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%.