 (efforts have been about

100% successful by 2012). The transformation of the MLCC market in this segment grew the market for Y5V formulations for nickel

(BME) electrode MLCC. Paumanok estimates the global market for Y5V formulations at $58 million USD in 2012, with Fuji Titanium

controlling about 50% of the market, and Ferro controlling (25%) and KCM Corp. controlling the remainder. This segment of the

market is also susceptible to penetration by ULF type materials from Ferro and MRA. Ferro’s TAM Ceramics business has offered

their XL103 and 183U product lines in this segment for years; and the TAM business unit had really pioneered its use in Asia, along

with Ferro Transelco’s Y5V173L materials. But Fuji Titanium’s 153L series material has always dominated the majority of this

business in Asia. Yageo, Walsin, Team Young, Prosperity, Pan and Pan Overseas Generally, in most major Taiwan accounts, such

as a significant amount of Fuji and Ferro Y5V formulations are consumed.




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Figure 41: Global Merchant Markets for Formulations by Type (COG, X7R/X5R, Y5V, Other): FY 2014


Ceramic Dielectric Formulation Suppliers to the Global Merchant Market: FY 2014 Estimated Market Shares Worldwide

Paumanok estimates that the major vendors of formulations include Ferro Corporation with 33% market share, followed by TOHO

Titanium with 27% share; Prosperity Dielectrics with 13% share, KCM Corp with 10% share, Fuji Titanium with 7% share, MRA Labs

with 5% share, SinoCera with 3% share and other Chinese vendors with 2% share. Between 2008 and 2014 primary sources reported

COG Formulations

30%$83 MM USD

X7R/X5R Formulations

44%$122 MM USD

Y5V Formulations

21%$58 MM USD

Other Formulations

5%$14 MM USD




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that Ferro Corporation discontinued some of the dielectric product lines to focus specifically on those lines that were profitable for the

company. This gave other vendors the opportunity to increase share in the formulations space.

Figure 42: Ceramic Dielectric Formulation Suppliers to the Global Merchant Market: FY 2012 Estimated Market Shares


Ferro Corp.33%

TOHO Titanium27%

Prosperity Dielectrics

13%

KCM Corp.10%

Fuji Titanium7%

MRA Labs5%

Sinocera3%

Others2%

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