January 26, 2010

Choosing the right ITAD provider: Look at operational, financial, environmental and liability capabilities

Choices. Everyday we are faced with choices from the simple (what color shirt to wear) to the more complex (what to get my son for his birthday). Making the right choice can be easier when you do your homework and have the right information to make an educated decision.

The same holds true in choosing the right IT asset disposition supplier. Because enterprises are looking at a long term partnership, I recommend that companies look at service providers through four primary areas: operational, financial, environmental and liability.

First, what are their operational capabilities? What type of quality certifications do they have? You need to know that the work can be performed at a high-level on a repeated basis.

Second, from a financial perspective –What is their financial strength? Where do they receive their funding and how many years have they been in business?

Third, understand their environmental policies, and make sure that they have the appropriate permits to handle your e-waste. An ITAD provider should have a clear landfill and exportation policy. You certainly want to make sure that your assets aren’t ending up in a landfill, or exported to other areas of the world for ultimate disposal.

And fourth, from a liability protection perspective, what levels of liability protection can they provide to you? Are they going to be able to give you indemnification for any data security breaches, and indemnification for environmental compliance?

If there are other areas you consider important to evaluating an ITAD provider please let me know your thoughts.

In June of 2010, Converge was acquired by Arrow Electronics. Our ITAD services are now under Arrow Value Recovery. For more information, please visit www.arrowvaluerecovery.com.

January 13, 2010

FedEx introduces its first Boeing 777

Converge Freight and Compliance Alerts.

In January FedEx will put the first of an upcoming fleet of Boeing 777 freighters in the air. FedEx will be the first carrier to put the now-largest freighter into circulation. FedEx has 15 more of these crafts on order to create the largest global fleet. Other airlines with 777 freighters on order or in testing include Emirates SkyCargo and Air France.

"This is quite a machine. For those of you who don't know, this airplane will fly 6,000 nautical miles with almost 100 tons of payload, which means it's going to revolutionize our system; we'll be able to leave later [and] give our customers more processing time. We'll burn about 18% less fuel; the airplane makes less noise so it will also be good for our environment," stated FedEx chairman, president and CEO Frederick W. Smith during the October homecoming event introducing the B777F to the Memphis team.

The first plane in the fleet is named Saad after the son of a Newark terminal employee. FedEx held a company-wide contest to name the plane.

As FedEx is Converge's primary small-package carrier, we are looking forward to later cutoffs and lower FSCs (fuel surcharges) as the fleet is fully onboarded.

LCD shortage intensifies in first quarter

Converge LCD Update.

Few could forget how the LCD market staggered and tumbled just a year ago. Well, things have changed in just a short time, with panel makers having a tough time fulfilling worldwide demand.

One factor that contributes to the current market dynamic is the recent shortage on certain key components, which include polarizer, driver IC and glass. One other factor is seasonal, as most of the LCD manufacturers cut back 10-15% of production capacity during the December holidays. The more encouraging factor has to do with an increase of overall demand for LCD panels from all major markets. Customers in Europe, in particular, are placing additional forecasts to refill their inventories, which were nearly depleted amid strong December sales. Demand from Asia is also healthy, as Chinese New Year is a few short weeks away. Among various applications, TV panels are having the toughest time reaching their customers.

Lead times quoted by most factories have extended to 12 to 16 weeks on average for TV panels, particularly those 24 inches and under, with fulfillment rates dropping to around 30%. This means that many factories are able to fulfill only 30% of their existing orders. Although January pricing had not been officially released at the time this report was written, it is safe to expect a 6-8% increase from the current level. Supplies on TV panels over 24 inches seem to be in better shape, as fulfillment rates are in the 75% range. Lead times have also extended from the six to eight weeks seen in December to eight to 10 weeks in January. A 3-5% increase in pricing is anticipated.

The shortage on desktop panels of 18.5 inches through 22.0 inches continues in the first quarter of 2010. Prices are expected to go up by 5-8% in January for the mainstream form factors, with the current fulfillment rate at approximately 50%. Most panel production plants are fully booked through the end of March. Factory lead times have also extended to six to eight weeks. Notebook panel supplies will be subsequently affected as the shortages spill over. Expect to see a 3-5% increase for the month in pricing for 10.1-inch through 17.3-inch notebook panels. Although the shortage remains moderate, with roughly 85% fulfillment rate for LED models, the old-school CCFL models are becoming depleted in the channel. Market pricing for notebook panels will likely become less stable going forward.

The demand for industrial panels remains healthy. Certain advanced desktop models, including the LM190E08 and LM201U05 series by LG Philips, are popular among industrial customers. While CMO and AUO continue to gain a foothold in the industrial panel market, especially in the range of 5.7 inches to 12.1 inches, Sharp and Mitsubishi remain a top choice for many discriminating users.

Expect continued progressive demand and relatively stable pricing in the near term

Converge Storage Update.

Positive signals and demand drive market.
Heading into the December holidays, the market was experiencing shortages in higher-capacity 3.5" HDDs, especially the 1TB capacity, as well as strong demand for 2.5" SATA HDDs on a price-point-variance basis. At that time it was speculated that these trends would continue into the midway point of Q1 CY10. As we emerge from nearly two weeks of holiday downtime, we don't have specific data to confirm or deny this speculation. Further, we have yet to pinpoint concrete open-market pricing for the HDD range in question. There was activity during this downtime, especially in the ID space. However, we don't feel that the pricing and volume data necessarily translates to the January time period.

A broader look at the market suggests the trend will continue. The majority of analyst reports that we reviewed are predicting double-digit PC growth rate (10-15%) in 2010. Several factors are believed to contribute to this, including a recovering economy, falling unit prices, increased IT spending projections and operating system upgrades. These factors translate to a positive outlook in both the 2.5" and 3.5" markets. Seagate and Western Digital appear to be the favorites to capitalize during this period, as both manufacturers have product offerings for the PC (mobile and desktop) and storage system space. Additionally, each possesses a bridge product between the relatively slower SATA drives and the emerging SSDs. But don't look for a significant transition to solid-state drives until there is more widespread availability of directly compatible motherboards.

In the near term, we expect continued progressive demand through the emerging capacities, speeds and cache sizes in all major form factors. Generally, pricing is expected to be relatively stable based on projected market growth. Lastly, continuation of the shortage environment in the 3.5" space will depend on major manufacturers retreating from their conservative production approach in 2009. However, we expect them to be tentative early on.

Converge advises caution regarding semiconductor demand

Converge Semiconductors and Integrated Circuits Update.

Finding a consistent pattern of shortages and extended lead times.
The market is settling into a fairly consistent pattern of shortages and extended lead times, which is being driven by the following factors:

  • The Texas Instruments (TI) shortages on Data Converters, Logic and Op Amps (discussed last month) are continuing, although TI has been able to meet some of its data converter deliveries sooner than expected.
  • Lead times on Altera programmable logic devices (PLDs) and TI and Freescale digital signal processing (DSPs) remain unchanged, as do those of multi-manufacturer microcontrollers (MCUs).
  • Tightness is continuing in the diode market and has returned on some Infineon voltage regulators as well as Tyco high-density connectors.
  • Now that lead times seem to be settling into some consistency, the severity of material shortages over the next several months will be determined by demand levels. Although demand forecasts are still guardedly optimistic coming out of the holidays, there are enough questions surrounding the global economic recovery to warrant caution.

New product launch shortages and pre-Chinese New Year demand drive CPUs

Converge CPU Update.
Recapping 2009 and current pockets of demand.
In 2009, the move toward faster, cheaper CPUs has continued unabated. Moore's Law, which describes the long-term trend of doubling CPU and other IC speeds every two years, remains intact. However, many of the traditional business models of technology leaders are being challenged, as production is on the rise but revenues are falling due to cannibalization of their own revenue streams.

Challenges and opportunities.
The continued popularity of inexpensive netbooks and the move toward cloud computing will put pressure on the CPU production market. In addition, we are seeing many other areas contributing to CPU spot-market demand:

  • Embedded computing: Industrial computers, while produced in smaller quantities than mainstream models, rely on a higher percentage of more powerful, previous-generation processors.
  • Server chips: Mainstream and trailing-edge AMD and Intel parts are currently available at a 10% savings off list price. This is due to the relatively higher costs of the chips and the slower-moving market driving less commoditized pricing.
  • Service parts: The service and repair market remains robust, with IT purchasers more inclined to repair and upgrade as budgets are slashed. Demand includes obsolete and trailing-end CPUs.
  • Bundles: Sales of bundled chipsets, CPUs and wireless cards remain robust. However, the percentage mix is expected to decrease as prices decline.

Immediate focus.
In 2009, January delivered a surprising boom for CPUs. This was driven by new product launch shortages and pre-Chinese New Year demand. Currently, we do not anticipate any shortages. However, with several new I5 and I7 models going mainstream, it remains inevitable that supply issues will arise.

Demand for SDRAM PC133 material is strong and supply is weak

Converge Memory Update.
2010 begins with strong demand in all categoriesAfter two straight years of negative news, poor sales and low average selling prices, there's finally some good news to talk about in the DRAM market. 2009 brought a rebound sooner than many expected, and the positive news is that it looks like it's here to stay for a while. The spot market was active during the last six months of 2009, with solid activity for DDR2 and DDR3 modules as well substantial demand for SDRAM chips. What legitimizes this rebound is the fact that demand is coming from all areas of the industry. Both PC builders and contract manufacturers have been active with RFQs and buys from the spot market.

While many anticipated that 2010 would start with the traditional lull after the holidays, this has not been the case. Converge believes many are being caught off guard by the surge of demand for memory so early in the month/year. Demand for SDRAM PC133 material is strong and supply is weak. Both 128MB and 256MB SDRAM have surged in price since the last week of December, with some configurations up as much as 50% in the spot market. Lead times from Samsung and Micron are getting longer, and we believe the shortages will continue for several months.

Several industry trade magazines are predicting strong spend from the corporate world for PCs in 2010. Microsoft® Windows® 7 seems to be a hit, and it's been years since many companies have upgraded. Converge anticipates DDR3 to remain in short supply throughout the first half of the year and possibly longer. We are already seeing the market in short supply for 2GB DDR3 in both desktops and notebooks. As 2010 continues and markets gain momentum, demand will only continue to grow.

January 12, 2010

Federal bill to protect personal information

In December, the federal Data Accountability and Trust Act passed the House of Representatives and has been sent to the Senate. Although similar bills have been presented to Congress in the past, none have ever come to vote.

The Act revolves around the security of consumers' personal information and establishes the FTC as the enforcing agency. The FTC will require specific data security procedures and any data breach that exposes individuals' personal information will need to reported to the affected individuals and the FTC within a specified time period. It also requires organizations to offer free credit monitoring for two years.

This is a big step in the right direction, however there are two issues I'd like to note. First, this Act only applies to organizations that fall under the jurisdiction of the FTC. Insurance companies, banks, educational institutions and the government are not subject to the FTC regulations.
Some say it lacks teeth because of this.

And second, because it’s a federal bill, it would supersede state data security regulations, many of which are much stricter than this. It would, in effect, render the state regulations useless. However, the other side of the coin is that it would provide some data security protection to residents of states that have no regulation or improve the situation for those that have insubstantial regulations.

We'll monitor where this goes but for now, you can get more information here: http://www.opencongress.org/bill/111-h2221/show