July 15, 2009

No significant shortages seen in 2.5" drives

Converge Storage Update.

3.5" Drives
There has been some price erosion in 500 GB through 1TB 3.5" HDDs since our last update. This is not due to a drop in contract prices, but is a result of lower demand coupled with excess opportunities in the marketplace. Meanwhile, demand for 160 GB, 250 GB and 400 GB has remained steady, with pricing unchanged month over month. This is true of both the SATA and IDE interface. Currently, only $2 to $3 separates the 160 GB from the 250 GB capacity. However, the difference between the 250 GB to the 400 GB level, the price jumps over $10 to the high-$30/low-$40 range. Lastly, we are still seeing liquidity in 40 GB, 80GB and 120 GB IDE HDDs.

2.5" Drives
While market analysts continue to speak about shortage and allocation when discussing the 2.5" market, we have not experienced a significant impact yet. We believe this will change in the near term, but for the July/August time frame, availability is expected to remain unchanged month over month. As stated previously, this is particularly true of, but not exclusive to, the SATA interface in the 160 GB through 320 GB range. Finally, activity in lower-capacity 2.5" IDE HDDs remains strong. This pertains to 20 GB to 80 GB capacities in both the 4200 RPM and 5400 RPM speeds. Pricing levels for these drives have not changed since our last report.

IC shortages and lawsuits - oh my!

Converge Integrated Circuits and Semiconductors Update.

As we head into the middle of summer, we have started to track significant increases in the amount of shortage requirements. As reported in last month’s Market Insights, lead times have begun to stretch for many different manufacturers due to limited inventories and reduced capacity at the manufacturing fabs. TI, Altera, Freescale and Xilinx are some of the manufacturers that have been affected. It is rumored that Xilinx is having some major delivery issues on its Virtex-5 due to lower yields at UMC. This has caused some major shortages of certain Virtex-5 chips that are in high demand. Ultimately, this supply tightness might not correct itself until September.

Another potential issue that could affect more than just the IC market is the Tessera ITC patent ruling. This ruling will affect the importation of certain BGA packages from particular suppliers: Freescale, AMD, ST Micro, Motorola and Spansion. Supply and pricing in the United States of these particular chips could be affected, and companies building with chips in the US need to make sure they have taken the necessary steps to ensure adequate supply and firm pricing on these devices. It will be interesting to see how this unfolds going forward and how much of an impact this will have on manufacturers.

Barely a shortage whisper

Converge CPU Update.

Shortages take a vacation
In the past, the summer months have brought not only warm weather, but shortages in the CPU market. And July has always been a busy month in the spot market. Last year, the big Intel end-of-life desktop shortage rolled in around June and kept the market busy until the pre-Christmas season. From the Pentium 4 630s to the 925, and the E6550 to the E8400, desktop parts arriving or leaving the market drive market volume demand.

This year the there are no hiccups to report in the Intel supply chain. The E8400 is still being supported though Q4, and there’s barely a shortage whisper on other desktop parts. It appears that Intel has confronted the trend for the time being. Currently, we’re watching the E7400-500 and E5200-300 model switch for possible signs of a shortage.

Xeons drive reductions
Xeons and AMD Opterons are the current drivers this summer for cost-saving opportunities. This is the direct result of relatively higher pricing, a long shelf life allowing excess pockets to build and many price discrepancies across regions. The spot market is abundant, with many cost-saving opportunities in server chips, which is an unexpected situation given stalling consumer demand.

Laptops continue to lead the way
OEM TJ models and low-end parts are dominating current demand. Broadly, we group the current mobile business into two categories: low-end shortages and high-end savings. Users of the T7, T9 and P9 series should be able to obtain large-margin open-market savings. The T9400, T9600, P9500 and T9500 in particular offer extraordinary value. The T9500 sits direct above $500, while it can trade far below $300 in the spot market. The T4200/T4400 and all the T5 (Santa Rosa and Montevina) and T6 series have been short for the past several months. Celeron Mobile 4 and 5 series are still hard to find. Savings on the end-of-life T6 series can be found, although some OEMs are sticking with the older parts as long as possible. If they are committed to the T6400 and it goes short, they may move up to the T6500 or T6600. Otherwise, it is a lot harder to transition back down the speed range.

DDR3: Everybody wants you

Converge Memory Update.

According to the major DRAM manufacturers, DDR3 demand has been on the rise over the last two months and supply is limited. Sources claim that all DDR3 server DIMMs (dual in-line memory modules) are going directly to the Tier 1 OEMs as quickly as they can be manufactured, with lead times being quoted as far out as the end of October. This may not appear like a long time, but given the state of the memory market for the past two years, any talk of a lead time is big news. The lack of supply in the spot market confirms that parts are becoming scarce. While the DDR2 market remains flat, the DDR3 market is showing signs of life. Pricing is up about 15% to 20% over the last four weeks, and while there was no change in contract for DDR2, DDR3 pricing was up about 5%.

Converge anticipates that the DDR3 market will continue to show activity as we head into the busier build season. The notebook and desktop modules should also see a spike in demand in the coming months. Look for supply issues to occur with UDIMMs (unbuffered DIMMs) as well.