December 17, 2008

Storage drive market prices continue to fall

Converge Storage Update

3.5" Drives
Converge has been tracking an increase in sales in the 3.5" storage drive market month over month. Meanwhile, pricing has remained relatively stable in the 160 GB to 500 GB range during this timeframe, differing by only $1 to $2 since our last Market Insights update. However, pricing in the higher-capacity drives, 750 GB and 1 TB, is eroding at a much faster rate, with open-market pricing in the low $70 to high $90 range, respectively. Conversely, sales in lower-capacity drives have slowed, with 80 GB and 120 GB capacities no longer moving at the same volume they were two to three months ago. These devices have experienced sharp price declines compared to mainstream drives, with price parity occurring between these two capacities.

In general, the PATA interface remains liquid as compared to the SATA interface, which is particularly true in the lower-capacity models.

2.5" Drives
The 2.5" market continues to slide. Open-market IDE pricing fell by 10% to 15% month over month. However, sales volumes have remained relatively stable. Meanwhile, the SATA market is experiencing even sharper declines, with as much as an $8 difference between comparable IDE hard drives of the same capacity and speed. SATA sales volumes are low, but part-specific demand remains.

Excess inventory becomes available earlier

Converge General IC Update

As with overall global economic conditions, the IC market slowed down a bit in November. Many customers have shifted their forecasts downward, and demand has softened up for many builds. We have also seen a number of excess inventory lists, and although it is not unusual to see excess inventory become available as we approach the end of the calendar year, these activities usually don’t take place until mid December.

Even with the end of the year and the economic slowdown, there are still areas where customers are experiencing delivery issues. We are still seeing quite a bit of activity on some Freescale processors, and lead times have extended out to 12-16 weeks for some products. We have also seen some activity on Altera, Tundra, Analog Device and Avago. These are mostly short-term needs and not anything prolonged, with the exception of Freescale shortages. Some Freescale parts, such as MPC8540, MPC8560 and MPC8280, have been tight for a few weeks, if not months.

We expect more slowdowns in December, especially mid-month and beyond, since many factories are closing for two weeks around the holidays. For customers who do have demand, there could be some good deals out there up until the New Year.

CPUs seeing resurgence in the service repair market

Converge CPU Update

In this month’s CPU update, we will reflect back on the past year and look forward to what 2009 markets may bring for the microprocessor market.

In 2008, we saw the usual variability of shortages and savings and the never-ending march toward smarter, faster and less expensive models. Proving more interesting were the emergence of new markets, the blossoming of the service microprocessor industry and some alarming price trends.

Low-cost devices reign
The dilemma with chip manufacturers making their parts better and cheaper is that customers may no longer require the mid- and higher-level parts to perform their day-to-day computing functions. As Intel and AMD have fought bitterly for market share, the resulting price war has left consumers with far more computing power for their CPU investment. In 2008, we witnessed the market being split, with demand on one end for high-end gaming machines and on the opposite end for everyday computers. This resulted in a shrinking demand for mid-level CPUs. The high-end market, while lucrative, is not built based on a high-volume model.

Lower-end Intel models such as the E2140-80, E2220 and T3200-T5900, priced between $50 and $100, have become mainstream, taking over for the $150+ midrange P8400/E8400 models as our best sellers. Demand has remained healthy. However, OEMs now need to sell more CPUs to match their previous revenue streams. For 2009, it has yet to be determined how the emergence of mini computers with low-cost, low-voltage CPUs will affect the market.

At the other end of the market, the new Intel i7 gaming models are bringing a new dimension to the gaming market. It will be interesting to watch how these devices trade in the open market.

Second life
Service and repair CPUs have always been staples of Converge’s CPU offering, and this past year has seen a broadening of demand and supply across all regions of the world. CPUs once considered yesterday’s technology have seen a resurgence in the service repair market.

These CPUs are circulating in greater numbers to meet emerging market and service repair demand. While economic conditions remain a concern, we can expect the growth of the service market to continue as system refresh rates are extended.

Identifying cost savings
Slowing demand for some components combined with excess inventory entering the spot market at year-end has created an opportunity for potential cost savings. Manufacturers looking for CPU components can find opportunities in the spot market.

DRAM manufacturers need to reduce production

Converge Memory Update

As the year draws to a close, 2008 will perhaps go down as one of the worst years on record for the DRAM industry. The lack of demand for PCs and the condition of the global economy have caused the DRAM market to reach a new low. The second half of 2008 experienced falling prices month after month. Even after output reductions and cutbacks, DRAM manufacturers were not able to recover. Losses are piling up, and drastic measures will be necessary in the coming months in order for the smaller DRAM manufacturers to survive. Unfortunately, it will only benefit the market if a manufacturer or two were to go out of business. Anything that will help alleviate some of the supply funneling into the market will only benefit the situation in the end.

The outlook for 2009 does not appear much better. The DRAM manufacturers need to reduce production even further and to hold course on production levels as a team. There is so much excess supply accumulating in the channels that it will take a significant increase in demand from the box builders to burn through the excess inventory. Until the economy improves, DRAM manufacturers need to understand that part of their current problem is themselves. They need a plan to reduce production and need to stick to it to truly affect the market.

November 20, 2008

Spot market storage update

Converge Storage Update

3.5" Drives
The 3.5" market has been trending in the same direction month after month. Slow sales and inventory surpluses continue, which are contributing to additional price declines. This is most evident, but not limited to, the PATA interface. The result is compact pricing in the lower capacity HDDs, with only a few dollars separating the 80 GB through the 250 GB IDE HDDs. Further, it has been reported that direct pricing for the 750 GB drives has dropped to the low $90 range. The impact is being experienced in the higher capacity HDDs, specifically the 400 GB drives, where products can be found in the low $40 range on open-market excess buys.

2.5" Drives
The 2.5" market is falling in line with the 3.5" market. The once slower, eroding IDE interface is beginning to experience sharper price declines. The 40 GB drives are trading in the high $20 range, while the 80 GB capacity is in the mid-$30 range. Meanwhile, there are little if any speculative buys occurring in the SATA interface. There does remain part-specific demand and with that comes premium prices; otherwise, buyers are seeking aggressive price points to stock 2.5" SATA HDDs.

Look for good buying opportunities in the IC market

Converge General IC Update

October was relatively active given the overall market conditions. While there were no major shortages in the market, there continue to be some spot shortages among various manufacturers. The one area that appears to be impacting customers the most is the series of Freescale PowerQUICC processors. Of that series, the MPC82xx seems to be the item that is causing the most problems. Many customers are experiencing issues, and lead times have been stretched out to 18–20 weeks.

Other products experiencing spot shortages include Micrel, NXP and some connectors. However, these shortages are not currently having a noticeable impact on the market.

We have been tracking some spot shortages on tantalum capacitors, but the activity is very sporadic. One area that has slowed a bit is military diodes. There was quite a bit of activity in this area over the past year, but it appears to have subsided.

Overall, it will be interesting to see how the market reacts to overall global economic conditions as we head toward the end of the year. November and December are short months due to holidays and, with the economic slowdown, there could be forecast fluctuations. This could present some good buying opportunities in the market for customers taking advantage of market supply and pricing.

Slow demand for CPUs means open-market savings

Converge CPU Update
In October, the spot market braced for the traditional pre-holiday rush on CPUs, but this has not yet materialized. Instead, we have seen slowing demand as a strong US dollar and lower consumer spending has tempered demand in the CPU market.

The positive news for OEMs is that pricing has softened considerably, especially on Xeons and TJ Montevina models, with a reduction of 10% or more on several models (T5800, T3200 and E8400, for example).

October also saw a planned price drop as mainstream desktops were discounted—including the Q8200, E7400, E2220, E2200 and X3220 models. Meanwhile, pockets of aggressively priced mobile CPUs, such as the T9500, can be found with pricing at $100+ cost savings per piece.

Xeons fill the gap
Intel server chips have returned to the forefront, as older parts such as the X5140 are providing good value. Meanwhile, Intel has launched up to 20 new models between September and November, thus considerably extending its current range of chips offered.

End-of-life models in demand
Half of the demand currently tracked for mobile CPUs in October was centered on older, trailing-edge technology. Desktop models such as the E2160, E4500, E4600 and E7200, and the mobiles T7250, T8100, T7200, T5550 and T2370 have all enjoyed resurgence in demand.

Looking ahead
In November, Intel launched the new range of i7 desktop CPUs codenamed Bloomfield. There are three models and the pricing runs from less than $300 to almost $1,000 for these Quad cores. These CPUs are targeted toward “gamers” and should attract strong interest in the first several weeks on the market.

We also expect holiday market demand to increase, as current signs are encouraging with rising day-to-day requirements being filled by Converge. OEMs should be actively searching for open-market savings as a slow start has left weaker pricing than usual for early buyers to take advantage of aggressive price points to fill demand.

DRAM spot market opportunities should occur the week before Thanksgiving

Converge Memory Update
While it appears pricing has finally stabilized in the DRAM market, there are still no signs of demand. Contract pricing has caught up to pricing in the spot market and both are essentially at parity. 1 GIG 800s modules have been stable in the $9–$9.50 range for the past few weeks; 2 GIG 800s modules have settled around $18. Although pricing has leveled off, supply remains plentiful. Most vendors are open to offers, but the market has reached a point where pricing is no longer a factor because demand remains soft.

Due to the holiday in the United States at the end of November, Converge believes DRAM manufacturers will look to get an early start to move inventory for the month-end push. If there are going to be any spot market opportunities, they should occur the week before Thanksgiving.

October 15, 2008

Converge Storage Update

3.5" Drives
Some analysts are reporting that inventory levels for the 3.5" storage drive segment are at a seven- to eight-year high and expect things to remain this way through the end of 2008. The result is that excess inventory is pushing pricing sharply downward. HDDs in the 80 GB to 250 GB range are experiencing the greatest decline, with only $2 to $3 separating open market resale pricing for each capacity. In spite of the excess inventory and price erosion, we are still tracking volume sales for IDE HDDs in this range. Meanwhile, pricing for the 400 GB capacity and higher have stabilized somewhat month over month. However, sales volumes are much lighter for this capacity range as compared to the lower capacities. This is especially true in the IDE interface.

2.5" Drives
The 2.5" market is not experiencing the same excess levels as the 3.5" market. As a result, open market pricing for the 20 GB through 80 GB IDE HDDs decreased by only $1 to $2 month over month. Demand remains steady in this range and interface. Meanwhile, sales volumes for the 2.5" SATA market remain light. We are tracking very few speculative buys at any price. There has been an increase in spot market demand for specific part numbers, including WD1200BEVS, WD1600BEVS and MK1234GSX. The 7200 RPM drive in the SATA interface continues to fetch a premium.

Converge General IC Update

We are currently tracking parts that might experience shortages and delays in the following areas:

  • Spot shortages remain on Freescale processors.
  • We have been monitoring an uptick in demand for some Murata chip inductors and filters.
  • Activity is increasing once again for military connectivity devices. Meanwhile, military contractors are tightening their quality processes.
  • Some manufacturers showing increased activity are Broadcom, Infineon, Analog Devices, PMC and IDT.
  • Overall activity in September was better, but it will be critical, given the current financial situation, to monitor general market activity over the next 90 days.

Converge CPU Update

In this month’s CPU update, we look back on a busy start to autumn, when a shortage market drove CPUs sales, and consider how the spot market can stimulate demand and provide value for buyers when a shortage market passes.

During a CPU shortage, supply chain professionals such as Converge scour the global spot market for the right parts to meet OEM demand. Generally, the requirements are created by market demand. When supply tightens on in-demand parts, requests intensify from concerned OEMs looking for parts to meet their production schedules. Finding cost savings in the market can be altogether trickier and more time consuming than filling shortages, but ultimately this is where Converge can help make a positive impact on a customer’s bottom line.

A Frenzied September
September saw a CPU split: 70% mobile sales, the remainder Xeon and desktops. Considering that traditionally desktop CPUs dominate in the spot market, this was an exceptional month. For example, end-of-life T7300s and T7500s were short, while the T7700 was a popular cost saver in OEM excess. Converge has long predicted that the expected Montevina family would be short, and this was realized in spectacular fashion as everything from the low-end Celerons and T1600s to the high-end Penryns, including T9600, T9400 and P8600, were in high demand. The T3200 and T5800 are interesting parts, as they work for both the current Santa Rosa refresh and the new Montevina platforms. Such dual compatibility is very rare and it adds to the popularity of these crossover specifications.

Fishing for Cost Savings
Shortages can end as suddenly as they began. At the time of writing this Market Insights, supply is relatively smooth and demand flat across the CPU market. In markets experiencing a relative calm, Converge focuses its attention on finding cost-saving opportunities for OEMs.

Converge will work with customers to identify parts used in their products and provide a customized model to identify potential cost savings on line items where excess supply may reside or to forecast possible shortages. The end goal is to provide customers with market visibility so they can identify parts that may become short and, just as important, where they can save money by buying through Converge.

Converge Memory Update

The expectation that the DRAM market would bottom out last month did not come to fruition. Similar to the stock market, the DRAM market continues to free-fall. As previously reported in our September Market Insights, Converge was expecting some market stability heading into October, but this did not occur. The 1 GB PC800 modules have dropped from $14 to $10.50 over a four-week period, and the 2 GB PC800 have dropped from $29 to $22. Given the condition of the global economy, it does not appear that these prices will rebound anytime soon.

Where is the unseen benefit in all of this activity? The box builders are paying approximately $21 to put 2 GB of memory in every PC they build. As we head into the holiday season, consumers should begin to see aggressive market pricing for new PCs and notebooks. The expectation is for weak PC sales in the fourth quarter, which should add to the current horrific market conditions.

September 18, 2008

Converge CPU Update

In this edition of Market Insights, we look at the complexities of predicting CPU demand shortages as well as the patterns of supply that tend to repeat themselves with each product launch.

In our June and August updates, we discussed rumors of shortages due on the new mobile Montevina platform. These reports persisted throughout the summer, but as the product began to ship in August, we saw the market begin to heat up.

Celeron Mobile 575, T3200, T3400, T5800, T5900, P7250 and T9400 have been in demand across all regions for the past six weeks, and we expect this situation to continue well into October.

Forecasting demand
As a supply chain solutions provider for technology-driven companies, Converge has tracked nearly every CPU product launch by building forecast models to help predict potential supply and market demand concerns. It is through this experience that we can expect each new product line launch to bring shortages on the end-of-life parts, followed by shortages on one or two of the new products themselves.

For example, at the time of writing this update, the soon-to-be launched T3400 and T5900 seem to be safe investment choices for an early stock buy as soon as they become available. Additionally, there is enough dialogue across the regions to suggest that the T3400 and T5900 have the potential to be the next hot mobile parts in demand. It will be interesting to track how the supply situation with the Montevinas develops during the run-up to the holiday season.

However, as any production planner can attest, the life cycle of supply and demand for a CPU can still be difficult to predict.

For example, during the last holiday season, the Intel product road map prescribed that the E8400 would replace the E6550. Previously, the P4 630 SL7Z9 and the PD 925 CPUs were the bestsellers, as they occupied the traditionally hallowed space of the 3GHz desktop processor.

Knowing that the E6550 would be eventually phased out meant that there would likely be some last time buy supply issues. In midsummer 2008, the E6550 led the demand for end-of-life Conroe shortages.

When the replacement E8400 hit the market, it quickly launched as a cost-saver and a brief shortage part instead of simply a shortage part. Initially launched at a direct price of $179, the part quickly dropped to $154. A speculative stock buy that may have looked like a smart move at the start of the year would have turned into a potentially costly mistake as the unpredictable life cycle of the CPU unfolded.

Although forecast models can help predict potential supply issues, Converge strongly recommends consulting with experts who track the daily progress of CPU market supply and demand fluctuations in the spot market.

Converge Storage Update

3.5" Drives
We have been tracking an increase in demand and volume sales on IDE HDDs in the 3.5" market segment. This represents a sharp reversal of a downward trend experienced during the past three months. Most of the activity is in the 80 GB to 160 GB range. However, the 250 GB and higher capacities are experiencing an increase as well, although not to the extent of the lower capacities. While demand and sales are on the rise, pricing has remained low, with no significant change month over month, with the exception of 1TB devices. This capacity has dropped to the $115 to $125 range in the open market.

2.5" Drives
Pricing for 2.5" SATA HDDs continues to decline in the open market. The 40 GB and 60 GB capacities are priced in the low- to mid-$20 range, while the 80 GB and 120 GB are selling in the mid-$30s. Meanwhile, 160 GB and 250 GB HDDs can be found in the mid-$40 and mid-$50 ranges, respectively. Overall, sales volumes remain low. However, we are seeing an increased amount of part number–specific demand at the CEM/OEM level.

Converge General IC Update

We are currently tracking parts that might experience shortages and delays in the following areas:

  • The anticipated uptick in demand for tantalum capacitors due to the expected increases in raw tantalum pricing has been slow to materialize, primarily as a result of general market sluggishness.
  • Spot shortages continue on some Pulse Engineering transformer modules, with the heaviest activity occurring in early September.
  • Shortage activity has increased on Freescale network processors as well as some Vitesse transceivers.
  • Converge has learned that Altera has increased prices 20% across the board.
  • Altera PLDs are currently showing some pockets of shortage activity.

Converge Memory Update

The past four weeks have not been sympathetic to the DRAM market, with both contract and spot market pricing suffering significant declines. During this time span, prices for 1 GB and 2 GB PC800 modules dropped roughly 20% in the spot market. Modules with 1 GB declined from $16.50 to as low as $13.20 at one point, and 2 GB modules declined from $37 to $30. The majority of the product available in the spot market has been from Samsung. Meanwhile, domestic memory vendors have refrained from taking on additional inventory due to the price volatility and supply saturation in the Asian market. As of the second week in September, the spot market is still approximately 10% below direct pricing, even after the latest round of contract negotiations.

Converge believes that the market has bottomed out. Due to rapid price declines, the market has not had time to settle. We believe that pricing should stabilize for 1 GB and 2 GB PC800 modules in the $14 to $15 and $31 to $32 ranges, respectively. As October draws closer, there should be a slight rebound in pricing. With the severity of price declines since July, we anticipate that DRAM manufacturers will try to counter these record-low prices by slowing down production and reducing supply. Additionally, October and November are generally busy production months, so they should help further stabilize the DRAM price freefall.

August 13, 2008

Converge Storage Update

3.5" Drives
In recent weeks we have been tracking an increase in demand in the 3.5" market, which includes both the IDE and SATA interfaces. Most of the activity is surrounding the 80 GB, 120 GB and 160 GB capacities. However, we are beginning to see signs of increased demand in the higher capacities as well. While pricing has slipped $1–$2 across the board, the uptick can likely be attributed to a combination of lowered costs, a leveling of inventories and seasonal production increases.

2.5" Drives
Unlike the 3.5" market, this segment has not experienced any increase in activity. The SATA drives are slow moving even as independents significantly drop prices to move inventory. Pricing for the IDE drives remains stable, but sales volumes remain flat. Overall, there has been little change in the 2.5" market month-over-month.

Converge General IC Update

We are currently tracking parts that might experience shortages and delays in the following areas:

  • Due to significant price increases in raw tantalum, there has been heightened open market activity with OEMs and CEMs looking for cost-savings opportunities on tantalum capacitors.
  • We are still tracking spot shortages on some Pulse Engineering transformer modules. However, shortages are not widespread, as Pulse is delivering some customer orders while pushing out deliveries to others on the same devices.
  • Demand, although still active, appears to have stabilized on military diodes and connectivity devices. Lead times are still extended, but most builds have been scheduled factoring in longer lead times.
  • July and August are traditionally slow months for IC activity. However, after a flat spring, activity in July was better than expected and demand continues into August.

Converge CPU Update

July proved to be an active month for CPU sales in the open market. Although there were a number of contributing factors to this activity, it remains intriguing that one of the peak months this year occurred during a traditionally slow manufacturing period. In this month’s report we examine some of the reasons for this effect and look ahead at some emerging trends for the buildup to the holiday sales season.

Push factors
Gaining a return on end-of-life, excess and obsolete parts has been one of the cornerstones of the open market. Conversely, we have been tracking a rise in excess components offered in the open market during the summer lull in manufacturing and in particular during the month of August.

The opportunity for cost savings attracts buyers while turning previously dead inventory at OEMs and CEMs into revenue. For example, OEMs still using the Conroe E2140 and E2160 can currently acquire the component for 10% below their direct price – as it is phased out and excess inventory appears in the spot market. Older Napa mobiles, T2130s, that were no longer being used at most OEMs’ production lines are now in demand by the embedded computer builders.

In much of Northern Europe, the Mediterranean and Latin America, factories shut down for three to four weeks over the course of the summer. During this time, a flurry of stock offers appear in the spot market as manufacturers look to enter the holidays with a clean balance sheet.

Pull factors
As announced at the marquee computer show Computex Taipei in June, AMD and Intel will go head-to-head with a series of chipset and CPU launches to be rolled out over the summer. As designers and manufacturers wait for news on the latest technologies, the open market prepares for increased demand caused by missed production schedules and shortages. It is anticipated that the Intel Centrino 2 Montevinas and AMD’s Puma are components to potentially be in short supply.

For end-of-life parts, the open market can resurrect demand. As highlighted in last month’s Market Insights newsletter, we reported the desktop E6550, E6750, E6850, E4600 and CD 440 chips all became short and in high demand as they moved out of mainstream production. On mobiles, the midrange Santa Rosas, T7XXXs and Celerons, as well as older Napas, changed hands quickly.

Overall, the number of new product launches this summer not only pushes shortages on new chips but conversely causes the pull of supply for some end-of-life parts through the spot market.

Looking ahead, in August, we see the continuation of “back to school” demand driving CPU sales while the mobile Montevinas, Atoms and recently launched Desktops (E5200, E7300, E8500, Q8200, Q9400, etc.) emerge.

Converge Memory Update

August is not even at the halfway point and the market is already in a spiral. Things are not going well for the DRAM manufacturers as the much anticipated “back to school” boost is nonexistent and the second–half year DRAM rebound is all but nonexistent, at least for now. The 1GIG 800 module has dropped to the $16.00 range, and Converge believes it will drop even further before the end of the month. This is a new low for the 1GIG 800, which was trading around $19.50 on the last day of July. It appears a significant amount of inventory dumping is taking place, as large quantities of parts are available, especially from the Far East. There are also numerous reports in the media stating PC sales are slow and total sales are going to come in below original expectations. Although notebook demand remains strong, there are some signs they, too, may miss forecasted expectations.

Currently 2GIG 800 modules are trading in the $38.00 range and it appears those will also continue to decrease in price. Any further price drop for the 2GIG 800 will also be a new low. Converge believes there will be no positive price movement for the remainder of August. The one upside to this activity is that the spot market can offer significant cost savings to end users if they have a place to put some modules. Gathering 50,000 to 100,000 units of the staple 1GIG 800 module below contract pricing is quite attainable.

July 16, 2008

Converge Storage Update

3.5" Drives
Oversupply and decreased sales volumes characterize the current state of the 3.5" HDD market. However, open-market pricing has remained stable month over month. The 80 GB and 120 GB capacities are only separated by $1–$2 and are selling in the $27–$29 range with 160 GBs moving at $33–$35. We are still observing pricing for 250 GB, 400 GB, and 500 GB HDDs in the low $40, $50, and $60 ranges, respectively, while the price difference between SATA and IDE HDDs of the same capacity and speed is insignificant. Lastly, there is little activity in the 750 GB and 1TB capacities.

2.5" Drives
There has been no significant change in the 2.5" HDD market since our last Market Insights update. Sales volumes for SATA interface hard drives continue to be low across all capacities, with resale prices slipping by $1–$2. There is now a $5–$7 price disparity between SATA and IDE HDDs of the same capacity and speed. Meanwhile, the 2.5" IDE drives remain liquid in the 20 GB through 80 GB models. A $3–$4 price difference exists between the 4200 RPM and 5400 RPM HDDs of the same capacity.

Converge General IC Update

As the general IC market heads into the summer months, we have yet to see any dramatic changes in overall market conditions. In fact, other than some of the specific activity mentioned in previous editions of Market Insights, there has been little change over the last 12–18 months. There has not been any prolonged product shortages since the high CV caps were in short supply in the second half of 2006. What we have been experiencing are quick “hiccups” in the supply chain on certain products or with certain manufactures. These shortages are not broad based, and tend to come quickly, lasting for a short amount of time before being corrected. The recent issue with shortages on Pulse products indicates just how quickly things can be corrected.

Looking forward, we have heard from a few franchise distributors and manufacturers about the possibility of price increases on certain products in the coming months. These include Altera, Broadcom, Infineon, Xilinx, and Cortina, to name a few. We have also heard that there could be some extended lead times as well, but there are no specifics as of yet. In addition, other manufacturers are starting to increase pricing on leaded material, while at the same time they are starting to cut back on production of this material. As most manufacturers will soon be changing all of their production to lead free, some of the leaded products will be in tight supply soon. We recommend that customers requiring leaded material for their builds plan accordingly.

Converge CPU Update

The story of Q3 has been the dramatic resurgence of shortages in the desktop market after a sustained period of relative calm. Back in the summer of 2007, the phaseout of an older CPU family led to product shortages, and this theme is set to dominate the market once again over the coming months. Last year, the Pentium D9 series caused box builders headaches, while currently the Pentium E series Conroe family is in great demand.

Meanwhile, cost savings characterize the mobile market, with shortages appearing only on newly launched parts.

Desktop CPUs

  • In our last edition of Market Insights, we reported savings available on the end-of-life Conroe family, E6XXX. The market quickly changed as the parts reached end of life and supply dried up. Requirements far outstrip supply at this point, with a steep rise in prices - particularly on the E6550, E6750, and E6850 modules.
  • Before the end of July, we will see many new parts launched, resulting in a wide range of price drops. For example, this has caused the Wolfdale E8XXX family to edge down in price day by day, as vendors try to clear their stock before the changes take effect.
  • The Q6600 has been a very active open-market part. There are large regional variances in pricing, and these gaps make for very good savings opportunities. Interest in the other Yorkfield CPUs (Q9300, Q9450 and Q9550) has faded.

Mobile CPUs

  • The off-road TJ models (T2330-90, T5450-750) provide consistent cost savings for tier 2 and 3 manufacturers, which in many instances are unable to access supply through direct channels. These models can often be bundled with their equivalent WiFi card (3945 or 4965 models) to create an attractive package, as surplus supply drives prices down.
  • The shortages previously highlighted on the Santa Rosa Celerons continue, with the newly launched CM 560 in tight supply, along with the 550, 540, and 530 models.
  • Small patches of demand still exist for the older Napa models (T2050-T2130 and higher-end T5500-T7200), as production ends and the requirements have yet to fully tail off, and the supply of Montevina is slowly reaching the market.

Server CPUs

  • Cost savings still exist within the Harpertown family (E5XXXs), which is prominent among server CPUs. Given the relatively higher cost of server chips compared to desktops, there is plenty of room for price variance, and worthwhile savings can be found.

Converge Memory Update

There appears to be turbulence once again in the DRAM market. June was considered a disappointment, with expectations of an increase of more than 10% in contract prices, while the actual result was roughly 5%.

July is shaping up to be a struggle, as the DRAM manufacturers were unable to achieve any price increases, resulting in a flat first half of July. The spot market has been quiet and inventory is once again starting to build up. 1GB 800 desktop modules have dropped from a high of $23 in early June to just under $20 thus far in July. Open-market vendors are listening to offers, but there are no signs of any buyers. It appears that for the second year in a row, we could be looking at a lackluster back-to-school build season.

These results do not come as a surprise, as there is no activity driving demand in the market. Rumors and predictions of a DRAM recovery in 2008 have been overstated. The global economy is showing signs of increased weakness, and corporate IT spending is limited. If market forces do not change soon, we expect pricing to decline further. In the meantime, depending on activity in July, we could see potential inventory dumping for the first time since February.

June 18, 2008

Storage Update

3.5” Drives
Although there are reports of high single-digit decreases in inventory week-over-week, the market remains in oversupply, while demand continues to decrease across all capacities. As a result, open-market pricing remains soft, with continued pricing declines in the higher-capacity IDE and SATA drives. Specifically, we are seeing pricing for 250GB, 400GB and 500GB HDDs in the low $40, $50 and $60 range, respectively, for a quantity of 400–800 units. Currently, there is minimal difference in prices between SATA and IDE HDDs of the same capacity and speed. We are also monitoring pricing declines in the lower capacities as 80GB units have dropped to the $27–$29 range and 160GB units to the $33–$35 range.

2.5” Drives
There has not been a significant change in the 2.5” market month-over-month. The SATA HDDs continue to move slowly, while open-market pricing trails IDE HDDs of the same capacity and speed by an average of $5. Meanwhile, the 2.5” IDE devices appear to be performing the best in the storage market. The 20GB through 80GB have moderate demand in both the 4200 RPM and 5400 RPM speeds. Open-market pricing has remained relatively stable, with only a $1–$2 decline on 60GB and 80GB capacities. The 60GB 5400 RPM units are priced in the $33–$35 range, and 80GB 5400 RPM in the $40–$42 range.

General IC Update

Converge tracks pricing and supply trends for a number of CPU product lines in the global spot market. The following are activities we are currently tracking:

  • Op amps, military diodes and connectivity devices that have been in shortage for months continue to have strong activity.
  • Many of the Pulse shortages to their transformers line, created by the earthquake in China, have been resolved. Initially there were about a dozen part numbers involved, however there are a few parts that remain in short supply with the lead free H1102NL and HX1188NL being the tightest. Currently Pulse is meeting deliveries for some customers while pushing out others.
  • Spot shortages appear to have calmed on high-CV capacitors including the 1.5 picofarad and higher Murata caps that were cycling every few weeks across multiple case sizes.
  • Freescale processors still appear to be the most active in the microprocessor market.
  • As anticipated, spot activity on TI DSPs and Altera PLDs did not turn into any significant issues last month. However, spot market activity on the Altera line appears to be a potential issue, which we are monitoring.

CPU Update

As we approach the third quarter of 2008, a new generation of Intel chips is set to launch, along with a wide range of scheduled price reductions. In anticipation, many OEMs remain cautious to stock materials, although there are a number of end-of-life savings to be discovered, particularly on the desktop Conroe, Xeon Clover and Harpertown models, as well as the Mobile core 2 Duos (T5600, T7700, etc.).

Shortages are easing on desktops, although the mobile market remains tight, with midrange Napa (T2130, etc.) and Santa Rosa Celerons in tight supply.

Desktop CPUs

  • As expected, demand for the Wolfdale E8XXX desktop processor family has dropped with excess supply offered to the market. Pricing has settled down to Intel-direct levels or slightly below.
  • Demand for the Intel Conroe remains low as they are phased out of mainstream production. The Core 2 Duo E6320, E6550 and E6750 processors are currently trading below direct pricing and are readily available.
  • We are still experiencing frequent requirements on the Yorkfield CPU Q9300/Q9450/Q9550. Customers are looking for more cost-saving opportunities as the severe shortage of early Q2 has ended. This CPU family is still trading above direct, but there has been occasional cost-savings available.
  • Pricing on the Q6600 has been erratic with a very active open market, as Intel provides top-tier players better than direct pricing. Some OEMs are paying as much as $20 less than published, and many have an inventory of parts at the published direct pricing of $199.


Mobile CPUs


  • The most actively traded and sought-after mobile part has been the Celeron 550 Santa Rosa. Lead times have been as long as 3 weeks, and vendors/OEMs are not receiving the product they expect due to limited quantities available. We have observed a price increase by 20% over the last month, which has caused demand to increase for the 540 and 530 models.
  • The end-of-life Napa midrange models are in short supply, with the T2130, T2050 and T2080 affected. This has led to increased demand on the higher-spec 2MB T2350 and T2450 models.
  • There has been much discussion about a delay in the new-generation Montevina platform, first thought to be delayed until August. However, there appears to be supply scheduled to hit the market in July.

    Xeons


  • The main area of growth in cost-saving opportunities has been on Intel server chips, particularly the E5 series, as OEMs transition from Clovertown (53 series) and Woodcrest (51 series) to Harpertown E54xx, L54, X54 and Wolfdale E52xx, L52 and X52.

Memory Update

As predicted in our last Market Insights newsletter, the market for DDR2 memory has stabilized over the past 30 days. During this time, there were numerous news reports of substandard parts (PC800-based) leaking into the market and of a major Korean DRAM manufacturer trying to retrieve them. Despite these events, market pricing did not respond the way many had anticipated.

In actuality, market supply dried up on 1GB 800 and 2GB 800 desktop modules, while prices increased only a few percentage points. 1GB 667 desktop modules increased from $19.50 to $20.50 and 1GB 800 desktop modules from $21 to $23 over the past month. Converge believes the primary reason for this occurrence is that demand is simply absent from most box builders. The fact that contract pricing increased only 2–3% for the first half of June also indicates the DRAM manufacturers may have jumped the gun on their predictions for a 12–15% increase in the month of June. We believe they have their work cut out for them to deliver a 10+% increase for the second half of June.

Overall, there is a lot of uncertainty in the market. Open-market buys have been spotty, and there does not appear to be any consistency or sustained momentum week to week. We believe the next 30–40 days will be critical to the DRAM market. If demand from all the box builders does not materialize by the end of July, the market could end up flat, or possibly weaken, by the end of July and into the beginning of August. What is most concerning is the 2–3% increase in the first half of June, while the market expectation was for 5–7%.

February 21, 2008

Don't be fooled by the sudden rise in spot market pricing for DRAM

Don’t be fooled by the sudden rise in spot market pricing for DRAM memory over the last four weeks. Although the market has spiked roughly 20%–25% on the staple 64x8 PC667 chips, there have been no signs of any module activity in the spot market. The 64x8 PC667 chips rose from $0.85 to $1.10 over the past month, but they have since settled at roughly a $1.00 price point. With the rise in 64x8 PC667 pricing, module pricing also rose — not due to demand, but due to the cost of goods to assemble. In fact, there is still plenty of 1 GIG PC667 module inventory available in the channels. The 1 GIG modules rose from $17 to $20–$21 during the time span already mentioned but also retreated to an $18.50 price point. Various industry analysts believe the rise in price was due to a slight reduction in production from the DRAM manufacturers and spot market buys needed for builds before the Chinese New Year. As the holiday approached, pricing quickly dropped by about 10%.

None of this activity should be considered a rebound, as the market has not been able to sustain the increase in price. Converge still believes we are several months away from a true, sustainable rebound in the DRAM market. It is still too early to forecast an exact timetable as to when the market will gain some meaningful momentum, but we are hoping that by the end of March we will see some signs of life.

February 18, 2008

Chinese New Year quiets IC market

The anticipated slowdown leading up to Chinese New Year arrived a little sooner than expected this year. There will be little movement in the industry until Asia returns to full force by the middle of February. We are currently tracking parts that might experience shortages and delays in the following areas:

- TI op amps, Freescale processors, and Microsemi military diodes continue to experience long lead times.
- Some high-CV capacitors are still seeing spot shortages, as are some of the "run of the mill" ceramic caps.
- Lead times on Kemet tantalum capacitors are extending, and there is an increase in demand for AVX tantalum caps.
- Pressure on Cypress microcontrollers and clock drivers seems to have abated somewhat.
- We are tracking some spot shortages on Fairchild and Maxim devices.
- We see continued shortages of Broadcom parts, especially the Serverworks chips.
- There are continuing inquiries for Qualcomm mobile phone chip sets from Asian mobile phone makers, confirming a slight upturn in mobile phone demand.

January 24, 2008

Storage Update: Notebook drive market remains active

Desktop Drives
There has been little change in pricing for mainstream IDE/SATA drives since last month. The demand remains steady for SATA HDDs in the 250 GB through 400 GB capacities. Meanwhile, as manufacturers discontinue or slow production of the lower-capacity desktop IDE drives, we are seeing a spike in demand for the 40 GB through 160 GB HDDs. This is both part-number specific, as with the model WD400BBs, and capacity specific, especially in the 40 GB and 80 GB HDDs.

Notebook Drives
The notebook drive market remains active. There continues to be strong demand for 2.5” SATA HDDs in the 80 GB, 120 GB and 160 GB capacities. Open-market pricing varies by as much as $10/unit among same spec drives from different manufacturers. The 2.5” IDE market remains strong as well, specifically for the 40 GB, 60 GB and 80 GB 5400 RPM HDDs, although the lower-capacity, lower RPM HDDs volume has yet to drop off, with pricing remaining relatively stable month over month.

Server Drives
SATA drives continue to overtake SCSI in the server space. Their higher available capacities and lower cost make them attractive alternatives. The mainstream capacities range from 400 GB to 750 GB. There has been little, if any, demand for 1 TB drives as of this update. There is part-number-specific service demand for ST373207LC/LW and ST3300007LC/LW.

January 22, 2008

CPU Update: Intel introduces upgraded CPUs

In January, Intel reduced the list price on a number of its active processors and introduced upgraded CPUs into the market at pricing similar to that of its predecessors. Typically, when new product releases and price drops occur at the same time, a period of market uncertainty is created within the OEMs, creating open-market demand. Although the Intel desktop Core 2 Duo E8190, E8200, E8400 and E8500 have been released into the market, the official launch date is listed as January 20, 2008.

These new CPUs, valued from $160 to $260, replace the similarly priced 1.86 GB E6320 through 3 GB E6850 models. Converge is currently receiving a great deal of inquiries for the new E8XXX series CPUs (although current availability remains tight) as well as the E6XXX series CPUs. Demand persists for the E6300, E6400 and E6750 models, provided they are delivered at standard pricing. We anticipate strong demand for both series through February, with little cost savings on the replaced stack.

Strong open-market demand for notebook processors continues, for trailing edge technology rather than current processors. For example, there has been demand for newly released CPU models such as the T8100 through T9500; however, requests also continue for older T7XXX, T2XXX and T5XXX series CPUs, with pricing roughly at standard published pricing.

January 17, 2008

Memory Update: Surviving the DRAM market

The theme for the first half of 2008 is surviving the DRAM market. As the new year begins, look for DRAM manufacturers to strive for stability during the first quarter. The DRAM market is already at an all-time low and, generally, Q1 tends to be slow from a production standpoint. Converge believes that current spot-market pricing is where the market will remain during the next three months, plus or minus a percentage point. There is not much room for further decline, and if this occurs we can expect to lose one of the larger DRAM manufacturers to lack of funding. At today’s pricing, $8.50 for 512M DDR2 and $16 to $16.50 for 1GIG DDR2, there is no money being made.

If the contract and spot-market prices can remain stable over the next three months, the market should slowly rebound in Q2. We cautiously use the word rebound because any sustained increase in market price, even if small, would be considered a rebound. In the past, activity during the month of March has usually been a good indicator as to how Q2 will unfold from an open-market perspective. March tends to be a strong production month as forecasts for the year begin to come to fruition.