Converge Memory Update.
There has been a lot of chatter over the last month or so about a possible severe shortage in memory by the end of 2009. It’s not really that far-fetched if you think about it. The memory market has been in a prolonged slump for over two years, and the biggest casualty has been DRAM. Although the flash memory market has also suffered severely, DRAM stands out the most because of its volatility, the range of end user markets and the volume of revenue produced from its sale. When one refers to memory, the first thing that comes to mind is, “What is the price of DRAM today?” That is what investors want to know when it comes to the state of the memory market.
The amount of money lost on DRAM has reached historic levels, which has prompted a series of events that could result in the perfect storm for a severe memory shortage. Qimonda filed for insolvency, which has resulted in a loss of jobs, reduction in output and a closure of fabs. The amount of Qimonda product in the market is quickly evaporating, which is forcing end users to use other manufacturers. Samsung, Micron, Elpida and Hynix have all cut back on CAPEX; reduced output (in some instances as much as 50% over the last year); and manipulated their workforce through either layoffs, reduced hours or job elimination. Finally, the Taiwanese DRAM manufacturers have been forced to merge companies in order to survive. This move will certainly eliminate sourcing options and stabilize prices. Even with all these moves already in motion, the price of DRAM remains at historic lows and supply remains abundant.
Looking back, it has been years since corporate spending has had an impact on the memory market. When the economy does turn around, Converge believes that the corporate market will make it a priority to update older computers, IT infrastructure and outdated servers. When this does happen, we believe that volumes will be high. That will no doubt trigger a shortage of memory. After two straight years of underinvestment, the DRAM manufacturers will simply not be positioned to handle this type of demand. It will take time to get fabs back up and running, hire staff, and increase output levels to meet demand.
April 15, 2009
Converge Memory Update.
Posted by Converge at 11:50 AM
Converge CPU Update.
In this update, we look at the curious case of AMD as an open-market channel, the continued hegemony of mobile CPUs and some unexpected desktop shortages.
AMD – an unpredictable open-market beast.
AMD (Advanced Micro Devices) has never acted like its chief rival, Intel, which announces and schedules price drops during the year. Instead, with AMD, different pricing per SKU can be offered to customers within the same region. This makes AMD a different animal on the open market, accounting for a smaller percentage of the overall CPU market share. Additionally, unconfirmed rumors of a pending price drop in April/May, and which parts will be affected, have caused concern among vendors and customers alike.
On the positive side, we are tracking an increase in demand for AMD mobile chips. End-of-life models such as TL50-64+ are good cost savers in emerging markets or service environments; current models in the QL/RM/ZM series are also providing good spot savings opportunities.
Mobile shortages give market a lift.
The month of March brought a number of shortages in mobile CPUs. Intel parts at the lower end of the scale such as Celeron mobiles; T3, T4 and T5 OEM models; and the BGA SP9300/400 were also affected. The higher-end P8400 is proving hard to find as it moves into end of life, while the P8700 processor slides into supply. Demand for the Intel Atom has been on the rise and excess has been nonexistent. Customers are looking for the Atom family with or without the chipsets that are normally bundled with them. Those who currently have inventory decline to sell, fearing that Intel will not be able to keep up with demand for the popular netbooks.
Customers continue to cluster around the lower–to-midrange models. As mentioned in previous Market Insights reports, there is cheap excess of higher-end parts, and, in March, the T9500, T9600 and some of the X9… parts were available at a cost savings.
End-of-life Napa parts (T2250-T7200) are an excellent value now, and even some of the older Santa Rosa models such as the T8100 have enjoyed a revival through last-time excess saving buys.
A quiet desktop market.
Older desktop Celerons enjoyed a last hurrah in March, with dozens of customers looking for last-time buys. The parts are short and becoming less popular in common production, with the E1 series taking over. Nevertheless, CD 430/440/450 were very active and were trading about $5 above their normal price. The E8400 and E7400 continued to offer moderate savings, but as these are both high runners on most OEM’s AVL, demand remains high and stable.
Posted by Converge at 11:48 AM
Converge Storage Update.
There has been little change month over month in the 3.5" market. Demand for 3.5" IDE and SATA HDDs is on par with March. Pricing for 80 GB through 400 GB has increased slightly in the open market. Converge believes this is a combination of the need for cost savings, alternative solutions and shrinking supply. There is a pricing logjam in the 80 GB through 320 GB range, with only $1 to $2 separating capacities. This holds true for both SATA and PATA. At the 400 GB level, prices increase sharply to the mid-$30 range, with 500 GB and 750 GB in the high-$30 and mid-$50 ranges, respectively.
The trend continues in the 2.5" market month over month, with an increasingly positive outlook for Q2. Converge is still monitoring increased part number–specific demand for the SATA interface in the 80 GB-through-320 GB range for both service and production. The preferred brands are Toshiba and Fujitsu, followed closely by Western Digital. Inventory levels seem to be decreasing as pricing has stabilized for these SATA capacities.
The 2.5" PATA market remains unchanged from March. Excess opportunities remain scarce, translating into increased demand and prices. This is true from the 20 GB up to the 80 GB capacity in both the 4200 RPM and 5400 RPM speeds. In both interfaces, the 7200 RPM speeds carry a significant price premium.
Posted by Converge at 11:46 AM
Converge General Integrated Circuit (IC) Update.
Although March was slightly more active than February, we are seeing the general integrated circuit market once again slipping into a holding pattern. Converge has been tracking occasional upticks in demand, but nothing that appears able to sustain anything noticeably different from the normal demand patterns of the last six months. OEM/CEM customers are still trying to move excess inventory, shop for savings and control costs through better procurement planning including just-in-time (JIT) deliveries.
Programmable logic devices are still one area where demand seems to be consistently tighter than in the rest of the market. Altera PLDs are still somewhat tight, and we are seeing an increase in activity on Lattice PLDs as well. Freescale Processors and TI DSPs have joined the Broadcom and PMC networking chips in pulling back slightly on demands, but we have seen some spot shortages showing up on some Maxim, Linear Tech and Analog Devices chips.
We expect this holding pattern to continue for several months, though there are indications that we will see “non-widespread” spot shortages spread to some other manufacturers.
Posted by Converge at 11:35 AM