January 13, 2010

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.

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