1. Technological Development in the Connector Industry
Connectors are components that connect electrical circuits. They mainly serve to provide electrical connections and signal transmission between devices and components, between components and cabinets, and between systems and subsystems. They also prevent signal distortion and energy loss between systems. The quality of connectors is related to the overall reliability of the system equipment. They are an important supporting product for mainframe manufacturers, and their technical characteristics are greatly affected by the technological development of downstream industries.
A complete connector product generally goes through three processes: design, manufacturing, and packaging/assembly. The design must consider factors such as resistance, pin configuration, and insertion/removal forces. Manufacturing typically involves mold development and design, stamping, injection molding, electroplating, and assembly. During assembly, the quality of the components must be considered to ensure the reliability and stability of signal transmission, including current.
Therefore, connector manufacturing technology includes diverse technologies such as terminal (contact) manufacturing, mold manufacturing, plastic molding, surface treatment, wire manufacturing, assembly and inspection, and testing. With the development of downstream industries such as computers and peripherals, automobiles, communications, industry, aerospace/military, and medical, the overall development of connectors is moving towards miniaturization, high density, high frequency, and high power.
2. Basic Characteristics of the Connector Industry
① Connector Overview
Connectors are crucial nodes in information transmission and conversion. They are devices used to connect conductors in one circuit to conductors in another circuit, or one transmission element to another. Their function is to enable the connection and disconnection of wires, cables, printed circuit boards, and electronic components, thereby transmitting signals and exchanging information. A basic connector can be structurally divided into contacts, insulators/bases, housings, and accessories.
Among them, the contact is the core component, consisting of a positive contact and a negative contact. Both the positive and negative contacts are generally made of brass or phosphor bronze. The insulator/base ensures the insulation performance between the contacts and between the contacts and the housing. The material requires good insulation resistance, voltage withstand performance and easy processing. The housing provides mechanical protection for the internal insulating mounting plate and pins. The accessories are divided into structural accessories and mounting accessories.
As a fundamental electronic component, connectors must not only meet basic performance requirements and be compatible with various connected components, but also satisfy the increasingly demanding requirements of customers in different fields regarding product quality, stability, size, and cost. The technical specifications of connectors mainly include three categories: electrical characteristics, mechanical characteristics, and environmental resistance characteristics.
② Characteristics of the connector industry
The upstream industries of connectors mainly consist of various raw materials such as metals and plastics, while the downstream industries are widely distributed across fields such as computers, automobiles, communications, consumer electronics, aerospace, and military, serving customers in multiple industries. It has the following industry characteristics:
A. Connectors grow in tandem with downstream industries.
Connectors are the connecting bridges in electronic circuits, essential basic electronic components that make up the entire electronic equipment. The technological innovation and manufacturing standards of connectors naturally adapt to the development of downstream industries. When downstream markets place higher demands, connector standards will also rise; when the size of downstream markets changes, the demand for connectors will increase or decrease accordingly. It can be said that the connector market is a reflection of the changing trends in downstream markets.
B. Connectors are customized products.
Connectors primarily emphasize contact impedance, mating cycles, and environmental adaptability. Connectors have a low degree of standardization, a very wide range of combinations, and are highly customizable. Therefore, most connector products are developed in collaboration with customers, with designs tailored to their specific needs.
C. High stability requirements, with certain technical barriers.
Connectors serve as the hub connecting various electronic components, requiring high stability. This is primarily because connectors are generally used at the intersection of two electronic components, where they are subject to greater impact and friction than other parts. Secondly, connectors also play a crucial role in protecting core components from external dust, temperature, and radiation interference. This necessitates manufacturers to invest heavily in research and development to ensure connector stability and maintain high yield rates. Consequently, the connector industry has a certain technological threshold.
3. Overview of the Connector Industry
(1) Overview of Global Connector Development
In recent years, benefiting from the continued development of downstream industries such as new energy vehicles, data and communication, computers and peripherals, and consumer electronics, the global connector market demand has continued to grow. According to statistics from Bishop & Associates, the global connector market size has grown from US$55.402 billion in 2014 to US$77.991 billion in 2021, with a compound annual growth rate of 5.01%. The global connector market size in 2021 increased by 24.30% compared to 2020.
In terms of market application distribution, connectors can be categorized into several major sectors, including automotive, communications and data transmission, computers and peripherals, industrial, transportation, military and aerospace, and consumer electronics. In the global connector market of 2021, connectors for communications and data transmission, automotive, computers and peripherals, and industrial sectors accounted for a significant proportion, representing 23.5%, 21.9%, 13.1%, and 12.8% of the market share, respectively.
In terms of market regions, according to statistics from Bishop & Associates, the global connector market in 2021 was mainly distributed in China, Europe, North America, and Asia Pacific (excluding Japan and China). China accounted for 32.0% of the market share, Europe accounted for 20.9%, North America accounted for 21.1%, Asia Pacific accounted for 14.6%, and Japan accounted for 6.8%. These five regions together accounted for 95.4% of the global connector market share.
(2) Overview of the development of connectors in China
In recent years, with the continuous advancement of the information technology wave, my country's information technology construction has developed rapidly and its scale has jumped to the forefront of the world. Significant progress has also been made in quality and technology, with emerging industries such as smartphones, communication equipment, and drones having a particularly significant impact. Connectors, as fundamental components for realizing information technology, have benefited from the continuous expansion of investment in information technology construction.
According to data from Bishop & Associates, from 2014 to 2021, the size of China's connector market grew from US$14.95 billion to US$24.978 billion, with a compound annual growth rate of 7.61%, higher than the global growth rate of 5.01% during the same period. From 2014 to 2021, China's share of the global connector market increased from 27.5% to 32.0%, making China the world's largest connector consumer market.
As China's economic transformation and structural adjustment accelerate, the manufacturing industry is reaching a new critical juncture for development. New demands for equipment, new consumer demand, new needs for people's livelihoods, and new national security requirements all necessitate a rapid upgrade in the manufacturing sector's technological level and manufacturing capabilities. Continuously stimulating the vitality and creativity of the manufacturing industry and promoting its transformation and upgrading have become important national strategies. With the transformation and upgrading of domestic manufacturing, the Chinese connector market will continue to experience rapid and sustained growth in both scale and depth.
4. Major barriers to entry into the connector industry
(1) Technological barriers
Connectors are components used to connect electrical circuits. Their primary function is to provide electrical connections and signal transmission between devices and components, components and cabinets, and systems and subsystems. They also ensure that signal distortion and energy loss do not occur between systems. The quality of connectors directly affects the reliability of the overall system equipment operation. As a crucial component for OEMs, their technical characteristics are greatly influenced by the technological development of downstream industries. A complete connector product generally involves three processes: design, manufacturing, and packaging/assembly. Design must consider factors such as resistance, pin type, and insertion/removal forces. Manufacturing typically involves mold development and design, stamping, injection molding, electroplating, and assembly. Assembly must consider the impact of quality on the reliability and stability of signal transmission, such as current.
Connector manufacturing technology encompasses a diverse range of techniques, including terminal (contact) manufacturing, mold making, plastic molding, surface treatment, wire manufacturing, assembly and inspection, and testing. With the development of downstream industries such as computers and peripherals, automobiles, communications, industrial applications, aerospace/military, and medical devices, connector development is generally trending towards miniaturization, high density, high frequency, and high power. To maintain technological leadership and product competitiveness, manufacturers in the industry need to continuously invest in the development of new technologies and products, thus creating high technological barriers for potential market entrants.
Miniaturization and Integration: The future trend for electronic connectors is towards smaller size and greater integration. As electronic devices shrink in size and increase in functionality, connectors need to become smaller to fit into more compact designs. Furthermore, the integration of connectors with other electronic components will also be a trend to reduce space footprint and improve connectivity.
High-speed data transmission: With the rise of applications such as big data, high-definition video, and virtual reality, future connectors need to provide higher-speed data transmission capabilities. For example, high-speed connector standards such as USB 4 and Thunderbolt 4 have emerged and are expected to develop further to meet the growing data demands.
High-density and multi-port designs: As electronic devices become increasingly versatile, they require the connection of more devices and sensors. Future connector trends will move towards high-density and multi-port designs to provide more connectivity options and greater flexibility.
High reliability and durability: In harsh environments such as industrial, automotive, and aerospace, the reliability and durability of connectors are crucial. Therefore, future connectors will continue to improve their dustproof, waterproof, vibration-resistant, and shock-resistant properties to adapt to use in a variety of harsh conditions.
Flexibility and pluggability: Future connectors will offer greater flexibility and pluggability to adapt to diverse application needs and interconnectivity between devices. For example, new technologies such as flexible connectors and magnetic connectors have emerged, featuring bending and detachability, providing designers with greater freedom.
Compatibility and Standardization: As the need for interconnectivity between different devices and systems increases, connector compatibility and standardization become more important. Developing and adhering to unified connector standards will help improve interoperability between devices and reduce compatibility issues.
Connector industry development trends, opportunities, challenges, market size forecast, and prospects.
1. Industry Development Trends
(1) Improved connector performance and reduced size
The development of application areas for connector products has a significant impact on industry trends. In response to the needs of downstream applications, connector technology is evolving in different directions. Taking communications, industrial control, and medical fields as examples, in the communications sector, with the increase in data traffic and data transmission speeds, communication connectors are developing towards higher speeds and frequencies, as well as miniaturization and higher reliability. Mobile communication technology has gradually transitioned from 4G to 5G, with transmission speeds becoming much faster. 5G networks can achieve data transmission rates of up to 10Gbps, 100 times faster than 4G LTE cellular networks. The greater bandwidth required for data transmission has also led to a continuous increase in the upper limit of signal frequencies, which has driven the improvement of transmission rates and frequencies for related communication connectors. Communication environments involve numerous electronic components and have limited cabinet space. During operation, interference can occur with other surrounding electronic products, affecting data transmission. Therefore, communication connectors need to improve reliability, reduce electromagnetic interference during information transmission, and reduce size to save cabinet space and lower costs.
In the field of industrial control, on the one hand, industrial environments typically involve dust, dirt, and other corrosive substances, as well as vibration and shock. This necessitates industrial control connectors with a high degree of reliability to adapt to complex and harsh application environments. Furthermore, automated equipment needs to operate for extended periods to ensure production efficiency, and the stability of automated production lines significantly impacts product yield. Therefore, the long-term stability of connectors plays a crucial role in the normal operation of automated equipment. On the other hand, the size requirements for industrial control connectors are also gradually increasing. General-purpose board-to-board connectors for industrial control equipment have transitioned from 2.54mm, 2.0mm, and 1.27mm pitches to smaller pitches such as 1.0mm, 0.8mm, 0.635mm, 0.5mm, and 0.3mm, greatly reducing the space occupied by the connectors.
(2) Increased demand for connector customization
With the increasing prevalence of downstream applications, the demand for connectors is gradually increasing, leading to higher requirements in terms of functionality, structure, and size. To meet the needs of downstream application manufacturers, connectors are evolving from standardized products to customized products. Therefore, connector manufacturers need to improve their customized production capabilities by strengthening design capabilities, improving product quality, reducing customization costs, and shortening customization production time. Against this backdrop, connector manufacturers are required to possess customization service advantages throughout the entire product manufacturing process, and to quickly realize the personalized requirements of downstream application manufacturers for performance, structure, and appearance through modular design and flexible manufacturing, achieving small-batch, rapid delivery capabilities to gain a larger market share.
(3) Modularization and integration of electronic components
The trend of miniaturization and intelligence in equipment in fields such as wireless communication, servers, data storage, new energy, and medical devices has driven a surge in the number of electronic components, while also promoting the modularization and integration of electronic components. Consequently, the modularization and integration of connection solutions have gradually increased, placing comprehensive demands on the current carrying capacity, high-speed and high-frequency transmission capabilities, and environmental performance of connection products.
(4) Automation of connector production
As connector products continue to evolve towards higher performance and smaller size, manually assembled and inspected products are gradually failing to meet quality requirements. This is especially true for some high-precision, miniaturized connector products, which necessitate automated assembly to meet the precision requirements of downstream industries. Furthermore, automated production lines can operate continuously and stably for extended periods, improving production efficiency and yield rates, thereby shortening delivery cycles and increasing customer satisfaction. Therefore, production automation plays a crucial role in enhancing the competitiveness and reducing production costs for connector manufacturers.
(5) The trend of domestic substitution of connectors is deepening.
Currently, the connector market share in the communications, industrial control, and new energy sectors is mainly dominated by large European and American connector manufacturers. However, as my country's strength in end-products in communications, industrial control, new energy, medical, and automotive fields continues to increase, numerous downstream markets are gradually expanding. Driven by demand and technology from downstream end-product manufacturers, coupled with the continuous improvement of design innovation capabilities and production technology strength of Chinese connector manufacturers, the trend of connector localization is deepening. Simultaneously, the rapid development of the new energy economy, represented by wind power, photovoltaics, energy storage, and new energy vehicles, suggests that the market share of domestic manufacturers will rapidly increase under the future trend of domestic substitution.
(6) Increased concentration in downstream industries
The downstream application manufacturers in my country's connector market are becoming increasingly concentrated and specialized, placing ever higher demands on suppliers' R&D capabilities, production capacity, supply chain management, price control, and regional transportation conditions. Leading suppliers maintain their industry leadership through continuous R&D investment, developing new products, technologies, and processes. Their close collaboration with downstream application manufacturers leads to a continuous increase in market size and share, creating increasingly significant economies of scale. Meanwhile, most smaller manufacturers with lower-level production equipment and relatively outdated processes and technologies will gradually be eliminated due to their inability to meet product specifications and lack of customization capabilities.
2. Opportunities Facing the Industry
(1) Support from relevant national policies
Connector manufacturing is a crucial sub-sector of the electronic component manufacturing industry. The government has continuously introduced numerous policies to support the development of this sector, placing it within the scope of national encouragement and support. In January 2021, the Ministry of Industry and Information Technology (MIIT) released the "Action Plan for the Development of the Basic Electronic Components Industry (2021-2023)," which included connector components in the key product high-end upgrading action project. The plan proposes that by 2023, the competitiveness of advantageous electronic component products will be further enhanced, the security level of the industrial chain supply will be significantly improved, and breakthroughs in basic electronic components will be promoted for important industries such as smart terminals, 5G, and the industrial internet. It also aims to strengthen the supply chain security capabilities of key materials, equipment, and instruments, and improve the modernization level of the industrial chain and supply chain. These continuous national policy initiatives provide important guarantees for the long-term stable development of the connector industry.
(2) Strong demand in downstream applications of connectors
Connectors are indispensable components in fields such as communications, industrial control, new energy, medical, and automotive. In communications, my country is vigorously promoting the construction of 5G base stations and data centers, and as a key component in these projects, the market size for communication connectors will continue to expand. In industrial control, my country is actively promoting the upgrading and transformation of its manufacturing industry. Industrial automation, intelligent manufacturing, and the industrial internet will be the main development directions in the future. As downstream applications continue to expand, the demand for industrial control connectors will increase accordingly. In the new energy sector, against the backdrop of the "carbon neutrality" era, with the rapid development of wind power, photovoltaics, and energy storage, installed capacity is increasing year by year, and the market size for connectors used in new energy equipment is continuously expanding. In the medical field, with the increasingly serious aging population problem, improved living standards, enhanced health awareness, and increased healthcare spending in my country, the medical equipment industry continues to grow, and the market size for medical connectors, as an indispensable component of medical equipment, is also expanding. In the automotive sector, electric vehicles are strongly supported by the government due to their cleanliness and safety. As the shipment volume and penetration rate of new energy vehicles increase year by year, automotive connectors will also usher in greater development opportunities. The aforementioned downstream industries are booming in my country and gradually leading the world, which is the most important driving force for the rapid rise of the domestic connector industry.
(3) The process of domestic substitution of connectors is accelerating.
In recent years, the downstream applications of connectors have been continuously expanding, and demand has been gradually increasing. Chinese connector manufacturers have a significant locational advantage, with many downstream manufacturers located in or near China, giving them a greater advantage in terms of customer proximity, customer service, and cost control. These factors have driven continuous technological progress and improved services from Chinese connector manufacturers, promoting the sustainable development of my country's connector industry.
Simultaneously, driven by pressures from international trade and surging demand from the domestic application market, China's connector industry has entered a new wave of domestic substitution. R&D capabilities, production processes, and manufacturing levels are continuously improving, gradually narrowing the gap with international leading levels. As a major global connector production base, some of my country's connector products are becoming increasingly competitive in the international market, achieving domestic substitution levels in terms of product quality, reliability, functionality, and precision. Against the backdrop of the national strategy of building a new development pattern of mutually reinforcing domestic and international circulation, the accelerated process of domestic substitution in connectors provides excellent development opportunities for Chinese connector manufacturers.
(4) The global connector industry chain is shifting to Asia
In the 20th century, the global connector industry was primarily dominated by Europe, the United States, and Japan. Since the 21st century, due to rising production costs and slowing economic growth in Europe and the United States, the entire electronics and information industry, including connectors, has been shifting from developed countries to emerging economies. Asia, with its relatively advantageous labor costs and skills, has become a target for this relocation of the connector supply chain. Since 2018, Southeast Asia has gradually become an emerging market for connector manufacturing, with domestic connector manufacturers setting up factories there to better serve the international market.
3. Challenges facing the industry
(1) The overall strength of domestic connector manufacturers is relatively weak.
Since the 1990s, multinational connector manufacturers from Europe, America, and Japan have established production bases and R&D centers in my country to reduce production costs, get closer to customer markets, and expand market share. These multinational connector companies have advantages in terms of operating history, capital scale, R&D investment, technological accumulation, production management experience, product portfolio, application scope, and brand awareness. Some Chinese connector companies, based on the huge domestic market demand, have developed certain R&D, technological accumulation, and manufacturing capabilities through cooperation and exchange with multinational companies over many years. However, there are numerous domestic connector companies, most of which are small in scale, have low R&D investment, insufficient technological accumulation, and low brand awareness, lagging behind multinational connector companies and placing them at a disadvantage in market competition.
(2) High dependence on imports for high-end connector manufacturing equipment
Connector manufacturing equipment demands high technical expertise; issues such as equipment stability, precision, and accessory compatibility all impact product quality. While my country's equipment manufacturing industry has significantly improved its technology and processes through years of accumulation and optimization, a considerable gap remains compared to foreign equipment manufacturers. In terms of precision, surface roughness, machine tool rigidity, and the compatibility of cutting tools and accessories, it currently cannot adequately meet connector manufacturing requirements. The high dependence on imported high-end production equipment, with incomplete domestic substitution, hinders the connector industry's development to some extent.
For more industry information, please refer to the "2023-2029 Connector Industry Market Research and Development Trend Forecast Report" by Puhua Youce Consulting. Puhua Youce Consulting also provides services such as industry research reports, supply chain consulting, project feasibility reports, specialization and innovation small giant certification, BP business plans, industry maps, industry planning, blue and white papers, IPO fundraising feasibility studies, and IPO working paper consulting.
