April 29, 2010

Three IT asset disposition differentiators

Recently, I posted a blog about how to evaluate and choose an ITAD provider. The advice provided is a good jumping off point to help clear the field of companies that aren't quite the right fit. The next logical question, once you've created your shortlist, is how do you differentiate between providers? There are numerous ways to measure one vendor against another but three key differentiation points always seem to rise to the top.

First, look at geographic reach. Are they a local provider, a national provider, or can they provide ITAD services on a global basis? If your locations are only in the U.S., it won't really matter if the ITAD provider can provide services around the world. If, however, your organization has offices in various parts of the world, you will certainly want to consider a single vendor who can offer one ITAD process for all your locations. The standardized process will save time and offer increased liability protection.

Second, what are their reporting capabilities and are they convenient for you. The most advanced ITAD providers have developed online systems with complete transparency into the entire end-of-life IT asset disposal process, from pickup to final disposition. If you want to know when an asset arrived at its destination, you should be able to log in and find that information. You'll also want to make sure the reports that you want are available, that you can sort the data multiple ways and view and print certificates of recycling and destruction.

And third, find out about the ITAD vendor's remarketing capabilities. Chances are, not all of your equipment destined for disposal is e-waste. Your provider should be able to remarket the equipment that still has reuse value to help you recover some of your initial investment. How experienced are they, and how extensive is their network? Are they only able to remarket complete systems or do they have the ability to generate residual value through de-manufacturing and selling viable components?

The decision of an ITAD provider is not one that's taken lightly. Converge's customers come to us with laundry lists of questions and requirements and we wouldn't have it any other way. I want to make sure each customer has complete confidence in our abilities. In the end, you are handing over some of your most sensitive information to this vendor. Make sure it's an organization you trust.

April 15, 2010

Intelligently reintroducing product back into the service supply chain

A very high percentage of materials returned from technology service calls are actually in perfect working order. In the reverse supply chain industry we call this no-trouble found (“NTF”) or no-fault found (“NFF”). Some organizations simply scrap these components, chalking them up to the cost of warranty and repair. This introduces unnecessary spend on resupplying their spare parts inventory. The most intelligent companies use proven best practices to reintroduce the needed NTF products back into their service environment or create a new revenue stream from the items they don't need for potential warranty claims.

Here's a real-world example. Let's say you're home working on your desktop or laptop, and it breaks. You don't know what's wrong, and since your purchase included an on-site warranty, you call the 800 number for a technician to come to your house. The technician arrives with a repair kit, ready to fix pretty much whatever problem you're having with your system. But the technician is not really going to diagnose everything -- he doesn’t have the time to sit there and diagnose every single problem on your system. So he does a lot of swap-outs. He might pull out four pieces of memory modules and replace each, not knowing which of those memory modules is causing the problem. But your computer works now, so the tech packs up the four modules he’s just removed and goes on his way.

Now those four memory modules that were pulled out of your system end up back in a warehouse aggregated with similar material from the same situation that has happened thousands of times a day. Keep in mind that it is very likely that not all of these modules are faulty; in fact, maybe only one out of four is truly bad. That would amount to a 75% NTF rate on your memory, with three pieces being perfectly fine to use in the service depot once tested to ODM specifications and repackaged for field use.To intelligently reintroduce the working products back into the service supply chain, companies will aggregate these types of materials within their organizations, typically at one or two hubs. Converge then provides testing and screening services to go through this material and find those items that are NTF. Once we separate the good from the bad, the company decides if it requires any NTF product back for warranty support. In other words, is the company still supporting that product in the field? If yes, the product is routed back to them. If no, then the product can go out for asset recovery through the product returns management program. The benefit here is that the company leverages Converge's ability to look into multiple organizations' service pipelines and forecasted demands, and to resell that product, maximizing its returns.

NTF rates vary by component but can be as high as 77%, which is pretty unbelievable when you consider the amount of returns coming back to organizations. But companies are all about customer satisfaction -- they want to take care of us, as the consumer, as quickly as possible. So they do whatever they need to do to make sure your system is back up and running, even if it means replacing parts that may not be defective within those systems. The key is for them to implement a testing and screening process on the service depot end to be able to intelligently reintroduce NTF product back into the service supply chain.

April 14, 2010

Demand remains healthy

Converge LCD Update.

Despite sustained material shortages, the LCD market is catching its breath in April after a rally in recent quarters. While the overall lead time on TV panels remains between 4 and 8 weeks, 40" and larger sizes are actually delivering closer to 4 weeks than to 8 weeks. Factory pricing for these sizes has also only dropped by single-digit amounts. Pricing remains unchanged from the previous month for panels between 26" and 37", with lead times closer to 8 weeks than to 4 weeks. One factor for the pricing correction is seasonal, as demand declines from the peak of the holiday seasons around the globe. Panel makers are approaching the market situations with cautious confidence as the overall demand for TV panels is expected to remain healthy after this temporary correction.

Desktop panels are holding ground with factory pricing remaining largely unchanged and supplies tight for sizes between 21" and 24". Pricing fluctuates slightly on these sizes, in the $2 to $3 range, depending on the models. Average lead time is also unchanged in the 4- to 6-week range. Demand persists for certain 17" through 19" models, particularly those with 4:3 aspect ratios. Market pricing also remains high, at the low $100 range for these models.

Shortage is modest for notebook panels. Selected sizes with new LED technology, such as 10.1", 15.6" and 17.3" panels, are in higher demand. Pricing fluctuation is largely fueled by the weaker dollar in recent weeks. With CCFL backlights being obsolete, the demand for inverters also dropped. Not surprisingly, certain models featuring CCFL backlights with attached inverters are showing clear signs of shortage. Pricing will likely continue to rise in the foreseeable future as these panels become scarce.

Recent market activities seem to confirm Toshiba’s decision to exit the TFT business (see Converge’s March Market Insights). AU Optronics announced on March 31 the acquisition of AFPD, Toshiba’s subsidiary in Singapore. AFPD is one of the largest manufacturers of low-temperature polysilicon, or LTPS, TFT LCDs. LTPS is the base for the new active-matrix organic light-emitting diode, also known as AMOLED, technology. The AMOLED display technology is expected to replace conventional TFT in future mobile phones. This $110 million acquisition will allow AUO to better position itself to compete with Chimei Innolux Corporation in the mobile display market. This move is also interpreted by market observers as part of AUO’s strategy to regain its leadership position in the TFT manufacturing industry. This acquisition is scheduled to be official in July. Converge will continue to monitor the market impact of this marriage as well as Toshiba’s future plan for its TFT business.

Product development drives capacity and speed

Converge Storage Update.

Status quo is how we would characterize the HDD market in assessing the first quarter of 2010. Historically demand in the first quarter is the slowest of the year, but remains as expected and in line with previous years. When comparing the results of Q110 to Q409, it is evident that the shortages and demand that were prominent last quarter have diminished. However, this is not an overall indication of market direction but more of a seasonal trend. Most analysts are sticking to earlier predictions of double-digit increases in sales revenues year over year in the HDD space. Meanwhile, product development focused on more capacity and greater speed continues. Western Digital introduced a 600 GB VelociRaptor HDD, the highest-capacity 10K RPM enterprise 2.5" SATA drive designed to compete with the emerging SSD drives. Additionally, Toshiba is now offering a 1 TB and a 750 GB internal option in the 2.5" form factor more suited for the mobile, the SFF and the all-in-one desktop lines.

Specifically, there was no change in the 3.5" SATA pricing month over month with the exception of the 1.5 TB and 2 TB capacities. In these higher-capacity drives, there has been an approximate 5 percent decline in open market pricing to the mid-$90 and mid-to-low-$120 range, respectively. Pricing for the 2.5" SATA HDDs have remained stable since the last Market Insights report. We have not seen inventory issues in either form factor for this interface. As a result, most customers are seeking price point variance purchasing opportunities.

Last, low inventory levels in the IDE interface continue. While this is impacting pricing in both form factors, the effect is much more significant in the 2.5" drives. Here we have seen $5 to $7 increases starting at the 40 GB capacity and continuing through the full range. While this is in contrast to our general assessment of the market status, it is not a result of the typical factors that drive it but rather the phasing out of the interface. Industry segments such as off-lease mobile computing sales, where the IDE interface is still prominent on a 3- to 4-year refresh and original HDD destruction is a requirement, are experiencing difficulty finding replacement HDDs and thus driving price.

Demand continues to be strong and long lead times remain the norm

Converge Semiconductors and Integrated Circuits Update.

It has been more of the same in the semiconductor and integrated circuit market. Lead times in the 16- to 24-week range are the norm and there is little change in sight. Demand continues to be strong and suppliers continue to be conservative in bringing on or increasing their capacity. The same manufacturers continue to be short, with Texas Instruments, Freescale, Cypress, On-Semi, IR, Maxim and Xilinx at the forefront. Again, certain parts within these manufacturers might start improving their lead times, but then another series of parts within the same manufacturer start to get worse. We anticipate these conditions should continue at least through the second quarter and into the third quarter of 2010.

We are also seeing a significant amount of shortages and long lead times in the capacitor market. AVX, Sprague and Kemet in the SMT tantalums, especially the low ESR series, and Murata in the ceramics are the most common shortages we are tracking. Tantalum capacitor lead times are anywhere from 16 to 26 weeks and the ceramics are as long as 22 to 30 weeks. Shortage activity seems to be increasing in the market, and we anticipate it will continue to get worse before it gets better.

Arrandale shortage may have a prolonged effect

Converge CPU Update.

As reported in last month’s Market Insights update, the long-awaited Intel Arrandale mobile CPU shortage arrived and it gathered momentum in March.

In particular, the off-road i5-430M, i3-330M and i3-350M were affected. These processors are currently not available to all OEMs, with Intel supplying first to Tier 1 OEMs along with some smaller “early adopter” gaming machine producers. This meant that the shortage was not market wide, with only the very large or niche players affected.

Throughout March we were tracking sporadic large demand on these parts while supply was severely restricted. It is unusual to find a device shortage that cannot be solved in the open market, but in March the off-road-map Arrandale was in short supply and demanding a 20 percent premium above its contract price. This shortage looks to continue through April. However, many manufacturers remain unaffected as they continue to utilize the Intel Montevina processor family, where supply remains healthy.

While the mobile market buzzed with activity, the desktop market was quiet by contrast. The retail box market offered cost savings on a range of “I” series in Europe, and this lessened the demand for its tray equivalents. The E8400 enjoyed an extended lease on life as the processor remained a high runner, but demand is expected to tail off in favor of newer models.

The repair and embedded markets continue to show steady growth and we see signs of a more healthy market in April and May. We also believe the Arrandale shortage must ease soon or it will have a prolonged effect as the entire manufacturer base may “swap-out” to the newer models.

DDR3 price gap narrows between spot and contract pricing

Converge Memory Update.

Spot market activity for DDR2 and DDR3 modules has been light while contract pricing continues to rise. Open market pricing has also remained stable with 2 GB DDR2 PC800 trading in the high $40s and 2 GB DDR3 PC1333 in the low $50s. DDR3 spot pricing has been stable for several weeks; however, with several contract price increases the gap between spot and direct is narrowing.

Demand continues to be robust for Micron memory, especially SDRAM and DDR1. Micron lead times appear to be getting longer for most SDRAM PC1333 product, and while the spot market has been an avenue of supply, pricing has been at a premium. For those users who have Samsung approved as well as Micron, product is available and pricing has been much more favorable for comparable configurations.