August 13, 2008

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.

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