June 28, 2007

How long will the DRAM market stay at bottom?

We are finally starting to see some stability in the DRAM market. Although there were a lot of parts on the street for month end deals, pricing remained fairly stable. It appears we have hit bottom. The question now is how long does the market stay at bottom? It doesn’t look like there will be any rebound until late July at the earliest. Usually by then the market starts gaining some momentum as various OEMs begin their fall and winter builds. That said, there are still too many parts in the channel for any significant turnaround in the immediate future.

Industry analysts are split as to when the market will rebound. Many feel the adjustments the DRAM manufacturers are making in response to the oversupply / lack of demand will be enough to stimulate the market by the middle of Q3. Others feel the demand will remain below expectations which means the market will not turn around until early next year. Based upon our channel checks each week, we feel the market will not turn around until early next year. Usually when the market falls as fast and as hard as it did it takes some time for things to recover and regain sizable momentum. Since the second half of 2006 saw record highs for spot market pricing and huge gaps between contract and the open market, OEMs will not be quick to use the spot market unless a pricing or delivery advantage can be obtained. After the pounding the market has taken over the last five months stability is a step in the right direction.

June 21, 2007

What's in a name?

What's in a name? It's an age old question that makes you sit up and think for a second......what is in a name???

We live in a world that loves to categorize and use naming conventions. Everything in its category and a name for each. We all do it and examples are everywhere. If you live in metro Boston or New York, you're either a Red Sox fan or a Yankees fan...no in-between. No middle ground, one or the other. Democrat or Republican....North vs. South.....East Coast vs. West Coast....make your choice.
In a business context, it gets even more definitive. Names like "customer" and "supplier" have been traditionally etched in stone. We also have names like "product provider" or "service provider" and "software vendor" or "hardware vendor". Once again, pretty strict lines and definitions. No co-mingling the offering...one or the other...but not both. You know that old saying: if it looks like a duck and quacks like a duck, well then, it must be a duck. Or is it??

Let's get out of the theoretical for a moment and look at the real world example of how the "name game" is changing in the high tech supply chain. Historically, the high tech distribution space has used broad category names in order to designate segments or "turf" where companies play. Primarily, they fell into two main spaces, commonly referred to and "named" the "back end" and the "front end" of the supply chain.

Traditionally, the back end folks, a/k/a Electronic Component Distributors, linked suppliers such as Philips and Atmel with OEMs, ODMs, and EMS companies and the front end guys, a/k/a Resellers, VARS, and Retailers, connected end user communities with finished goods. Very simple, very clean, and in some respects, these "names" gave order to a supply chain that ordinarily had none. That said, we now live in a world that has electronic component distributors moving into the finished goods space and resellers pushing into service marketplaces. Won't there be chaos if we step outside our "named" areas? Not really. In fact, most of this movement is customer and market driven with the end result being a better, more comprehensive, and more valuable service for customers.

Now let's look at the Independent Distribution category. There seems to be a consistent hole in the way the historical and current supply chain participants are "named", specifically, Independent Distributors are left out. Not the "right" name so no category or value proposition. Believe me, I know the talk track used to explain this omission. To name a few, statements like "they operate outside the lines" or "they have no official product designations" have been used for a long time. In reality, both are untrue and irrelevant at the same time.

The fact is, Independent Distribution has been supporting both "front end" and "back end" customers for as long as there has been a "front and back end". And in the current environment, the more diversified Independents are moving outside their traditional model of helping to source products customers need and sell products they don't, and into really effective reverse supply chain and service supply chain spaces. Once again, customer driven services leading to a complete portfolio offering for the forward and reverse supply chain. All under one roof. What a great idea. Although the overwhelming majority of high tech supply chain participants use an Independent Distributor in their forward or reverse supply chains, it seems that the industry is now just beginning to acknowledge the value others have discovered long ago. Capabilities...plus service.... plus flexibility... equals value, regardless of the name or category.

I guess it all boils down to another age old saying...you can't judge a book by its cover.

June 14, 2007

Quality is an issue in the general IC space

There have been some increases in activity in the board level component space, but it has been sporadic and not limited to any one product type. Most of the activity on shortages continues to be in TI, Siliconix, and Freescale. We have seen an increase in requirements from the military space, especially in diodes.

Quality concerns are becoming more and more of a hot button issue with customers globally. Few independents have the quality control resources and infrastructure to ensure their customers complete quality assurance. Converge has a strong team of procurement specialists and a staff of Electronic Component Engineers that is unparalleled in the industry. This team is dedicated to supplying customers with only 100% quality assured devices. In this volatile market, customers should be wary of bottom-barrel prices as this may be an indicator of suspect quality of the product. The old adage "you get what you pay for" is applicable here and lowest price may not always be the best value if the quality of the product is compromised.