Converge Blog

Converge 2011 Survey Respondents Seek Quality Assurance

2012-01-25T09:16:00.000-05:00

Several months ago, Converge conducted its biennial customer satisfaction survey, which many blog readers probably received. If you were one of the hundreds of people who took the time to give us your valuable feedback, we cannot thank you enough. We view this survey as an opportunity not only to gauge (and improve) our performance level, but also to gain valuable insights about the electronic components industry from our global customers.

Converge customers are the innovators of today’s latest technology. They build electronics to fulfill every vertical need from telecommunications to consumer electronics to the industrial market – and beyond. And, of course, almost all our customers work with larger franchises and authorized distributors on a primary basis. But there are times when those normal supply channels become disrupted and a trusted independent distributor becomes the best option for sourcing the parts needed in time to keep production lines moving.

Alternatively, when the market slows and companies find themselves saddled with surplus inventory, they need a remarketing partner that can help them recover value while allowing them to remain focused on their core competencies. So we were not surprised to learn that the No. 1 reason that 2 out of 3 of our 2011 survey respondents say they come to Converge is for shortage solutions, followed by surplus remarketing and then market intelligence.

Keeping these results in mind, we did find it particularly telling that when asked to rank the most important service Converge offers, more than 30 percent chose “quality inspections” and nearly the same percentage chose “onsite anti-counterfeit equipment.”

When more than 60 percent of survey respondents say they come to Converge primarily for sourcing shortage materials, it is little wonder that the same percentage places the highest importance on our robust quality inspection program and our advanced on-site component testing services. Yes, our customers need parts that can be found only on the independent market, but in this day and age, they also know the risks involved in working with “any broker” to procure them. And many of them have decided that working with a distributor that doesn’t have in-depth inspection capabilities is not a chance they are willing to take.

Our survey respondents also told us that order accuracy and on-time delivery are highly important to them. We thought so. And we’re proud that more than 95 percent of them believe that Converge is meeting or surpassing their expectations when it comes to getting quality parts to them in time to meet their deadlines.

At Converge, we really love what we do – thanks, in no small part, to all of our innovative customers. Converge is proud to be your quality-driven partner for sourcing and remarketing quality electronic products in the independent market. We look forward to serving you even better in 2012.

Consignment Visibility Tool Simplifies Surplus Remarketing

2012-01-11T09:50:00.001-05:00

Trying to remarket surplus electronic components can be a tremendous amount of work for manufacturers and EMS providers. Unless your company is equipped with market intelligence, it’s not easy to find out how much your excess inventory is really worth or who might be interested in buying it. There is also the danger of finding the wrong buyer – e.g., a broker instead of an end user – whose markups and fees can minimize your financial return. In addition, dealing with product staging and global shipping logistics can be a real hassle when those activities are not part of your company’s core mission.

Converge specializes in helping technology manufacturers solve their complicated surplus problems, while minimizing effort for the manufacturer and maximizing return potential. One way that we make the remarketing process as easy as possible for our clients is through our consignment program. Converge consignment is a turnkey solution in which the customer ships the surplus inventory to Converge, where it is inspected, sanitized, and marketed to our global network of contacts. However, the customer retains ownership of the inventory until it sells.

Converge’s proprietary online Consignment Visibility Tool (CVT) simplifies the process even further by allowing customers to view and manage all consigned inventory via one centralized hub. Some of our CVT features include:

24-7 transparency. Customers can log in to see their surplus inventory status at any time.

Improved chain of communication. Our customers’ third-party partners – such as contract manufacturers – can also participate and access the CVT system, so customers can keep their entire supply chain streamlined and connected.

Inventory balancing ability. If customers’ forecasts change and they need some of their consigned products back, they can simply look in the CVT to view what is available. Converge will ship the products back at no cost.

Real-time financial forecasts. Consigners can see how much of their inventory sold, at what price it sold, and how much revenue to expect at the end of the month.

Flexible reporting. Converge sends regular consignment inventory reports and payments on a monthly basis. Clients can also download information to create their own reports at any time through the CVT.

Many companies struggle to find an effective way to get excess inventory back into the supply chain. Converge can help you return that value back to your bottom line … without all the work that goes with selling your own inventory one line item at a time.

Q&A with Scot Hennessey on Supply Chain Disruptions

2011-12-20T11:40:00.002-05:00

Shortages. For OEMs and EMS companies, few words can impart more angst and uncertainty. Electronic component shortages can virtually stop production lines, resulting in substantial loss of productivity and revenue. So what can manufacturers do to keep production (and profits) on track when the supply chain is unexpectedly disrupted? To learn more about supply chain disruptions, we discussed this topic in a Q&A with Scot Hennessey, Director of Sales for the Americas at Converge.

Q: What is the main cause of supply chain disruptions?

A: Supply chain disruptions can be caused by two different dynamics, one being demand-based and the other being supply-based. On the demand-based side, it could be due to new technology that instantly becomes popular, inaccurate forecasts, or seasonal demands. A supply-based shortage is typically due to raw material shortages or capacity restraints. Another prime cause is natural disasters, such as the flooding experienced in Thailand and the earthquake and tsunami in Japan, for example. Supply-based shortages can also be caused by geopolitical issues interfering with the normal business operations of a particular region or by parts going end-of-life. The reality is that no manufacturer can ever know with 100 percent certainty what will happen in the supply chain. It can be very unpredictable.

Q: What can manufacturers do to find the parts they need when the supply chain is disrupted?

A: The first thing most manufacturers will do when they encounter a shortage is go to an authorized distributor to try to find a solution. If that doesn’t work, companies can turn to a trusted independent distributor with market intelligence and a global reach. An exception-based partner that can offer market knowledge, such as Converge, will utilize its comprehensive database, sourcing strategy, and vast network of global partners to find material to fill the gap in a company’s supply chain.

Q: Should customers be concerned about where those parts are coming from?

A: We are. In this day and age, you can’t take anything for granted. That’s why Converge has invested in creating a comprehensive quality control program consisting of a 76-point inspection process and in-house advanced testing capabilities. Before any material is shipped to a customer, it must go through one of three Converge global hubs for screening. We also have an in-depth vendor screening and management process that tracks and continually scores our vendors.

Q: Do all independent distributors operate the same way?

A: In the past, I would have been inclined to say that practices were more similar among independents than I would today. But nowadays, the barriers to entry and the ability to meet industry-standard requirements separate most independent distributors from those that are best-in-class. Electronics manufacturers are looking for a certain level of supply chain confidence that can only be provided by distributors who are capable of making significant capital investments in engineering, equipment, infrastructure, and industry certifications such as IDEA. There are only a handful of independents in each region that can really scale to the quality requirements needed.

Q: So how would a manufacturer seek out a “best-in-class” partner in the independent space?

A: If possible, companies should be proactive and evaluate multiple exception-based partners before supply chain disruptions even occur. When doing so, I would audit facilities in person to verify there is a rigorous quality inspection process. Ideally, manufacturers should work with a firm that has certified component engineers in house so they are participating in the authenticity process. If an independent is not willing or able to make the investment in engineering resources and proper testing equipment, that should be a red flag.

Q: Do independent distributors have any insight on when a shortage is going to end?

A: No one can predict the future. The aftereffects of some supply chain disruptions linger longer than others. Sometimes parts are in shortage for months, and other times shortages resolve abruptly, leaving many manufacturers with surplus inventory after compensating for their shortage concerns by placing multiple product orders. The good news is that if manufacturers have already established a relationship with a trusted exception-based partner, that distributor will be ready to help with excess inventory challenges as soon as the market changes.

Why Working with an IDEA Member is a Great Idea

2011-12-07T10:30:00.035-05:00

Have you ever seen an independent electronic components distributor touting its affiliation with a group called IDEA and wondered what that meant? What’s the big idea behind IDEA – and why should you care?

IDEA is the Independent Distributors of Electronics Association. This is a non-profit trade association whose mission is to enhance the quality of electronic products and services in the independent market, and to standardize the techniques and methods used to test and screen parts. Before IDEA was formed in 2006, each distributor had to rely on its own collected information and experiences while inspecting products for non conformance. Since its inception, IDEA has worked with quality leaders from many distributors to create the first reference manual of industry best practices and recommendations for inspecting and testing electronic components in the independent market.

This “standard,” Acceptability of Electronic Components Distributed in the Open Market, was updated earlier this year with the latest industry information (IDEA-STD-1010-B). STD-1010-B offers hundreds of new photos that help explain testing techniques, in addition to more than 400 example photos of acceptable versus nonconformance parts. This detailed inspection criteria, differentiated by product and package type, gives inspectors an enhanced ability to detect suspect parts from any region of the globe. In addition, the standard gives detailed provisions for managing test service providers and advanced inspection techniques. Any electronic component distributor can purchase copies online, and would be wise to do so, and follow its recommended guidelines.

Converge goes a step beyond simply following the recommended IDEA guidelines; we are also an IDEA member. Companies are accepted into membership only after meeting a long list of requirements and receiving a confirmation by the IDEA board of directors, which is comprised of a peer group. It is important to note that not every company that applies will be accepted. The standards are high.

This means that when you work with an IDEA member, you are guaranteed that the company, among other requirements:

• Maintains a demonstrated, sophisticated, and continually improving Quality Management System (QMS).

• Has incorporated IDEA-STD-1010: Acceptability of Electronic Components Distributed in the Open Market into its QMS.

• Holds at a minimum both ISO 9001 and ANSI/ESD S20.20 certifications.

• Maintains product liability insurance at a minimum of $1 million per incident and $2 million aggregate annually.

• Has at least one (1) IDEA-ICE-3000 Certified Professional Inspector at each inspection location around the world. (Converge has more than 30.)

I would hope that those are the kinds of guarantees in a distribution partner that help supply chain managers sleep better at night. I know I would – especially knowing how many independent distributors there are who are NOT IDEA members. In today’s technology industry, you constantly have to ask yourself: who can you really trust? Working only with IDEA members just might be a great idea.

You can read the full list of IDEA membership requirements on the IDEA website.

Download Free Shortage Market White Paper

2011-11-23T09:30:00.001-05:00

Sooner or later, every technology-driven company will face an electronic components shortage. After all, the only predictable thing about the electronics supply chain is that it’s unpredictable. So how can manufacturers keep production lines moving when needed parts are not flowing through the typical distribution channels? That is one of the topics explored in the Converge white paper “Finding Components in a Shortage Market.”

This brief white paper also answers the most common questions about navigating the potential pitfalls of widespread supply chain disruption and allocation, including:

What are the risks associated with shortages?

What capabilities should you look for in a shortage inventory partner?

Is there a way to plan ahead for shortage situations?

If you prefer podcasts to white papers, then listen to our informative conversation with industry expert Scot Hennessey, Converge Director of Sales for the Americas, as he offers insight on “What You Need to Know About a Shortage Market.”

Supply chain disruptions in the electronic components industry may be a reality, but that doesn’t mean they have to derail your business. Partnering with a trusted independent distributor can give your company a significant edge when it comes to procuring shortage parts and protecting your supply chain from unwelcome interruptions.

Seeing Is Believing in the Electronic Components Industry

2011-11-09T10:00:00.013-05:00

At Converge, we like to say that seeing is believing in the electronic components industry. For more than 30 years, we have been among the leaders in quality assurance processes for independent distributors – starting with our original 76-point inspection. With each passing year, we further enhance our inspection and testing capabilities to continue to protect the supply chain from substandard components.

One of the many things that sets Converge apart is that we welcome customers who want to see our quality assurance processes in action. For customers who haven’t had the chance to visit, we have produced a short video that takes you inside one of our inspection facilities to highlight our in-depth quality inspection process. We hope you will take a few minutes to see what makes Converge such a reliable distribution resource:

When it comes to electronic components, it is imperative to verify your supplier’s inspection process and capabilities. Converge carefully screens all of its suppliers, and we urge our customers to do the same. It is the only way to guarantee the quality and peace of mind that your customers deserve.

What to Do When Parts Go End-of-Life

2011-10-26T10:00:00.004-04:00

Every electronic product and component has a finite life cycle. In a world of rapidly changing technology, companies need to react quickly in order to stay competitive in the marketplace. For example, when a component manufacturer introduces a new chip to the market, it already has engineers working on the next generation of that technology. Once the manufacturer has perfected the new and improved technology, customers are alerted that the old chip will be going end-of-life (EOL). Typically, customers using the old chip to manufacture their products will then have a short window to decide what to do next.

When a needed component goes EOL, manufacturers using that part have a few options:

They can switch to other previously qualified alternatives from their Approved Vendor List options.

They can “spec” in the next generation of the chip from the manufacturer. This would require engineering support and likely carry significant financial costs and time-to-market considerations.

Based on the product life cycle, they can estimate how many of the EOL parts will be required to continue manufacturing and servicing the product through a specified period of time. They can then order that quantity from the chip manufacturer as a last-time buy. This option places a large economic burden on the buyer, who must pay all the material costs up front and take possession of the product, which requires ongoing logistic and storage expense.

They can come to an independent distributor, like Converge, for market intelligence. Converge has a team of expert commodity managers who can give companies visibility into the liquidity of a particular part in the independent market. What manufacturers really want to know is: “Do we need to make this last-time buy right now? Can we lessen our financial burden of carrying costs long term? Will this part be readily available in two years if we need more?” These are questions that independent distributors can help companies answer – at no cost and no obligation.

The next time your company is faced with an EOL situation, why not put an independent distributor’s market intelligence to work for you? You might be surprised to find that you and your EOL parts can be happily reunited in the “afterlife” in the independent market.

Three Ways to Recover Value from Surplus Inventory III

2011-10-12T13:44:00.000-04:00

Part Three of Series: Demand Opportunity

Converge offers three valuable ways for manufacturers to recover value from surplus inventory. In this blog series, we have already learned about the outright buy and consignment options. Now we will take a closer look at the third option, which is taking advantage of our leverage program, also known as “demand” opportunity.

The demand opportunity option is very similar to consignment in that the seller receives the full benefits and expertise of Converge’s market intelligence, operational expertise, and extensive global network. In both arrangements, your company sends its surplus list to Converge and then we work to match the inventory to the demand that exists throughout our network. However, unlike the consignment program, Converge does not take physical possession of the inventory being sold. The products stay with their owners until Converge finds a potential buyer for them. If proposed terms and conditions of a sale are accepted, the products must come to Converge to undergo quality inspections before sales are finalized and the items are shipped to the buyers. All financial reconciliation and reporting are managed by Converge.

The demand opportunity is ideal for a company that has not previously worked with Converge. Perhaps you would like to evaluate our capabilities and performance on a smaller scale before you consider consignment? We completely understand, which is why we offer this program. Quite frequently, companies who start down this road will switch to the full consignment program as time goes by.

However, there are a few drawbacks to the demand opportunity option that companies should be aware of. Since Converge does not actually have the inventory in our possession, we rely on the accurate descriptions that the sellers provide. Products received by Converge must be in the exact condition expected; otherwise, the status of a pending sale could be compromised. The seller may also be required to provide additional company resources to facilitate the flow of information and approvals during the negotiation phase.

In addition, valuable time (and potentially, money) can be lost in a leveraged transaction, because it takes longer for the product to get from the seller to the buyer. The consignment program does not face these challenges, since Converge has the chance to inspect, sanitize, and prepare inventory for shipping before it is ever remarketed. When consignment products are sold, they can be shipped out the same day, which maximizes value for the seller.

There is no one “best” option for recovering value from surplus inventory. The one you should choose depends on your company’s specific situation. The important thing to remember is that there likely IS value in your surplus parts, even if you can’t use them. So before you scrap your surplus, give Converge a call. We will help you find a solution to recover the most value in the right amount of time.

If you missed Part One: The Outright Buy or Part Two: Consignment of this series, you can read them now.

Three Ways to Recover Value from Surplus Inventory II

2011-09-28T09:16:00.006-04:00

Part Two of Series: Consignment

In our last post, we discussed the benefits of using an outright buy option to recover value from your surplus inventory. Now let’s take a look at the consignment option. To simplify, we will start with a comparison.

In the last decade, consignment shops have become a popular way for families to resell expensive and unused child-rearing gear that they no longer need. The family leaves the unneeded items in the consignment shop. If the store is able to sell the items, the family receives a percentage of the sale. Buyers are delighted to find valuable items for less than retail cost, and the family is pleased to recover value from the unneeded items with almost no effort.

Consignment of surplus electronic components works very much the same way. If you find yourself with surplus inventory, but you don’t think that you can maximize its value through an outright sale, you can consign the products to Converge. We receive, reconcile, inspect, and stage the products, while your company retains ownership, complete visibility, and control of each line item – down to the resale price if you choose. Then our commodity experts put their market intelligence to work for you, scanning the globe for buyers who may need the parts you have in surplus. When we find a buyer, we take care of the details. Then your company gets the majority of the proceeds, which enables you to recover a significant amount of value from items that otherwise may have been scrapped.

The consignment option is very similar to Converge’s third option for recovering value from surplus: taking advantage of our leverage program, also known as “demand” opportunity. What is the major difference between the two, and which option would work best for your company? We hope to answer those questions in Part Three of this Series: Consignment.

If you missed Part One: The Outright Buy you can read it now.

Three Ways to Recover Value from Surplus Inventory I

2011-09-14T14:42:00.006-04:00

Part One of Series: The Outright Buy

Every OEM and contract manufacturer has been down the same road at least once: you order the parts needed to build a specific product and then the plan unexpectedly goes off track. The forecasts change, the customer cancels, newer technology is introduced…whatever the reason, you are suddenly left with surplus inventory that you can no longer utilize. Now it becomes a liability on your books. The challenge is, what is the best way to handle the situation?

You can try to return surplus inventory to the manufacturer or franchise distributor, and you will likely end up paying a restocking fee if you are able to return it at all. If that doesn’t work, you can check to see if the materials can be used by another internal project. If those two options don’t pan out, some companies will resign themselves to taking a loss on the inventory and go into scrap mode.

OR…you could partner with an independent distributor like Converge to consider other possibilities. Converge offers three different ways for companies to recover value from surplus inventory: outright buy, consignment, and our leverage model, also known as “demand” opportunity. In this blog series, we will explain and differentiate these options, starting with the outright buy.

In an outright buy, a manufacturer sends Converge its surplus inventory list. Converge’s commodity managers review the list, determine what the products are worth on the current market, and then may make an offer to buy the inventory outright. This is the perfect option for a company that wants to unload the surplus immediately. Keep in mind that if you are an OEM that owns surplus sitting in a contract manufacturer’s warehouse, you are probably paying storage costs for that inventory.

In addition, there is the potential for depreciating technology due to price erosion and product freshness factors. So the longer the inventory sits, the more money you stand to lose. With the outright buy option, Converge takes the inventory out of your hands and off your books, and you are free to focus on other matters.

One drawback of the outright buy is that your product mix may be moderately liquid, which could negatively affect your buyout amount. If your independent distribution partner is unsure about the return on investment due to market conditions, product condition, date code, or other risk factors, the buyout offer will be lower than if the risk were being shared by both parties. If this is the case, risk-sharing options such as consignment or demand opportunity might be a better choice for recovering value from your surplus. We will explore the topics of consignment in part two and demand opportunity in part three of this series.

What to Look for in a Surplus Remarketing Partner

2011-08-31T14:07:00.003-04:00

In our last blog post, we talked about the need to mitigate surplus risk by partnering with an independent distributor to remarket your excess inventory. But there are many different kinds of “remarketing partners” out there – and not all of them are reputable.

When looking for an independent distributor to help you remarket surplus inventory on the open market, there are several key qualities that you should check for:

Size. Independent distributors come in many shapes and sizes. The bigger the company, the more “tribal knowledge” you will have working to your advantage. Size does matter when it comes to recovering the most value for your inventory.

Commodity managers. Generally speaking, commodity managers go hand in hand with size. A small, independent distributor will probably not have experts who are solely dedicated to studying one particular commodity’s global activities; larger ones probably will. Commodity managers devote their time to assembling complete market intelligence around one or two specific commodities and can provide a wealth of in-depth market knowledge to the traders working on your behalf.

Around-the-clock workforce. We operate in a global economy, not one that ends at 5 p.m. in the time zone that we happen to live in. When it is 5 p.m. here, the workday is just beginning somewhere else in the world. A global independent distributor will have commodity managers working around the clock in different regions of the world, which enables that distributor to find a solution for your surplus parts in as little time as possible. In addition, because an independent distributor with an around-the-clock workforce never stops working, it never misses a beat when it comes to knowing about world events that may affect the market.

The need to remarket surplus inventory will always exist, whether there is a surplus market or a stable market. Despite their own best-laid plans, manufacturers will end up with more parts than they need for the current demand of their products. It is simply the cost of doing business in an unpredictable world. The good news is that solutions do exist to help mitigate surplus inventory costs, no matter which market currently prevails. By partnering with an independent distributor you trust, your company will be better prepared to handle any surplus market challenges that come along.

Mitigating Risk in a Surplus Market

2011-08-16T09:04:00.001-04:00

In the electronic components industry, there is no debate over the definition of “surplus” inventory. However, what kind of inventory should be classified as surplus has evolved a bit over the last ten years. Formerly, electronic components were considered surplus after they had been in inventory for at least six to twelve months. Now, due to the rapidly changing pace of modern technology, parts can be considered surplus the same day they arrive. At that point, the owner must rush to “move” the surplus inventory before the parts become obsolete. With new technology continually being introduced, the velocity of turning surplus electronic components into recovered value is critical. It is more important than ever to move quickly to try to recapture value from the parts you no longer need.

There are substantial financial risks for any company that finds itself with surplus inventory in a surplus market. A manufacturer could lose millions of dollars, depending on the volume of surplus inventory it owns and the original purchase price, or established cost of the components. The majority of the time, the company will not be getting that entire established cost amount back.

It is possible to find a buyer for surplus parts in a saturated market with the help of an expert with vast market knowledge and global connections. A reputable independent distributor mitigates risk and expense in a surplus market by helping manufacturers recover value from their surplus inventory. Of course, one must understand that the resale price may be less than the original price, but it is better to recover some of the loss on surplus inventory than to sit on it indefinitely. Timing is a vital part of the remarketing process. When it comes to surplus inventory, the company that goes to market with a specific type of component first is likely to see a better-value return than are the companies that remarket the same component in the days that follow.

So what qualities should you look for when choosing a surplus remarketing partner? Good question. We will give you some important tips in our next post. Stay tuned!

And remember – if you don’t want to miss a post, you can follow @market_insights on Twitter for the latest news from Converge.

Vendor Screening and Management Is a Must

2011-07-13T09:00:00.002-04:00

There is a common misnomer in the electronic components distribution market. Just because independent electronic component distributors operate in the open market, it doesn’t mean that they have an “open” policy when it comes to procuring parts. Although most technology-driven companies go to the open market to solve shortage or surplus problems at some point, some still think that independents simply click a button to purchase parts from anywhere in cyberspace – even from questionable sources. In fact, for most reputable independent distributors, nothing could be further from the truth.

At Converge, we have a very strict vendor screening and management program. Our commodity managers carefully screen each potential new supplier before any approved purchase is made. In most cases, this process qualifies the vendor as a potential sourcing partner, confirming that it is a legitimate company in good standing. Converge will not do business with vendors that fail this initial screening process.

Once a vendor makes it past our initial screening, it is registered as a new supplier in the Converge database. As an added layer of protection, every supplier is assigned a “new vendor” status for a probationary period. Throughout this probation, each supplier is graded on product quality history, performance and service fulfillment, stock supply/demand, and order history information. This information is visible on each vendor’s “supplier scorecard,” along with details about every Converge transaction with that supplier. After the probationary period, each supplier is assigned a status based on its performance. Thereafter, every supplier continues to be carefully monitored and could have its status upgraded or downgraded at any time.

Every time we purchase parts from any supplier, Converge utilizes a comprehensive 76-point inspection process to identify potential problems or concerns well in advance, before product ever reaches the customer. And we continue to make significant capital investments in the most advanced component testing equipment available, such as X-ray and decapsulation equipment. We leave no stone unturned when it comes to preventing substandard components from entering the supply stream.

Before your company works with an independent distributor, be sure to ask how they vet their suppliers. While vendor screening and management shouldn’t be a distributor’s only line of defense, it should always be its first line of defense. In the open market, trustworthy distribution partners will go to great lengths to ensure safe and successful transactions for their customers. Your company should not accept anything less.

Why a Global Footprint?

2011-06-29T08:00:00.007-04:00

It seems that most independent electronic components distributors want to claim they have a “global footprint.” But you may need to read the fine print to determine what that footprint really includes. Sometimes a “global” distributor has a sales office in only one country besides its home base. That may qualify as international, but it probably isn’t exactly what you envision when you think about working with a global distribution partner.

True global reach is something you should seek in an independent electronic components distribution partner for the following reasons:

-When you have a shortage situation, a distributor with a network of thousands of trusted sources around the world increases your chance of finding even the most highly allocated component quickly and effectively.

-When you have surplus inventory, a distributor with visibility into industry wide usage of electronic components in every global region helps you find the right buyer in the right time frame.

-A truly global sales and procurement partner never sleeps. So, an independent distributor with 24/7 coverage can find solutions to your needs as soon as they become available in any region of the world. It can also provide around-the-clock support.

-A global distributor has a thorough understanding of local cultures, customers, languages, and international transaction regulations, which means you don’t have to worry about anything but your core mission.

Converge is a true global independent distributor. We have three headquarter offices located in each of the world’s major trading regions: Peabody, Massachusetts (the Americas); Amsterdam, Netherlands (Europe, the Middle East, and Africa); and Singapore (Asia Pacific). Converge also has experienced electronic components traders, commodity managers, and logistics teams stationed at additional locations around the world.

Whether your company needs to recover value from surplus inventory or source hard-to-find parts to keep your production moving, you don’t want your solutions to be limited to a certain region of the world. You want the world at your fingertips – and a global independent distributor can give it to you.

Expert Engineers: Another Piece in Quality Puzzle

2011-06-15T09:05:00.020-04:00

At Converge, we are committed to ensuring the quality of every single electronic component lot that passes through our facility.

Recently, we have been using the Converge blog to explain some of the ways that we do this, from our advanced quality testing methods to our vendor screening and management program. Now I’d like to tell you about one more extremely important layer of defense: our expert electronic component engineers.

Every inventory lot that comes through Converge facilities undergoes a 76-point inspection process. This begins with our front line inspectors who check to make sure that the part numbers, manufacturer, quantity, date codes, and physical condition are exactly what were ordered. Then, the lots are further inspected by a skilled component engineer. Our engineers are the expert eyes that spot even the tiniest details that would qualify a component as “substandard.” They are a critical part of our quality process and line of defense.

That is why Converge only hires certified engineers with a bachelor’s degree and three years of field experience, or an associate’s degree with five years of field experience. Upon joining Converge, they undergo an extensive training process that includes learning the detailed steps in the Converge inspection process from one of our tenured component engineers.

-Among other credential and training requirements, Converge engineers are required to:

-Pass the IDEA-ICE-3000 Certified Professional Inspector exam within 90 days of hire, and be recertified every two years

-Certified to ANSI ESD 20.20 – 2007 standards

-Attend ongoing Counterfeit Electronic Component Avoidance Workshops (CCAW), which highlight the latest counterfeiting trends in the marketplace

-Attend ongoing Measurement System Analysis training

In addition, many of our non-engineer inspectors go through the same training and certifications. In fact, Converge has more IDEA-ICE 3000 certified inspectors than any other IDEA member company – a fact that makes us proud. Every certification, every training course, and every electronic component engineer is a significant investment for our company. But we feel that these are investments that must be made in order to protect our customers’ supply chains and deliver the quality they expect and the peace of mind they deserve.

The Value of Commodity Management

2011-05-11T11:34:00.004-04:00

One of the things that sets Converge apart from other independent distributors is the fact that we employ a full team of commodity managers providing around-the-clock global coverage for our customers. Not just one or two…but thirteen! Most independent distributors do not have even one.

In the electronic component market, a commodity is defined as a type of component whose price is subject to supply and demand. Each commodity is considered interchangeable; the market treats it as equivalent no matter who produces it. The commodities that Converge tracks, buys, and sells in the independent electronic components market typically include, but are not limited to, CPUs and chipsets, memory, LCDs, integrated circuits (ICs), and passives.

A commodity manager is responsible for closely tracking the performance of a specific set of commodities in the marketplace, similar to the role of a broker in the stock market. This ensures that, in the ever-changing world of electronic components, a commodity manager can help determine the best time to buy and sell that particular commodity. Our commodity managers monitor market prices, analyze market trends, and provide Converge traders with real-time access to the information they need to make informed decisions.

How does this help our customers? Well, our traders buy and sell to serve our customers’ needs. If you have excess memory that needs to be unloaded, our memory commodity managers will put their market intelligence to work for you to obtain the best value for that product. Not only do they know what that commodity is selling for, and whether it may be affected by an excess or shortage situation, but they also know what companies are using that particular product and might want to buy it.

Conversely, in a shortage market, when you cannot obtain the parts you need from contracted distributors, our commodity managers can not only source the electronic components but also have the negotiating power to get the best price.

Converge has the broadest, deepest, and most dependable network of technology manufacturers and suppliers in the world. Those relationships do not come easily; they are the result of providing quality service for more than thirty years in the industry.

So what is the value of working with an independent distributor that has commodity managers? Competitive advantage. Our market intelligence will help you make better, more reliable, and profitable trading decisions as well as help minimize your risk in the supply chain more effectively around the globe.

When It Comes to Excess Inventory, Help Me Help You

2011-04-27T11:25:00.004-04:00

Tips on how to extract the most value from excess inventory, special to the Converge blog from veteran trader Ed Graham

Even though it has been 15 years since “Jerry Maguire” was released in the theaters, I still hear lines being quoted from the movie all the time. You know the ones I’m talking about: “You had me at hello,” “Show me the money,” and of course, “Did you know that the human head weighs eight pounds?”

One memorable line from that movie has always jumped out at me, because it so succinctly says what I frequently wish I could tell my customers in my role as a trader of electronic components. It’s when sports agent Jerry Maguire begs his star client, Rod Tidwell, “Help me help you.”

Help me help you. I couldn’t have said it better myself!

As a trader at Converge, who deals primarily with excess inventory, my job is to help companies find buyers for inventory they no longer need. The longer these parts sit idly, the more investment companies stand to lose on them. When a company comes to me with an excess problem and I begin to evaluate their inventory resale possibilities, I can’t tell you how often I think, “Wow. If I had only known about this three months ago, when this part was in shortage, I could have found them a great price.” I can almost guarantee that the company has been sitting on the excess for longer than three months. They just took a long time to get around to telling me about it.

So here’s my insider tip. If you want to make the most out of your relationship with an independent distributor, the key word is “relationship.” Build one. If you think back to “Jerry Maguire,” Jerry and Rod Tidwell end up forming a relationship through having constant contact. And ultimately, it is that relationship and an understanding of one another’s needs that enables them to help each other.

Getting to know your inventory as early in the game as possible will allow us to help you get the most return on your excess products. Talk to us regularly. Tell us about your excess inventory as soon as you know you have it. Not when you must get rid of it…but when you could get rid of it, if the price is right. Then we can put our market intelligence to work for you on an ongoing basis, instead of just when there’s urgency. And we can help you make educated decisions about when market conditions will be most favorable for you to sell.

Whether you’re looking for an outright buy solution, a consignment program a demand opportunity, or something in between, I can find the resale solution that is most beneficial for your bottom line.

I’m always happy to help you find a solution for your excess inventory. It’s what I do. But if you tell me sooner rather than later, I might be able to get you top dollar for those parts, instead of pennies on the dollar. Help me help you.

X-ray Vision: Leading the Way in Electronic Component Supply Chain Quality Initiatives

2011-04-13T11:57:00.005-04:00

At Converge, we are always looking to enhance our inspection and testing capabilities with technology.

As an established independent distributor, it is a necessity for us to take extra care with components originating from the open market.

Recently, I have read several articles citing estimates that up to 10 percent of global technology products are counterfeit, equating to roughly $27 billion in product sales worldwide. Numbers like that can be frightening to electronics manufacturers, who could face serious damage to both their reputation and their bottom line if they unknowingly purchase counterfeit or substandard components on the open market. I can certainly understand their concerns. In fact, this is precisely why Converge takes quality control so seriously.

To ensure that every part we sell is 100 percent authentic, Converge has invested in the most advanced technologies available for electronic component inspection and testing services. Not only do our highly trained, in-house component engineers microscopically inspect a sampling of every part number purchased by date/lot code, we also use X-ray and decapsulation machines to view inside components to eliminate potential non-conformance. Much like an X-ray exam you might have at the hospital, our X-ray machine allows us to verify that everything that should be inside a component is there and intact.

If we need an even closer look, we can remove the top of a component with our “decap” machine. This gives us a magnified view of the interior of the circuit and enables us to confirm that the die matches the component, when needed. Not having to outsource these inspection services also helps us provide customers with faster delivery TATs.

Converge is one of only a handful of electronics distributors in the world who have this kind of testing capability in-house. These state-of-the-art machines require a significant financial investment and a highly trained internal inspection team.

I believe that our willingness to continually invest in technology and detection methods demonstrates Converge’s commitment to preventing counterfeit parts from making it into our supply chain. And after 30 years as an independent distributor, we have the quality record to back that claim.

Counterfeiters continue to get more sophisticated, so electronic component distributors simply have to “up our game.” Converge has done it, and we will continue to use our “X-ray vision” to lead the way in the quality initiatives of the future.

Broker vs. Independent Distributor: What’s the Difference?

2011-03-30T14:39:00.005-04:00

Once upon a time, if you needed to buy electronic components on the open market, there was only one way to get them. You had to work with a broker.

In the beginning, most brokers of electronic parts fit the classic definition of the word and didn’t offer much beyond that: They arranged transactions between buyers and sellers and earned commissions from the sales. A broker could be a large firm or a guy in a basement with only a handful of inexpensive parts stocked as inventory. A broker simply knew how to get the parts that you needed, and that’s what made his services valuable.

Times have definitely changed.

A new type of parts broker was born in the 1990s, when the founders of Converge coined the phrase “independent distributor.” Although the company started out as an electronic components broker in 1980, it evolved into much more than that.

The founders identified the need to differentiate the new services that Converge provided from those of the “average” parts broker. The “independent distributor” distinction caught on immediately and is now widely used throughout the industry.

While brokers and independent distributors both help buyers and sellers find each other, there are significant differences between them. Five main points of distinction include:

Global footprint. Independent distributors have infrastructure (in addition to sales offices) sprinkled around the globe. This enables them to provide full end-to-end service — from warehousing to packing to shipping — for customers almost anywhere in the world.
Robust quality programs. This is an important differentiator. Counterfeiters grow more sophisticated every day. The average broker does not have the capability to inspect and test the parts that it sells. Conversely, an independent distributor invests in capital test equipment, staff education, and internal engineers, who conduct rigorous inspections to ensure the authenticity of every component.
High industry standards. I’m not trying to say that the “average” broker doesn’t have standards. However, independent distributors (at least the ones that want to be taken seriously) are required to have them. Most aim to join industry trade organizations, such as the Independent Distributors of Electronics Association (IDEA), which has stringent membership requirements. These IDEA standards set the bar high on everything from the certifications that independent distributors must obtain to the amount of product liability insurance they must carry. When you work with an IDEA member, you are assured that you are working with an electronic components distributor that has dotted every “i” and crossed every “t.”
Market Intelligence. Due to its global footprint and vast network of industry connections, an independent distributor can provide valuable insight into what is transpiring in the market. Instead of simply finding or selling the parts that a client needs, an independent distributor can help the client make educated, long-term decisions based on market dynamics prior to each transaction.
Reliability. Since independent distributors offer more resources than do brokers, they are able to offer higher levels of service, quality, and liability protection to their customers. If there is a problem with a shipment that you purchase, you can trust that an independent distributor will be there to remedy the issue. Small brokers cannot make that same guarantee.

In the world of electronic components, brokers and independent distributors may share some of the same functions, but they are far from being the same. At Converge, we have worked hard for the past 30 years to set ourselves apart. We hope that our customers — and now you — will notice the difference.

Japan's Earthquake Impacts Supply Chain

2011-03-16T17:01:00.099-04:00

On March 11, 2011, Japan experienced a 9.0-magnitude earthquake and tsunami.

As we continue to monitor the situation, we have been in ongoing contact with suppliers located in this region to gauge any impact to their businesses and the supply chain.

Suppliers with operations in Japan have indicated that they may experience delays.

Arrow Electronics has compiled a list of official supplier statements on their website. To view the latest updates please visit www.Arrow.com

At Converge, our thoughts go out to those individuals affected by this terrible tragedy.

Converge: A Recipe for Success in the Global Electronics Industry

2011-02-22T10:32:00.001-05:00

Don’t you love the business success stories that start with two regular guys in an unlikely location with little money and a far-fetched dream?

We all know the story about the two guys who started a computer company in a garage back in 1975; the accomplishments of Bill Gates and Paul Allen have become the stuff of IT legends. In more recent digital-era folklore, there is the tale of a kid named Mark Zuckerberg and what he and a few of his college buddies developed in a Harvard dorm room (it was a little social media application known today as Facebook). There was also the Stanford dorm room start-up that turned into Google. But do you know the story about the global electronics company that started with two guys in a kitchen?

Back in the early seventies, two guys named Henry Bertolon and Jeff Filmore worked together as Radio Shack salesmen at a store in a Boston-area strip mall. There, they started to tinker with early versions of computers and fell in love with technology. In 1980, Bertolon convinced Filmore that there was a huge market for helping technology-driven companies to fill component shortages. Using Filmore’s kitchen, a small line of credit from a bank, and $22,000 from the sale of Bertolon’s house, they started a company called New England Circuit Sales. Their mission was to deliver “quality products on time.” By the end of the year, the small Beverly, Massachusetts, start-up was making headway.

Bertolon and Filmore were visionaries in the field of electronic component distribution. Early on, they had recognized that one of the biggest problems facing value-added resellers was getting hard-to-find electronic components delivered on time. They realized that sometimes manufacturers needed to be able to go outside of their partnered network to order necessary parts, whether it was due to a shortage, a need for faster delivery, or just to save money. In 1994, the pair coined the term “independent distribution” and changed the company’s name to NECX Exchange. To Bertolon and Filmore, there was a clear distinction between an independent distributor and a broker. Brokers did not inventory large amounts of product, guarantee internal quality inspections, or offer any high-touch services — but independent distributors did, and built customer loyalty in the process. NECX continued to build a large network of global clients.

In the 1990s, NECX established additional offices overseas, including headquarters in Amsterdam and Singapore, in order to better serve its global client list. Even after Filmore and Bertolon sold their shares of the business in the late nineties, it has continued to grow exponentially. Of course with growth, often comes change. Over the years, NECX was sold and renamed as Converge. New segments of the company have been developed to provide reverse supply chain solutions and IT asset disposition, both of which are essential components of running successful technology-driven companies. Most recently, Converge was acquired by Arrow Electronics in June 2010, and is now under the umbrella of a Fortune 200 corporation.

One thing that has not changed is that Converge has continued to stand out as a leader in the global electronics industry. Over the past three decades, Converge has established the broadest, deepest, and most dependable electronic components distribution network in the world. While some companies currently are talking a lot about their new quality measures and advances in counterfeiting techniques, Converge has been leading the way in quality control for well over five years. Visionary … once again.

In 2010, Converge celebrated the thirtieth anniversary of its founding — that great “two guys in a kitchen” moment. Thinking back on everything that has happened since then, it’s almost hard to not be amazed. Who knew that helping companies find the right electronic components at the right time could turn into this? However, every business that starts with a great story also starts with identifying a real need in the marketplace and finding a way to fill it while meeting customers’ needs. That’s what Converge has done. As long as that need exists, we will continue to provide our customers with up-front, proactive, and responsive service, and an unwavering commitment to quality. It is a continued recipe for success.

Converge China offices closed for Chinese New Year.

2011-01-31T11:35:00.002-05:00

Converge’s China offices will be closed from February 2^nd through February 8^th in observance and celebration of the Chinese New Year. All China offices will re-open for regular business on February 9, 2011. Happy New Year!

It’s Not Easy Being Green

2010-12-13T09:50:00.005-05:00

Anyone who watched the television show “Seinfeld” probably remembers the episode in which Jerry tried to pick up a car he had rented, only to discover that the company had not held the vehicle for him. “See, you know how to take the reservation,” he told the rental agent in frustration. “You just don't know how to hold the reservation, and that's really the most important part of the reservation … the holding.”

When I think of this scene, it reminds me of the ability of modern enterprises to uphold “green” initiatives in the corporate world of cost cutting and quick decision making. Any company can claim to be green. But when you take a closer look at company practices, things are not always what they seem. This is especially problematic when the company’s line of work is helping other enterprises properly dispose of their retired IT assets.

How often do we read about sham recyclers … those that claim to be environmentally friendly but ultimately send e-waste to developing countries? It is much easier to fill up a container and ship IT assets to another country than to take the numerous and costly steps to ensure that equipment is properly recycled in the United States. Some of the latest headlines demonstrate that even the companies that are trying to be green can still be tempted to take dangerous “shortcuts.”

Being green takes a serious commitment. It is not a label to use when it is convenient and ignore when it is not. A commitment to the environment and sustainability must be inherent in the company’s idealistic mission and concrete processes. It can mean that your costs are higher and your business processes more complicated. For Converge, it means that we hold ourselves accountable to a strict no-landfill, no-e-waste-export policy. Every employee and downstream partner knows about our environmental commitment and understands that we take no shortcuts. Every vendor is strictly vetted and regularly audited to ensure that they are handling e-waste the correct way. It isn’t easy, but it’s the right thing to do.

At Converge, we do all the legwork so our customers don’t have to worry about a thing. Whether they want to remarket, redeploy, or donate end-of-life IT assets, we help them make the best decision. And when IT equipment has no residual value, we make certain that every asset is properly recycled so that none of it ends up in a landfill or overseas. Our customers are able to uphold their green promises, often returning money to their bottom line in the process … and we are all able to feel good about what we are doing to protect this world that our grandchildren stand to inherit.

This is why I am excited to announce that Converge has been named a 2010 Green Supply Award winner by Supply & Demand Chain Executive magazine. We have been recognized for our ability to help global enterprises identify the best strategies for end-of-life IT assets and at the same time meet their sustainability goals. Unfortunately, this recognition probably won’t be written about in major newspapers, but it is certainly news worth sharing. And it is an accomplishment to be proud of.

After all, as a famous Muppet once said, “It’s not easy being green.” We couldn’t agree more. But it is easy to ask Converge to do the hard work for you. It’s what we do. And we love it.

Providing Value and Quality in a Shortage Market

2010-12-07T15:45:00.007-05:00

Electronic component shortages can virtually stop production lines, resulting in substantial loss of productivity and revenue. Shortages only add to the struggles of manufacturers in already-challenging economic times. Unfortunately, in a shortage environment, many manufacturers are forced to search for supply in the open market, leaving them vulnerable to counterfeit or suspect parts.

In this market, more than ever, you need a reputable independent distribution partner that you can trust to eliminate quality concerns, improve lead times, and keep the manufacturing process flowing.

Finding the right partner -- one with years of expertise in securing quality products from carefully screened suppliers -- is an invaluable benefit to companies looking for a competitive advantage.

A vendor with a comprehensive database and sourcing strategy can offer customers the right parts at the right time, even in a shortage market. Having a global footprint is all about the reach from a sourcing, service and delivery standpoint.

Customers also need to feel secure about the partners they use and the quality of products provided. Having a rigorous incoming inspection process so that suspect parts never enter the channel is key.

Overall, customers should be working with companies that comply with IDEA standards. Ideally, you should work with a firm that has certified electronic component engineers in house so they participate in the authenticity process. If a company is not willing to make the investment in engineering resources, that should be a red flag and a deal killer for you.

At Converge, quality is our top priority. We have an unmatched track record of quality in the industry and an established anti-counterfeit prevention program.

So here is my parting thought for customers in a shortage market.

Find a supply chain partner with a proven track record, and conduct an audit to meet them face to face. Make sure they can execute globally and that they are willing to invest in the partnership. They should also have commodity expertise and a global footprint so they can provide you with quality products and rapid fulfillment.

Work to form a long-term partnership that will ensure your quality objectives are met and your supply chain runs smoothly. And in the end, you’ll have proven confidence in your supply and in your supplier.

Third-party certification still not an IT asset management requirement

2010-11-17T10:42:00.004-05:00

I attended the 2010 E-Scrap Conference for the first time this year, and I was honored to present my projections about trends in enterprise IT asset disposition and its impact on the e-scrap market.

It was a well-attended conference, with participants from large corporations and manufacturers, IT asset management and e-scrap providers, and government and certification bodies. The hot topic on everyone’s discussion list was industry certifications, which were represented quite well at the conference. It quickly became apparent that organizations are paying close attention to the evolving certifications, but are not rushing to endorse any particular one yet. Rather, most companies are taking a wait-and-see attitude to let the standards develop before starting down the path to certification.

At this point, a third-party certification is not required to conduct business in the IT asset management space. But it soon might be, and clearly people are looking at the core business requirements of these certifications to determine which ones fit their organization.

Enterprise organizations have a significant amount of influence in the industry certification race. The business requirements they set could draw a line in the sand for providers wishing to partner with them. For our part, Converge has always had the required ISO certifications and a no landfill/no export policy. We also anticipate achieving the R2/RIOS certification in spring 2011.

If you attended the E-Scrap Conference, I’d love to hear your opinion as well.

Data security ranks number one

2010-10-08T13:08:00.005-04:00

Ensuring data security is the number one objective of IT managers when it comes to IT asset disposal. This is no surprise to us, as the world's media focuses on privacy and data breaches, waiting for their next big story. The topic is hot. Organizations found to have unwittingly exposed customer records risk having their reputation tarnished and customer loyalty shattered.

A Google search on "data breach" lists 6,930,000 results. And The Privacy Rights Clearinghouse chronology of data breaches http://www.privacyrights.org/data-breach lists over 500 million records breached since 2005, including details. Technology gurus say once something is posted on the Internet it remains there forever. You can bet the organizations in these articles cringe at the constant and permanent reminder of a gaffe they would rather everyone forget.

The 2010 Data Breach Investigations Report is a study conducted by Verizon and the U.S. Secret Service, analyzing data breaches from the past six years. The results can help shed light on common causes of data breaches.

For example, according to the study, in 2009 48% of data breaches were caused by insiders, both deliberately and unintentionally. Misuse also accounted for nearly half of breaches. Misuse can occur from insiders, but can also happen when a partner or third party does not take appropriate steps to protect an organization's data. What I find hopeful is that only 1% of data breaches from misuse were the violation of an IT asset disposal policy.

This relates to a 2010 Converge Trends Report statistic: 86.4% of respondents have a formal, end-of-life ITAD strategy. In our 2009 study, only 67.3% responded that they had such a strategy. All of these findings indicate that IT asset disposition strategies are being recognized as crucial to organizations' data security efforts, and organizations are communicating them internally. In fact, in the Trends Report, 83.5% said their organization had controls in place to ensure that end-of-life equipment is disposed of in accordance with their corporate strategy.

Each of these studies is managed independently, with varying controls and samples. While none of them can be considered "comprehensive", each can provide some level of useful information to help you evaluate and refine your IT asset disposition strategy. If there are other relevant surveys or reports, let me know by sending me a comment.

Damage to parts in transit

2010-10-06T09:19:00.007-04:00

Recently, I was on a call with a prominent technology OEM client that Converge works with to test, product identify, classify and refurbish external hard drives. After the hard drives are tested and classified, the next step in the reverse supply chain service was to return the materials to the supply chain — either by Converge managing the process on behalf of the OEM, or by returning the materials to the OEM directly. The OEM’s representative raised a legitimate concern about an issue with a previous vendor that had sent back damaged materials.

This is a common problem when shipping components around the world. Hard drives in particular are very mechanical. They have spinning plates and other interworking parts that are susceptible to damage. Packaging and shipping logistics can have a direct impact on their quality, and the more times a hard drive is handled in transit, the greater the probability that damage can occur due to wear and tear.

Climate control is also a contributing factor to damage. The recommended temperature to store hard drives is from 86°F to 122°F (30°C to 50°C). If the drive is exposed to temperatures above 55°C (131°F), the drive might become compromised. International Customs Inspection is another damage factor. Product integrity is dependent on the import country, duration of the inspection, temperature of a holding area, as well as the quality of the country’s transportation system. Last summer’s traffic jam near Beijing, China, that stretched for more than 62 miles (100 km) and lasted over a week comes to mind as a transportation issue. The average temperature in Beijing was 90°F (30°C). The temperature inside a shipment truck would have surely exceeded the recommended hard drive storage temperature.

Many OEMs ship equipment to APAC locations for testing, only to have the materials return to Europe or North America. The back-and-forth international travel is more expensive and increases the amount of “touches” to the equipment. When materials leave distribution centers ready to be returned to the supply chain but are damaged in transit, it is costly to not only the OEM, but also to the third-party tester as well.

Utilizing a reverse logistics manager that has locations convenient to your facility can lessen the number of parts damaged in transit. Converge has locations in the United States, Mexico, South America, Europe, Asia, South Africa, Australia and New Zealand.

Have you had shipping issues with your equipment?

Shortest Path To Recovery

2010-08-30T09:19:00.001-04:00

For every batch of service spares that go out the door, a portion of them is bound to return, usually under less than ideal conditions.

No matter how well managed the forward-facing segment of a service parts supply chain may be, it’s often hard to predict exactly what will come back from the field. Will it test as good? If yes, will the organization still have demand for that tested good component? If it does not test as good, will it be covered by warranty, or will it simply be labeled as scrap? If it’s covered in-warranty, how long will it take for the organization to recover credit back from the device manufacturer?

All good questions that seem to be frequenting the desk of any supply chain director in almost perpetual fashion. It’s relatively easy to outsource the forecasting, planning and fulfillment of a service spares inventory, but what to do about this unpredictable returns stream? It represents an element of risk that is quite difficult to quantify until tough questions concerning the end-of-fiscal-period inventory reports are pushed out to inventory control teams by CFOs.

The answer lies within a complete turnkey service parts management solution that includes a buy-back model. The buy-back model has the potential to reduce the time it takes to recover all credits tied to field return product streams from months down to mere weeks or days. It’s the recovery equivalent of just-in-time access to service spares.

In fact, in today’s complex supply chain, no spare parts management solution is complete without a buy-back component. The buy-back model is based on sophisticated analysis of mountains of data concerning the field returns. The data is used by the inventory manager to build a profile of what the returns stream looks like for the organization in question. What is the product mix? What is the error margin within the product mix assumptions? What have the historical yields been for each SKU? How much has the organization recovered from device manufacturers as part of RMA claims concerning in-warranty failures? Does the scrap product carry an intrinsic value of any kind?

Once these questions are answered, a mathematical model is built that predicts the value of field return streams with manageable error margins. Our organization currently builds models that are sustainable for up to five months ahead of analysis date – with some margin of error, of course. The model is utilized to buy back inventory from our partners as soon as that inventory hits their dock doors – condition unknown.

As the underlying data evolves, the model evolves with it. The upside is near-instant gratification for our partners when it comes to recovering value from their field returns instead of managing accounts receivable reports for extended periods of time. And often, the buy-back model prevents good inventory from going stale and bad inventory from ending up in a dumpster somewhere.

While evaluating a buy-back model for your organization, the most important point to consider is picking the right partner for the right commodity mix. Once successfully on-boarded, a properly executed buy-back model will reduce total spend on inventory and will contribute positively to your organization’s lean planning practices.

Site balancing for a supply-chain advantage

2010-08-16T09:41:00.000-04:00

I was working with one of Converge’s customers a few weeks ago, analyzing service parts inventory levels across half a dozen of their global sites. The exercise was a valuable reminder of the importance of service parts inventory planning and brought to mind a broader supply-chain management problem concerning dynamic sharing of inventory across multiple sites.

Dynamic sharing is a relatively new concept that allows multiple sites to transfer inventory back and forth as needed. To put this into perspective, let’s take the computing industry as an example and focus on notebook computers. There are many common components across multiple brands of notebooks. These common components are typically categorized under CPU modules, memory modules, hard disk drives, optical drives and liquid crystal displays.

Now, let’s consider a service provider that refurbishes customer-returned notebook computers for more than one manufacturer within the same site or at multiple service locations.

The service provider will typically receive consumption or failure forecasts from each manufacturer, and in turn will procure service spares utilizing the notebook manufacturer’s internal part number for each service part.

While this system works well for meeting service-level requirements that the supplier must adhere to for each notebook manufacturer, it also introduces the risk of overprocurement of the same core part under various internal part numbers – either for the supplier or for the owner of the spare-parts inventory.

When this occurs, Converge is approached by our customers, at the end of each fiscal quarter or fiscal year, to evaluate cross-utilization opportunities of their “internal part number” inventory across multiple sites in an effort to drive down their inventory levels by reducing new procurement.

While periodic site balancing through many-to-many part number translation is a good step in the right direction, continuous linkage among internal part numbers that boil down to the same core part number across all service sites can improve supply-chain efficiencies by inherently altering procurement behavior.

Clearly, this is easier said than done. It requires clean data and a fairly sophisticated application logic that is deeply embedded in the supply-chain DNA of the service provider. However, it also represents a competitive advantage if executed properly. In today’s supply-chain services arena, where inventory ownership is the major source of financial liability, a quantifiable competitive edge such as real-time site balancing can be the winning ingredient.

Does your organization practice site balancing? Let me know what you think in comments or by sending me an email.

Inventory optimization strategies

2010-07-13T11:05:00.003-04:00

The risks associated with carrying excess inventory have persuaded a number of major technology OEMs and contract manufacturers to implement asset reallocation programs. The financial risks can be quite significant and certainly warrant a closer look at the benefits of inventory optimization.

The underlying problem is simple: Companies tend to pile up excess material for too long. As I've mentioned before, technology companies just don't have the dedicated resources necessary for proper inventory assessment. Because of this, many aggregate all excess product together, regardless of its value or condition, in order to balance the books. This unfortunately causes companies to lose a significant amount of revenue if and when they sell excess product to the wholesale market.

This situation can be significantly improved. The burden of inventory liability should be removed from technology companies and transferred to reverse supply chain specialists that have built asset reallocation strategies specifically designed to address excess inventory, and have developed strong channel relationships. Supply chain specialists such as Converge work with their partners to incorporate different levels of the supply chain and a range of unique services into inventory optimization strategies.

To effectively manage excess inventory, supply chain specialists can employ the following strategies on behalf of EMS providers, OEMs and service depots:

Asset reallocation
Testing and screening
Data destruction
System teardown and parts harvesting
Refurbishment
Spare parts management (SPM)
Product returns management (PRM)
Vendor-managed inventory (VMI)
Kitting programs
Market intelligence

Within the range of reverse supply chain strategies, three services stand out for their potential impact on the bottom line:

Product ID, Classification, Testing and Refurbishing: These tasks help to identify the product, its quality and restrictions. This service implements the strict multipoint quality control tasks necessary to refinish and test a product to ODM or OEM specifications and maximize value.

Reconciliation and Reporting: Supply chain specialists will offer the ability to reconcile any given shipment at any stage of the process life cycle, and provide real-time reports for an end-to-end chain-of-custody view.

Reverse Fulfillment: This service steers excess inventory or customer/depot returns back to the supply chain to be used in the service spares environment. Centralized stock views are updated in real time, enabling a more efficient, cost-effective organization.

There are, of course, scores of reverse supply chain services that could add value to the bottom line. The takeaway I'd like to leave you with is that even a small shift in focus can turn an excess inventory issue with floating values and interpretations into a solid financial asset. By optimizing excess inventory through a supply chain partner’s asset reallocation program, organizations can reduce inventory liability and exposure, maximize revenue recovery, and reduce operational costs – all while maintaining total customer satisfaction.

Top three ways to increase IT asset residual value

2010-06-29T09:43:00.002-04:00

Cost controls can be an important part of an IT asset disposal (ITAD) program, with cost-mitigation techniques often enabling the program to pay for itself. One of the most practical approaches taken is the remarketing of retired equipment, which is not only a green initiative, but also one that helps mitigate IT disposal costs.

Remarketing can return significant capital to your organization, especially if your equipment or components have residual value. Value is directly related to the assets’ age and condition, but there are other factors that you can influence to increase their net worth and the overall return rate. Here are the top three ways you can save money and help increase the value of your equipment even before it reaches your IT asset disposition partner:

1. Keep detailed records.
If you don’t know what equipment you have, you can’t anticipate the remarketing value or apply a strategy to your remarketing efforts. Plus, a thorough list of retired assets can decrease your ITAD vendor’s reconciliation costs and will provide extra security if there are ever discrepancies.

Make it a policy to catalog information such as manufacturer/model, hard-drive capacity, memory configuration, CPU type, optical drives and other relevant information.

2. Pack units yourself for safe shipping.
Logistics preparation, including packing and palletizing, is one of the biggest expenses incurred in the proper disposal of assets. Simply packing your equipment prior to pickup could reduce freight costs by 50 to 90 percent. And some ITAD companies, Converge included, will send preconfigured packing kits to clients to make the process extremely simple.

3. Keep machines clean and in working order.
Equipment that needs to be tested, screened and repaired will draw away value, and in the end it may even be cost-prohibitive to remarket. When machines are properly maintained and serviced throughout their life cycles, your ITAD partner will be able to remarket them easily, providing the best return opportunity. The end result is a greater return from your investment.

Start today by implementing even just one of these strategies. You’ll immediately start to save money and maximize the value of your end-of-life IT assets.

Recognizing inventory risk in technology manufacturing

2010-06-28T13:29:00.003-04:00

Carrying too much inventory is a risky situation, yet it’s a common occurrence for many computer manufacturers, EMS providers and service depots. Excess product is easily accumulated during the ebb and flow of the forward and reverse supply chains, and problems arise when overvalued, obsolete or expired products are no longer needed and become a fiscal liability. In the typical overstock scenario, excess inventories are typically liquidated for pennies on the dollar.

Sources of Excess Inventory
Surplus inventory tends to pile up from several sources:

Inaccurate forecasting
Service spares excess
Customer returns
Order cancellations
Out-of-warranty or scrap product
Product recalls

How It Happens
There are many reasons why inventory becomes a liability, but some of the more prevalent ones are purely driven by demand for excellent customer satisfaction – the product must be manufactured on time, shipped on time and serviced on time. This means having the right parts on hand at all times. What is typically lost in translation here is the fact that although supply on hand ensures total customer satisfaction, it also has the tendency to result in excess inventory accumulation. This is due in part to canceled orders, poor planning and forecasting, a lack of dedicated internal resources to monitor pockets of supply and, ultimately, overbuying.

In addition, customer returns or materials returned from field service are not screened, tested and recertified to ODM specifications for reuse in the service supply chain. This leads to an increase in spend on new service spares that companies may already have in their possession but are not leveraging.

Valuing Excess Inventory
Once excess inventory is properly assessed, it can be grouped into three types of material: leading-edge technology, common technology and trailing-edge technology. Prices in all groups are directly affected by market conditions, and as they change, technology values change as well.

Forward-thinking organizations can minimize inventory risk by implementing asset reallocation processes that maintain, test and authenticate excess product in order to take full advantage of market spikes or to increase efficiencies in the service spares environment. A limited number of supply chain specialists such as Converge exist to manage the risk caused by excess inventory. These supply chain partners have experience in both the forward and reverse supply chains and offer validated excess inventory management programs that can reduce inventory risk and optimize the supply chain for computer manufacturers and OEMs.

For more information on this topic, I invite you to download our white paper, Excess Inventory Management.

Set-top box builders' substantial returns rate

2010-06-15T10:06:00.001-04:00

Recently, I posted some solutions for managing the long life cycles in the set-top box industry. While this equipment sits in a home for years, many of its internal components become obsolete, thus having a direct effect on managing the service spares inventory for these products. I’d like to discuss another area where additional improvements can be gained, related to the substantial return rate of set-top boxes.

Even though set-top boxes have a long life cycle, they tend to be returned a lot. For instance, they can break, service requirements change or, quite often, the end user simply changes residence. These high field return rates are not just a characteristic of product failure but also of simple address change. Multiply this occurrence by tens of millions of users, and the quantities returned are dramatically high.

Now these boxes are widely deployed – logistically they can be located anywhere. As equipment is returned to local and regional distribution centers, the returns are often palletized and trucked cross-country to a single processing center. This process inflicts additional harm, as electrical components such as fans and hard drives are much more susceptible to damage when transported in a hot truck under less-than-ideal circumstances.

Rather than ship boxes across the country to one location, forward-thinking cable service providers and manufacturers can save money on freight by relying on partner-managed, centrally located processing centers, such as those handled by Converge. This type of outsourced solution can utilize packaging and product planning techniques to minimize transit time and ensure that equipment is not damaged further. Once the set-top box arrives at its destination, it is tested to strict standards and reconditioned for redeployment, and components are harvested for reuse/resale or responsibly recycled.

I’ve noticed two opportunities that manufacturers often fail to take advantage of:

1. Cross-utilization of parts in processing. Since a high number of set-top boxes are returned simply because of a move, they typically have a high yield or pass rate. In a heavy-return/high-yield environment, there is significant opportunity to repair failed units with NTF (no trouble found) parts harvested from other returned units. This practice decreases the need to purchase additional service parts inventory if implemented in the decision-making process properly.

2. Often the only reason set-top boxes cannot be immediately returned to service is CID (customer-induced damage), such as scratches or other blemishes on the surface of the unit. For example, maybe someone placed a plant on top of the unit, leaving dirt and a water mark. Damage such as this can be easily fixed with harvested shell components or minor cosmetic touch-ups such as paint or cleaner, enabling the manufacturer to return the box to service quickly and at low cost.

Because of the unique nature of these high returns and the potential to reuse parts, it is surprising to me that many vendors are still running old-school processing centers that do not take advantage of these opportunities to save time, money, logistics costs and repair costs.

Do you have additional ideas? Let me know if you have any other low-cost ideas that can have high financial impact.

The evolution of computing

2010-06-03T15:35:00.005-04:00

Last week I attended an industry event attended by many of the computing industry's heavy hitters. Among the many notable speakers was one who made a significant impression on me because his topic undeniably spoke to the changes that have happened and continue still, shaping the industry and the way we do business.

The key takeaway from the presentation revolved around the evolution of computing from the 1990s into the new millennium and up through and after 2010. The role of hardware and software has continuously evolved over time, and it has forever changed the way we manage the supply chain for enterprise computing.

To review history: Through the 1990s and into the early 2000s, most enterprise computing was vertically scaled, with expensive individual computers containing heavily specialized hardware running very proprietary computing environments. A by-product of this situation was that manufacturers had to run almost completely different supply chains for the enterprise versus the non-enterprise products, simply because the two platforms didn't have much in common. They weren't ever meant to share hardware or applications.

During this time the hardware itself was a differentiator — it was so unique that it was what made the enterprise special. But the challenge came in that the enterprise environment was usually very expensive to implement and maintain compared to the desktop environment.

Due to the uniqueness of enterprise products, manufacturers typically built higher volumes of non-enterprise products, which were more cookie-cutter in design and therefore less expensive. However, the heavy cost burden was on the enterprise side.

This meant that computer manufacturers had virtually no leverage through volume in the enterprise computing environment, because the materials lists were so different and the volumes so small. On the other hand, the non-enterprise products shared many components, allowing the computer manufacturers to negotiate volume rates.

Over the course of the past two decades there's been an increase in server farms, with the term "cloud computing" evolving to represent this. While in the 1990s hardware was the differentiator and a single enterprise computer running a specialized operation was the norm, the enabler for cloud computing now heavily rests with software as a strategic differentiator.

Today, enterprise computing has evolved to a collection of low-cost computers running a range of highly available software that is sold or allocated in portions — the current state of cloud computing. This industry trend offers an opportunity for computer manufacturers and service providers to implement lean planning and to optimize overall supply chain practices.

When you think about it, software technology and edge-of-the-network routing intelligence have come a long way to enable concepts like the cloud computing model. With this new environment in place, manufacturers have the option of cross-using the same set of parts that can be borrowed from lower-end products. Maximizing part sharing is an opportunity to build traditionally non-enterprise components into enterprise footprints.

Since the application layer has become a greater differentiating factor between enterprise and non-enterprise hardware, the underlying hardware platform is simplified and its components can be interchanged across multiple platforms. In turn, this strategic shift implies the merging of enterprise and non-enterprise supply chain management processes.

In short, the evolution of computing has led us to the present day, when hardware is becoming shared more and more across platforms. This translates into cost savings in both forward and reverse supply chains. Speaking specifically to service spares for this new footprint, this model helps to increase efficiencies by lowering inventory and operating costs. It also allows supply-chain managers to leverage their non-enterprise volume muscle to support enterprise platforms.

Along with R&D efforts currently under way furthering software development progress, we predict this trend of sharing parts between desktop and server to continue all the way through edge-of-network and infrastructure devices.

Set-top box builders' long life cycle problem

2010-05-19T15:40:00.003-04:00

In today's blog, we'll take a look at the reverse logistics of the set-top box market.

From my perspective, there is plenty of room for improvement in the return process for set-top box builders. Achieving improvements in the returns process is actually not difficult when you implement life cycle planning principles. In this blog, I'll touch upon the issues of managing the long life cycle of these materials.

Set-top boxes are widely used and recognized in the consumer market. These are the cable and satellite boxes used with televisions and found in most households in many shapes, sizes and configurations. They have a very long life cycle, staying in homes for years after initial installation. But the life cycle itself is not the core of the problem. The real issue is the core commodities (memory, storage drives, etc.) in each set-top box that reach end-of-life while the box is still in use. This creates a problem for set-top box manufacturers, who have to ensure that they have a supply of materials to properly service and repair equipment that has been in the field for a significant amount of time. This ultimately leads to manufacturers making substantial last time buys (LTB) to handle end-of-life component issues – thus inflating their overall service parts inventory – or finding engineering solutions for the products to utilize other replacement materials.

Compounding this situation is the fact that legacy storage devices have been rapidly moving to the newer models and configurations in the hard drive industry over the past few years. In response, set-top box manufacturers have moved to newer architectures and discontinued the use of older technology. But this response raises several issues: Vendors can't get an ample supply of materials or support older architectures, or if they can, it's at significant cost. The end result is that manufacturers are forced to choose between two options: either negotiate for LTB (significantly increasing service spare inventory levels) or find an in-house engineering solution. It's a risky business proposition in both cases.

The third option that I recommend is to more closely evaluate the manufacturers' return stream, meaning boxes or parts that come back from service calls in the field. Typically, when these parts are returned, they are an afterthought and end up ultimately being recycled or liquidated for pennies on the dollar. These materials are usually stored for long periods before disposition and are not factored into the forward supply chain. In this example, the manufacturer or the service provider might be receiving significant numbers of no-trouble-found components from the return stream, or reverse supply chain, that they just don't realize they have.

The valuable parts inside the returned set-top boxes could be harvested to be reused or remarketed back to the service supply chain, removing the need to purchase large quantities of LTB components. However, this option is usually not considered. And rightly so, because teardown is generally not a core competency for most manufacturers and is considered a cost center.

Utilizing the skills of a third-party service provider can remove this roadblock. Third-party reverse supply chain organizations, such as Converge, are highly skilled in tear-down, testing, kitting, packaging and shipping materials back to the manufacturer or service provider for reuse in their service spares inventory. A third party can also properly recycle materials or save any valuable components that meet testing requirements for future use.

This solution is environmentally friendly because it minimizes waste while maximizing reuse. It is also cost-effective because it produces a stream of service materials that are already owned by the manufacturer while removing the need for costly LTB. And it doesn't cost as much as you would think. In fact, a service like this is essentially a net gain for the customer.

What are your thoughts on reusing tested and screened materials in the service environment?

LCD market ready for a storm of activity

2010-05-12T14:26:00.000-04:00

Converge LCD Update.

The LCD market has been reasonably stable as we move deeper into the second quarter of 2010. Seasonal factors are a primary contributor to the recent downward slope of demand, following the holiday-crowded first quarter. A number of factories are not quoting firm pricing in May on TV panels that are 40" and larger. Instead, clients with forecasts are advised to negotiate contract pricing on a case-by-case basis. Pricing on sizes of 26" through 37" remains stable, with fluctuations in single-digit amounts. A high level of inventory in the distribution channel is another reason dictating the current market conditions. Overall, TV panels yield higher profits in comparison with notebook and desktop panels. As we approach the third quarter, when OEMs finalize their forecasts to meet the year-end demand, panel makers will be juggling to expand production capacities for TV panels at the expense of other product lines. Panel shortages and pricing instabilities may very well be in store in the near future.

The first product segment to feel the effect of shifting production capacities is notebook panels. Although not officially announcing the fact, factories are surely and quietly realigning their production lines to maximize profits in the third quarter. Given the ongoing material shortage and that Foxconn will be consuming a considerable portion of the Chimei-Innolux output, a shortage on notebook panels appears imminent. If such speculations become the consensus of the market, Converge expects to see upward pricing pressure in the open market in anticipation of the panel shortage as early as the second half of May. An estimated 3% to 5% price increase between June and July does not seem out of place at this point. The shortage will potentially spill over from the mainstream 15.6" and 17.3" to all other sizes. Meanwhile, the strong demand from the service industry for 14.1" with WXGA resolutions and CCFL backlight will likely stay center stage throughout most of the quarter, particularly for panels made by AUO and LG Philips.

The market for desktop panels is fluctuating modestly in May, with factory pricing largely unchanged for most sizes. Average lead time quoted by the factories is still in the four-to-six-week range. Little change took place in demand from April to May — although factory output volume as well as pricing may be due for adjustment amid the upcoming realignment of production lines. Like for panels for other applications, industrial panel supplies are also expected to be tighter as we approach the end of the quarter. For the month of May, Converge sees increased booking in preparation for the upcoming shortages. Despite a relatively quiet April and May, the LCD market seems to be staging itself for a busy third quarter. Stay tuned.

HDD pricing slopes expected to continue into June

2010-05-12T14:25:00.000-04:00

Converge Storage Update.

Higher-capacity 3.5" desktop SATA HDD pricing continues to drop. In our last Market Insights we reported a price drop in the 1.5 TB and 2.0 TB capacities. Now these price declines are occurring in the 750 GB and 1 TB drives as well. The 750 GB models are selling in the high $40 to low $50 range, and 1 TB drives can be purchased in the low to mid $60 range. Meanwhile, the 1.5 TB has dropped to the high $80 range, and 2 TB can be found at around $120. Converge believes this is due not only to the seasonal slowdown in the HDD market but also to reports that a 3 TB model will be introduced in the market later this year. Additionally, analysts are reporting that the big PC builders are pressuring the major HDD manufacturers for improved pricing after seeing HDD margins soar in 2009 while experiencing slim margins themselves. As a result, we expect the pace of this erosion to continue through May and into June. While price is eroding in the higher-capacity 3.5" desktop SATA HDD, this has had little effect month over month on the lower capacities, with prices off by only $1 to $2 on 80 GB through 500 GB drives.

Activity in the enterprise market is heating up, with the SATA interface emerging as the preferred interface. The higher-capacity ranges coupled with lower costs have significantly displaced the SCSI and Fibre Channel HDDs. Manufacturers continue to push development of larger-capacity, faster and quieter offerings in the SATA interface. In April’s Market Insights report, we noted the release of Western Digital’s newest addition to the Velociraptor line — a 600 GB, 10K RPM, 32MB, 2.5" SATA HDD. As previously mentioned, Seagate is believed to be releasing a 3 TB 3.5" HDD later this year, to be followed by a 1 TB 2.5" model. However, the SAS drives are slowly gaining favor in this space. They can’t compete dollar for dollar on cost per drive with SATA. However, the available speeds per capacity, as well as reliability, are justifying price for some and thus gaining favor and market share.

Finally, the IDE shortage continues. This is most evident in the 2.5" FF, resulting in soaring open market prices. This was reported last month and remains unchanged. Prices are up $5 to $7 per capacity. The 40 GB, 60 GB and 80 GB 5400 RPM models are selling for approximately $27, $30 and $36, respectively. With demand unlikely to change any time soon, we expect pricing to remain elevated for several months.

Lead times and shortages remain steady

2010-05-12T14:24:00.002-04:00

Converge Semiconductors and Integrated Circuits Update.

Lead times on most of the shortage items Converge has been tracking over the past six to eight months have remained steady. There are some products, most notably the TI TPS data converters and MSP430 series microcontrollers, that are seeing some easing in lead times, although it’s too early to tell if this is temporary due to a slight dip in overall demand during the past several weeks. Lead times continue to be long, however, in their DSPs, as some products are out to 28 weeks with open market prices climbing to record highs. Optoelectronic lead times remain steady in the 16-to-24-week range. Some families of On-Semi diodes are still tight, while others have loosened slightly. Microsemi diodes are still the kings of stretched lead times, with some pushing out over 50 weeks. AMCC has joined Atmel, Infineon, Freescale and TI with some microcontroller lead times out over 20 weeks.

Many of the spot shortages we have been tracking have been resolved by product “trade off” in the manufacturing process, allowing for delivery on some products while forcing others to go short. Chip manufacturers are still not sold on the strength of any global recovery and as a result continue to hold back on increasing capacity. Instead they are opting to make the best of what they have currently available. This is causing the easing of lead times of specific chips within a product type, while allowing for deliveries of others within that same product type to lengthen. In other words, shortening the lead times of a part that has been a problem at the expense of another.

All in all, barring an unforeseen downturn in the economy, we expect more of the same market conditions we’ve been watching for the past six to eight months to continue through the summer build season.

Market dynamics offering double-digit margin savings

2010-05-12T14:24:00.001-04:00

Converge CPU Update.

In April the market was active, as shortages and savings were in abundance across the range of processor families. This positive bounce, which was unanticipated, bucked the trend set in Q1 with sluggish demand across the main mobile and desktop markets.

In particular we saw the full force of the Intel Arrandale shortage, with the I-330M, I3-350M and I5-430M all suffering from depleted stock as OEMs moved from the Intel Montevina platform. This resulted in parts changing hands at inflated pricing during April. We expect the I3-330M to settle in the $100–$110 range, but spot market prices of around $130 have not been uncommon.

Currently, we are seeing a swath of excess inventory in the market as the Nehalem, Wolfdale and Montevina families go end of life. The T7700s, T8100s and P7350s are among the CPUs selling below their direct pricing in the spot market. Server chips continue to deliver savings, particularly in the 45 nm Nehalem and Dunnington families. In some instances, double-digit margin savings can be attained, making this an opportune time to gain a price advantage as we cross between new and old architectures.

Expect memory prices to slide in May, rebound in June

2010-05-12T13:52:00.003-04:00

Converge Memory Update.

The memory market, specifically for modules, has been showing some signs of weakening over the past four weeks. Although activity in the spot market for DDR2 and DDR3 modules has been relatively light since late February, pricing has remained stable. However, as a result of the lack of spot market procurement, prices for 2GB DDR2 and DDR3 modules are showing signs of coming down. Another factor that Converge believes has added to the pricing instability was the unexpected announcement that the contract price for 2H April had settled at stable to slightly down. As Tier 1 box builders weigh the option of reducing memory content for upcoming shipments in consumer desktop and notebooks, supply seems to be catching up.

Judging by the tone of numerous memory vendors, we could see the spot market price continue to slide a little over the next three weeks as we approach the long holiday weekend in the U.S. Converge believes that any further drop for DDR2 and DDR3 memory will be minimal. Pricing is expected to stabilize and possibly rebound by the beginning of June as the industry begins to prepare for the build season.

Three IT asset disposition differentiators

2010-04-29T16:40:00.002-04:00

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.

Intelligently reintroducing product back into the service supply chain

2010-04-15T14:02:00.000-04:00

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.

Demand remains healthy

2010-04-14T16:04:00.002-04:00

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

2010-04-14T16:01:00.001-04:00

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

2010-04-14T15:59:00.001-04:00

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

2010-04-14T15:54:00.002-04:00

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

2010-04-14T15:52:00.001-04:00

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.

Revenue from customer returns

2010-03-30T10:59:00.003-04:00

Reverse supply chain services, although gaining momentum, are still not a mainstream function for many OEMs and service depots. But given the increased efficiencies, security measures and cost savings that supply chain services offer, companies are quickly learning that best practices in this area are a must for any organization looking to maximize revenues.

Take, for instance, a large high-tech corporation I recently visited. It is a customer of Converge's Product Returns Management service and I was doing a site visit. As we walked through the warehouse, I noticed numerous pallets of hard drives taking up valuable floor space. I asked my host about them and found out that there were 200 pallets (and growing) of customer-returned drives that were not confirmed failures, yet most likely contained customer-sensitive data. The initial decision internally at this company was to have all these drives physically destroyed by a recycler -- this would have been a cost model for them.

The salesperson in me immediately saw another opportunity for my customer to not only realize cost avoidance but recoup some incremental revenues, and so I brought up Converge's ability to have the hard drives screened for physical damage, tested for functionality and securely data erased to DoD-level specifications. Any drives that failed any test or were physically damaged would be destroyed at a Converge facility with certificates of destruction provided. The hard drives that passed would be repackaged and sold into the wholesale marketplace with a Converge warranty. The customer immediately saw the value in this, vetted the processes fully and went with the proposed solution.

In the end we implemented a solid, ongoing product returns program that the company uses regularly. Not only has the company optimized the reverse supply chain, but it has realized significant revenue returns from the program, on the order of hundreds of thousands of dollars.

Of course this is just one example of how you can approach the steady stream of customer returns. The case above could easily have been for full systems, notebooks, LCD displays or any other part that is typically found inside of a PC or laptop. The important point to remember in the reverse supply chain is to consider all your options so as not to leave money on the table.

Rumors circulate around the Toshiba Mobile Display (TMD) division

2010-03-17T10:22:00.003-04:00

Converge LCD Update.

A strong market and an upcoming game of musical chairs.
Despite an improvement of 17% over the same period last year, the sales figures on LCD TVs during Chinese New Year failed to impress panel makers. Most manufacturers had hoped to see improvement in the neighborhood of 30% prior to the holiday. The factory pricing on LCD TVs remains largely unchanged for the month of March as a result. The sixth-generation line, which is responsible for building 26-inch through 37-inch TV panels, is still keeping busy, with full production capacities scheduled through most of the second quarter. The 7.5-generation line, which builds 40-inch and larger TV panels, reveals the realities of a different market segment. Current factory lead time for 40-inch or larger panels is around 4 weeks, down from the 6-8 weeks in previous months. This is indicative of weakening demand due to seasonal factors. A price correction is now starting to appear imminent for TV panels of 40 inches and larger.

Desktop panels are experiencing price increases of 4%-6% in March due to sustained shortages, in particular on mainstream sizes of 18 inches through 22 inches. Personal computer makers are also getting ready for a healthy back-to-school buying spree. Strong demand and material shortages continue to push the desktop panel pricing higher with minimum 4-to-6-week lead time. The situation is similar for notebook panels, with factory pricing expected to keep creeping up in the second quarter. Two of the more allocated sizes are 15.6 and 17.3 inches. For the month of March, there is a $1-$2 increase on most mainstream sizes. Unless the market changes due to unexpected factors, notebook panels will likely see a modest shortage through this summer.

The industrial panel market would have seemed uneventful had it not been stirred by the recent speculation that Toshiba will be selling its TMD (Toshiba Mobile Display) division due to repeated, hefty losses over the years. According to market insiders, Toshiba is currently evaluating its TFT product offerings and planning to retire panels of certain form factors within the next 2 quarters, which include 5.7, 6.5, and potentially 12.1 inches. Toshiba is planning to bump the 12.1-inch pricing from the current level of $120 to $150-plus as the panels transition to end of life. One or more of the production plants in Japan is scheduled to shut down in July as a result. Eventually, Toshiba will exit the TFT industry altogether. A number of panel makers from Japan and Korea are reportedly in talks with Toshiba to take over the TFT business. Converge will continue to monitor its progress and its market impact in the near future.

HDD market remains strong and stable

2010-03-17T10:20:00.004-04:00

Converge Storage Update.

Drives with the IDE interface remain in demand.
There is little change to report in the mainstream storage market month over month. We are still seeing industry reports indicating low inventory levels across the board, with strong demand in the mobile, desktop, and server segments. However, this has had little impact on pricing since our last Market Insights update, as both the 2.5 and 3.5 inch SATA HDDs have remained unchanged. Thus, while we had previously reported that factors were moving to repeat the shortage environment that characterized Q4 in CY09, this is still not the case.

Meanwhile, we are experiencing a sharp increase in demand for HDDs with the IDE interface. This is true in both the 2.5 and 3.5 inch form factors. In last month’s Market Insights, we had first reported this trend, indicating it was a result of sustained demand coupled with decreased production as manufacturers began to end-of-life this interface. As a result, prices are on the rise. In the 80 GB through 400 GB capacity range, 3.5 inch IDE HDDs command as much as a $5-$7 premium over the same 3.5 inch SATA HDDs. The 2.5 inch IDE HDD market is behaving similarly, with a 10%-15% increase seen in open market pricing.

In conclusion, the HDD market remains strong but stable. At this time, we are less certain that the current trends will ultimately result in a shortage environment. However, it does appear that the demand will continue and that Q2 will closely reflect the first-quarter activity. Last, expect the IDE market to continue on its present course.

20 week lead times have customers scooping up inventory pockets quickly

2010-03-17T10:19:00.004-04:00

Converge Semiconductors and Integrated Circuits Update.

Shortages take hold.
The shortages and extended lead times that we have seen for the past 2 quarters continue and show very little sign of letting up. In fact, some manufacturers seem to be increasing lead times - and we are certainly seeing the activity in the market. Maxim, On-Semi, Cypress, and International Rectifier are now reporting lead times that are out past 20 weeks and prices are rising in the market as well as in franchise distribution. Texas Instruments (TI) lead times continue to exceed 20 weeks, although some of the TPS series (DC converters) appear to be freeing up. Also, TI DSP looks to be getting tighter in the market along with some of the MSP430 series (processors). Freescale processors continue to be short, as well, with little relief in sight.

There have been reports of increasing lead times from Xilinx due to wafer shortages. The increased lead times, and what some industry analysts claim to be low safety stock levels, could be somewhat concerning to customers. Also, Xilinx terminated its 23-year franchise agreement with Nu Horizons in June, leaving Avnet as its only global distributor. It will be interesting to see what effect this will have on Xilinx supply and pricing throughout the transition and until Avnet gets fully up to speed on supporting all customers.

Overall we see shortages continuing through the next quarter. We are hearing more and more about lead times extending and new manufacturers experiencing tight supply rather than lead times improving. In fact, some industry experts expect conditions to get noticeably worse before they start to improve. We have been observing pockets of inventory being bought up quickly. With so many customers out looking to fill shortages, companies need to act rapidly to secure product. With current market conditions, some customers are even buying buffer stock to ensure delivery.

Intel Arrandale processor shortages may have manufacturers scrambling

2010-03-17T10:18:00.002-04:00

Converge CPU Update.

The shortage of the Intel Arrandale has arrived.
In February the long-awaited shortage of the Intel Arrandale processor arrived, while the desktop market was quiet as we waited for the new Intel I7 high runners to emerge.

February tends be an unusual month, as the Chinese New Year disrupts much of the production and supply to the CPU market. This year was no different, as the first half of the month passed with barely a ripple in the CPU market. Consequently, a flurry of preholiday demand saw OEMs stocking up on the older end-of-life technology, T6s, E2220s, T4s, P87s, etc., while manufacturers appeared to adopt a wait-and-see approach to the new processors currently available on the market.

Perhaps this cautious wait-and-see approach was ill-advised. February closed with shortages on the lower-end off-road-map Arrandale mobiles. The I3-330M, I3-350M, and I5-430M processors staggered into allocation and have remained steadfastly so as of the writing of this article.

Also, we are tracking cost-savings opportunities with I7-920, I7-820, and I5-650 processors with interest. In addition, the AMD Opteron server parts are creating attention, with cross-regional pricing gaps being significant and the 2435 and 8439 SE selling at 20%+ below their list prices in February.

DDR2 module pricing rebounds while DDR3 is in short supply

2010-03-17T10:07:00.005-04:00

Converge Memory Update.

After a three-week decline in 2 GB DDR2 module pricing, the market rebounded slightly in the first half of March. Spot market pricing dropped below $40 for a brief period, but has since settled back in the low $40s as box builders have taken advantage of the low pricing. Converge believes that DDR2 pricing will remain stable to slightly up over the next month. There’s still plenty of demand for DDR2 memory to support another uptick in pricing over the next 2 to 3 months.

DDR3 remains stable ahead of what many believe will be the busy season as the industry heads into the second quarter. As previously stated, Converge believes the DDR3 module market will experience shortages before the second half of 2010 approaches. Although there is product in the spot market, quantities are not significant and could easily be consumed through a couple of large orders, leaving the market with a shortage. As we head further into 2010, there will be a higher adoption rate for DDR3 memory, which could add to the impending supply strain.

On-site shredding ramps up with new technology

2010-03-03T09:04:00.003-05:00

Customers who use our on-site data destruction service appreciate the extra security and convenience of having a fully-equipped shredding truck deliver data destruction capabilities right to their door-step. And now the on-site destruction services are even better.

We’re pleased to be able to offer a new, state-of-the-art truck that can shred 500 – 600 assets per hour. I recently saw it in action and my first impression was how quiet it is compared to past generation shredders. But even with the lower noise level and high-tech interior, you may choose to watch the destruction process on live video feed from the comfort of your office. The entire interior is monitored by security cameras. You’ll see each asset barcode scanned, then dropped into the shredder, and the shredding gears as they grind up the material into cornflake-sized pieces. If the pieces are too big, they are automatically forced to be re-processed until they are small enough from a data security standpoint.

When all your assets have been destroyed, you’ll get the video on DVD and a spreadsheet listing each scanned asset, plus Converge’s Certificate of Recycling. The tiny shreds are then further processed into grain-sized particles and properly recycled in the U.S., completing the full ITAD process.

IT asset disposition has never been easier or more secure. I’d like to hear what you think. Are on-site destruction services overkill, completely necessary for corporate security or somewhere in between?

Merger mania buzzes the LCD market

2010-02-17T11:53:00.001-05:00

Converge LCD Update.

Hon Hai's (Foxconn) upward integration strategy to acquire CMO has moved along since the merger between CMO and Innolux was announced in November. To have the merger make sense, the new company, Chimei Innolux Corporation (CIC), is planning to take several cost-cutting measures on its future LCD production. One strategy to drive the costs down is to modify the mechanical design so that future products will be strategically configured to work with Foxconn's display applications across the line. This potentially will make CIC's future products less comparable with the mainstream offerings from other panel makers. Meanwhile, the new design will likely allow CIC to enter a niche market with improved profit margin. This also means that the open market will start seeing less liquidity on the CIC panels as a major portion of the new company's production output is allocated to its mother company, Foxconn.

In other areas of the market, the shortages on polarizer, driver IC and mother glass continue to hinder LCD productions globally. Many production plants throughout Asia are suffering from lowered capacities in February because of the weeklong Chinese New Year holiday. The shortage on desktop panels worsened because most panel makers underestimated the strength of the economic rebound. Stronger-than-expected demands from corporate clientele, in combination with those from various industries, have exceeded the overall production capacities allocated to desktop LCD by approximately 30% in the first quarter. In response, factory pricing rose again in February by 4%-6% (or around $4-$5) for mainstream sizes. Factory lead time stays at four to six weeks with deliveries often getting pushed back.

Television panel pricing stabilized this month with the only exception being 32", which goes up another $5, with an eight-week lead time quoted by the factories. The Chinese market remains an important consideration for panel makers when strategizing future pricing. The sales numbers during the Chinese New Year are expected to be relatively strong but not too strong. Many customers are taking a wait-and-see approach. This results in high inventory levels in the distribution channel despite the material shortage. It seems that TV panel pricing could be due for correction as we move into the second quarter.

Notebook panel pricing is again up by $3-$5, particularly for sizes between 14" and 17.3", with 17.1" and 17.3" being the most allocated. The 10.1" panels are also showing signs of shortage as manufacturers allocate some of the capacities to 15.6" and 17.3", where demand is among the highest. Production planning for notebook panels seems in line with actual demand. Panels featuring CCFL backlight are still among the most sought in the market, especially the 15.4" with matte polarizer. Of the most allocated, LG-Philips LP171WP4 and AUO B173RW series are two of the models in high demand in today's market.

The industrial panel market fluctuates little due to diverse usages and applications. Converge sees demand persist for STN models such as Sharp 6.4" and 8.4".

Expect HDD prices to increase along with shortages

2010-02-17T11:52:00.001-05:00

Converge Storage Update.

The storage market pauses before anticipated race
In the January edition of our Market Insights Storage Update we projected a positive long-term outlook for the HDD market with some near-term uncertainty as we emerged from the holiday period. At the midway mark of Q1 CY10, we expected a clearer picture of the current status of the market. However, presently this is not the case.

Recent HDD market analyst reports continue to predict year-over-year unit volumes to increase by 15%, with some stating that sales levels have recovered to pre-recession levels. Further, analysts expect prices to increase as supply remains tight vs. demand. Meanwhile, the shortages on 750 GB and 1 TB drives seen during the holiday run-up have subsided, at least temporarily, with pricing softening at this time. We also expected the shortage to broaden to the 1.5 TB capacity. Not only has this not occurred yet, we have actually seen a drop in pricing from the $105-$110 range to sub-$100 levels with little secondary market activity.

There has been little change in the 2.5" SATA HDD market over the past three months. Demand remains strong for the 160 GB thru 500 GB capacities in the 5400 RPM speed. It appears that supply is adequate and most manufacturers are shopping for cost savings. However, there is steady part-number-specific service demand that commands premium pricing.

Last, there is growing demand for IDE interface HDDs in both the 2.5" and 3.5" form factors. This is not a product of increased consumption but rather of decreased production coupled with continued service requirements as well as refurbishment of older technology to support trailing-edge markets. The demand has been stable month over month, but supply is diminishing. The result is an uptick in pricing for 80 GB through 250 GB in the desktop segment and, to a greater extent, the 40 GB through 120 GB capacities in the mobile segment.

In conclusion, we believe the current state of the HDD market is not indicative of the long-term outlook. This is historically a slow quarter for storage space, and there are too many opposing variables to sustain this course. Looking forward, we expect prices to tick up moderately as we shift back to more of a shortage environment across the mainstream capacities in both segments and interfaces.

Semiconductors and ICs as hard to find as a clean car in snowy New England

2010-02-17T11:50:00.004-05:00

Converge Semiconductors and Integrated Circuits Update.

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

Standard Logic shortages are continuing with no near-term end in sight. Texas Instruments (TI) is on allocation, while NXP, Fairchild and ST Micro are all running lead times of 12 to 20 weeks.
Microcontroller shortages are not easing, with Atmel now joining Freescale, TI and Infineon in having some lines out to 20+ weeks. Freescale's Coldfire and TI's MSP430s are the tightest of the bunch.
Altera and TI programmable logic and Altera and Freescale DSP lead times have not changed over the last eight to 10 weeks, while over that same time period Broadcom's networking devices (Ethernet switches, transceivers and controllers) have tightened.
Lead times on optoelectronics (couplers and LEDs) have risen steadily over the last two months with some lead times stretched out to 28 weeks on Vishay couplers and 16 weeks on Osram LEDs, with several lines on allocation.
The most highly visible shortages right now are in the analog arena, with data converters, op amps and voltage regulators. ST Micro is on allocation with its op amps and voltage regulators, while lead times on TI data converters are in the mid-20s and pressure to increase some prices is increasing.

Supply remains stable for new Intel I9, I7, I5 and I3 families

2010-02-17T11:47:00.002-05:00

Converge CPU Update.

Supply and demand balance the spot market
In January, the new Intel I9, I7, I5 and I3 families began to flow through the open market. Supply appears stable, and the shortages that had made the start to 2009 so memorable did not materialize this year.

Otherwise, January was stable, with respectable demand across all of the niche markets. Lead time offers, beyond the Chinese New Year holiday, indicated that pricing on the new models would soften in the coming months. However, there are neither large shortages issues nor price gaps with the new product lines.

New off-road parts and the spot market.
T6400, T6500 and T6600 are part numbers in great demand in the open market. These parts are sold directly by Intel to only a select few OEMs, meaning the direct channel is the only place to locate a significant quantity of material. P7, T42, T3 and T5 are all parts following the same principle. Seventy percent of CPU sales are now in this area, with market prices ranging from $40-$170. Intel prefers to guide smaller laptop OEMs toward the higher end of the CPU market, and they run from $200 upward. This places the spot market into the center stage as a solution for the smaller OEMs.

For new off-road parts, Converge has been tracking spot market offers, but pricing does not currently interest OEMs. For example, the new $100 model i3/330m is offered in the spot market at $110-120+; however, the T6600 is priced at far less and the bare bones are still in stock. We have also seen that the part is being offered in a bundle with chipset i3/330 +hm55, but so far the quantities available remain elusive. The post-Chinese New Year market will reveal opportunities as pricing and supply settle down into definable patterns.

Indications point to an early uptick in the memory market

2010-02-17T11:42:00.004-05:00

Converge Memory Update.

DDR3 demand expected to strain supply channel
Activity in the DDR3 market has shown signs of slowing down during the last two to three weeks. Converge attributes the slowdown to the time of the year and the arrival of the Chinese New Year holiday. Generally, February can be a slow month for activity as the box builders begin to get an idea of how their upcoming forecasts are going to materialize. Due to the slowdown, pricing has retreated a bit, especially in the notebook market. The 2 GB DDR3 SO-DIMM has dropped to the $47-$48 range for the first time in three months. Also, 2 GB DDR3 desktop modules have dropped to the high $40s as product has become available in the spot market. Converge believes DDR3 activity will resume in the first half of March and pricing will begin to climb back into the $50+ range for all 2 GB modules.

March has historically been a busy month for memory as box builders begin to fulfill their forecasts. Industry analysts are predicting the memory market to start taking off in the second half of 2010, but Converge believes the uptick in spot market activity will begin sooner. Many of the box builders are reporting an earlier-than-expected migration to DDR3, and that will put a bigger strain on the supply channel.

Another example of the early migration to DDR3 is the steep decline in DDR2 spot pricing. The spot price for 2 GB DDR2 modules has dropped from a high of $54 to $40 for both desktops and notebooks. There's plenty of supply, and we are seeing large quantities of excess for the first time in almost a year. We don't believe the DDR2 market will drop too much further as second-tier box builders take advantage of the low pricing.

The SDRAM market continues to experience serious shortages. Micron in particular is on the verge of allocation on most SDRAM product, and the spot market continues to rise at a rapid pace for all Micron SDRAM. For those using only Micron material, it may be a good time to start qualifying other manufacturers.

Unlimited Liability

2010-02-15T14:41:00.003-05:00

I’m often asked by enterprises about unlimited liability, and how a corporation can set up their IT asset disposition process so that once they turn over their assets for disposal to another party, they are no longer held liable for any potential breaches.

The straight answer is that there is no such thing as unlimited liability. Companies are still very much accountable for what happens downstream with that asset. That’s why a proper ITAD process is so important.

A third party provider can sign a contract promising to absorb any and all liability arising from an incident but the reality is that the limit to that liability is maxed out at the value of that provider’s assets. If you have a claim that exceeds the value of the provider’s assets, the provider may go out of business covering what it can of the claim, but your organization will still be responsible for the balance of the claim.

An agreement for unlimited liability also doesn’t address the other costs borne by your organization such as damage to reputation and loss of customer goodwill, notifying affected individuals of the breach, and implementing corrective actions to ensure it doesn’t happen again.

The bottom line is that a third party ITAD provider will provide a layer of liability protection, but ultimate responsibility for your organization’s assets always remains with the organization. Make sure you investigate your provider thoroughly and have a complete and transparent understanding of their disposition process, reputation and fiscal health. If you can look under the rocks and still be glad you did, you’re on the right path.

Study shows organizations are taking more measures to increase data security

2010-02-04T10:22:00.004-05:00

The Ponemon Institute issued their fifth annual Cost of a Data Breach Study in January. While none of the findings are exceptionally surprising, it is heartening to see that in 2009, organizations started paying more attention to and dedicating more resources to the prevention of data breaches than ever before.

The study focused on 45 organizations in 15 industries who experienced data breaches in 2009 and volunteered to share their information for the purpose of the study. The number of records lost or compromised in each incident ranged from 5,000 to over 101,000.

Here's a snapshot of some of the data from the study:

The average cost of a data breach increased from $6.65 million in 2008 to $6.75 million in 2009
The average cost per record compromised in 2009 was $204
Data breaches from malevolent attacks doubled between 2008 and 2009
Customer turnover from a data breach accounts for the majority of the cost
Healthcare, pharmaceutical, communications and financial services firms are those most likely to be affected by abnormal customer turnover
The average cost per compromised record is higher for companies who notify victims quickly

This last bullet affects me from two standpoints. First, as a businessperson, I understand the logic put forth by the Ponemon institute that rushing to notify customers of a data breach could end up costing more because of inefficiencies during discovery, notification and restitution. It makes sense that companies who methodically study the breach, wait to see the full extent of the damage, and carefully take action steps will be able to keep costs more contained.

But as a consumer whose personal information is in the care of hundreds, maybe thousands of companies around the U.S. and globally, I want to know immediately if my personal information has been lost or compromised. And I want the offending organization to take steps to protect my information without delay. In addition, state laws and the proposed federal Data Accountability and Trust Act require data breach victims to be notified immediately or within a specific time period.

I encourage you to download the study and consider its implications for your organization. And send me your thoughts about data security and data breaches too. Even though the topic is more commonplace than ever before, new ideas and process improvements are always called for.

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

2010-01-26T15:45:00.001-05:00

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.

FedEx introduces its first Boeing 777

2010-01-13T11:31:00.002-05:00

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

2010-01-13T11:29:00.003-05:00

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

2010-01-13T11:23:00.002-05:00

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

2010-01-13T11:17:00.003-05:00

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

2010-01-13T11:10:00.004-05:00

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

2010-01-13T11:06:00.001-05:00

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.

Federal bill to protect personal information

2010-01-12T08:10:00.001-05:00

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

Flexible Enforcement of Importer Security Filing (10+2 Rule) Ends on January 26, 2010

2009-12-16T15:46:00.001-05:00

Converge Freight and Compliance Alerts.

Effective January 26, 2010, all ocean freight to the U.S. will require a security filing known as ISF, or the 10+2 rule. This rule is nicknamed 10+2 because carriers are required to file 12 additional pieces of data with U.S. Customs; 10 of these elements are provided by the importer/consignee and 2 by the carrier. Failure to accurately file the ISF will result in penalties up to the value of the cargo, and freight will not be loaded, causing delivery delays. The fine for failing to update, withdrawing or submitting incomplete filings will be $5,000.

The ISF is filed with U.S. Customs electronically and is required to be filed 24 hours prior to vessel loading. This means the days are gone when freight can be loaded immediately, with a commercial invoice to follow at a later time. Most importers will utilize the services of their import brokers to perform this task but can also self-file.

The information filed will be used to help the U.S. better assess and identify high-risk shipments. Customs’ automated targeting system will analyze the data and flag appropriate containers for further review as they approach the U.S.

The importer is now required to provide its forwarder, prior to vessel loading, the following 10 data elements:
1. Seller name and address
2. Buyer name and address
3. Ship to name and address
4. Manufacturer/supplier name and address
5. Container loading location
6. Consolidator name and address
7. Importer of record number or Foreign Trade Zone applicant ID number
8. Consignee number(s)
9. Country of origin
10. Commodity HTSUS number (minimum 6-digit level required, 10 accepted)

The carrier (steamship line) is required to file its vessel stow plan and container status messages 24 hours prior to arrival in the U.S. These filings are for freight imported to the U.S. as well as freight transshipping to other regions, such as South America.

These filings can be done directly by the importer, or with a power of attorney, the importer’s freight forwarder can do the filing. The importer must also have a continuous bond on file or file a single-entry bond when filing. All entries into the U.S. are audited by Converge to ensure accurate and timely filings.

Desktop panel supplies tighten

2009-12-16T15:44:00.000-05:00

Converge LCD Update.

One of the biggest news items in the panel industry is the recent merger of CMO and Innolux. Innolux is part of the Foxconn Group, which is known in the electronics industry for its rapid growth and aggressive pricing strategies. The merger allows Foxconn to better integrate its supply chain, thus being better positioned to compete with industry leaders from mobile phones to notebooks and LCD TVs. Converge believes there is little doubt that Foxconn will surge ahead as a leader in the manufacturing of these applications in the coming years.

Despite the overall downtrend, TV panel pricing is showing signs of stability in December, and the pricing outlook for January 2010 is expected to remain largely unchanged. The strong seasonal demand from Asia before the Chinese New Year provides support at the current pricing level. Factory pricing for 32", a benchmark regarded by many market observers, remains around $200, with lead times stretching out to 4 to 6 weeks. Most factories are fully booked through the end of January. TV and desktop panels are both manufactured in the sixth-generation line. With more production capacities being allocated to TV, desktop panel supplies will inevitably be affected and are starting to show signs of shortage.

Downsized production capacities and strong seasonal demands in China conspired to push the prices higher for monitor panels. In addition to making 26", 32", and 37" TV panels, the sixth-generation line also supplies mother glass for mainstream desktop panels. Pricing for desktop monitor panels is expected to increase 5% to 10% between now and January 2010. Several sizes in the highest demand are 18.5" through 22.0". The factory lead time has also increased from 2 to 3 weeks quoted in September through October to 4 to 6 weeks at the current level. With the holiday seasons approaching around the globe, panel supplies are getting tighter.

LCD supplies for notebook PCs remain modestly allocated. Going into 2010, most of the 15.4" and 17" models featuring CCFL illuminators are completely discontinued, replaced by LED technologies. This is one of the technological advancements that revolutionize the entire industry. On the flip side, this may represent one of the toughest challenges that the service industries have had to face in a decade, in fulfilling their repair contracts as the shortages on the CCFL technology become permanent.

The industrial panel market shows little change, with demand resurfacing on certain EOL models such as the Sharp LQ084, LQ104, and LQ121 series.

Activity in the 2.5" SATA market is for HDD service support

2009-12-16T15:42:00.000-05:00

Converge Storage Update.

3.5" Drives:
Widespread shortages in the 3.5" storage market continue. This is especially true in the 500GB through 1.5TB SATA capacities, and specifically in the 1TB drives, across all manufacturers. The aforementioned drives are being allocated through distribution. Currently, when available in the open market, 500GB is selling at $55 to $60, 1TB at $89 to $92, and 1.5TB at $117 to $122 into the manufacturing space. These prices are reflective of non-enterprise-level HDDs. We expect this shortage to continue at least until the midway point of Q1 CY2010, with shortages in the 500GB and 1.5TB increasing to the levels that we are currently seeing with the 1TB capacity. Meanwhile, the lower-capacity SATA HDDs have not reached the shortage levels of the higher-capacity drives. As a result, pricing is relatively unchanged month over month. However, we are seeing volume demand on a price point variance (PPV) basis. The IDE capacities have been relatively unaffected by the SATA shortage. Demand remains steady for the 80GB through 400GB range, with pricing stable.

2.5" Drives:
Most of the activity in the 2.5" SATA market is in support of end-of-life HDDs needed for service. We are not seeing shortages near the level of the 3.5" market, thus most production inquiries are for PPV savings. Demand remains strong, with routine volume purchase inquiries for the 160GB through 500GB SATA capacities. Meanwhile, demand is increasing for the 2.5" IDE interface. This is evident in the 80GB through 250GB HDDs. We believe that the shift of mainstream production to the SATA interface coupled with an overall slowdown in production during late 2008 and early 2009 are primarily responsible for this. Looking forward, we expect this trend to continue, with increasing demand and shrinking supply for this interface in the capacities previously noted.

Texas Instruments (TI) Data Converters (TPS) Logic series (SN74) and OP Amps (OPA) still the hottest parts in the market

2009-12-16T15:39:00.003-05:00

Converge Semiconductors and Integrated Circuits Update.

Shortages and extended lead times trouble the market.
The market is settling into a consistent pattern of spot shortages and extended lead times, being driven by the following:

Texas Instruments (TI) Data Converters (TPS) Logic series (SN74) and OP Amps (OPA) are still some of the hottest parts in the market right now, with lead times extending 18-20 weeks on most products. National Semi appears to be the best option on competing lines, with lead times remaining at 8-12 weeks. However, On Semi and ST Micro are both facing allocations on some of their competing lines, which may further impact lead times.
Lead times on Altera PLDs have stabilized at 8-16 weeks.
TI and Freescale DSPs are still short, with Freescale lead times out to 14-16 weeks and some of the TI products out as far as 28 weeks. There looks to be no loosening of this supply well into 2010.
MCU lead times are extending across all manufacturers, with widespread allocation a possibility. TI’s MSP430 line is experiencing lead times over 22 weeks while Atmel, Infineon, and Freescale are pushing 20 weeks.
On Semi MBR(S) diodes have hit lead times up to 24 weeks, and prices on some parts have risen dramatically.
There are strong indications that the significant increase in demand we have been tracking over the last quarter will continue at least into the second quarter of 2010. Allocations on some products will likely occur, and customers need to be very attentive toward any rescheduled delivery dates from manufacturers.

AMD x2 215 can be found in the spot market in large volumes

2009-12-16T15:37:00.001-05:00

Converge CPU Update.

In November, the CPU market saw an increase in demand for new builds coming from PC production ramping. This development bodes well as we are tracking many encouraging signs in the market as the end of the year approaches.

A closer look at the embedded processor market.
Converge’s pedigree in IC and CPU computer production products means that we have a unique vantage point in tracking product movement in the embedded processor market. For example, Intel Atom processors move freely from the active netbook market to industrial computing, as do bundled chipsets.

This is a very dynamic market, and we have observed components move freely between the two market segments. For example, E6400 desktop and T7400 notebook CPUs are primarily coming from the embedded sector to fill end-of-life demand in the consumer PC market. The open market has become the ideal tool for rebalancing supply and demand inefficiencies, and the embedded/consumer crossover is becoming an area of consistent growth.

The mobile Calpella family waits in the wings.
As widely expected, many of the Calpella parts, Intel’s next-generation PC platform, were delayed for the holiday season. Converge anticipates that the new mobile chips will arrive with much fanfare in the New Year. We’ll provide future updates to keep you up to date on any potential shortages and savings that this switch will bring.

Additionally, the new Bloomfield, Lynnfield, and Clarkdale desktop families are creeping into the open market. Converge is tracking the i7-920s and i5-750s, which are currently attracting shortage demand.

Pockets of AMD desktop parts sit in excess.
We have been tracking a glut of excess, particularly in the AMD x2 215, which can be found in the spot market in large volumes. Market demand for these parts has been tepid. In addition, Converge has been tracking a number of Phenoms and Opterons in large OEM excess. The difficulty of using many revisions of a particular part makes it less fluid in the open market.

Price decline in 2GB DDR2

2009-12-16T15:34:00.001-05:00

Converge Memory Update.

For the first time in over eight months we are starting to see some softness in the DRAM market. The DDR3 market remains stable, but the DDR2 market is showing some signs of weakness. In both SO-DIMM and desktop, 2GB PC800 DDR2 has dropped from the low-to-mid-$50s range to high $40s in a two-week span. This is the first time since March that we have seen a price decline in 2GB DDR2. This decline in the spot market price seems to support why the DRAM manufacturers were unable to negotiate any further price increases in the contract market for the past two contracts. The tier one PC manufacturers are reporting that they have been receiving supplies of DDR2 from their direct channels over the last two weeks. With the upcoming holidays at the end of the month, it's not uncommon to see the memory market soften as we work our way through December.

Converge believes that the memory spot market price for DDR2 will continue to drop slightly between now and the beginning of January. However, we believe that the drop will be minimal and not anything drastic. With the spot market having been 20%-40% above contract for several months now, we are looking for the DDR2 market to drop to or slightly above contract for both 1GB and 2GB PC800.

The DDR3 market should remain stable throughout the remainder of the month. Demand for DDR3 is still strong, and Converge believes it will continue to increase as we head into the New Year.

Significant backlog in freight from Hong Kong to Europe and the United States

2009-11-11T15:53:00.000-05:00

Converge Freight and Compliance Alerts.

The Hong Kong Association of Freight Forwarding and Logistics is reporting at least 4,000 tons of cargo backlogs heading to the United States and Europe from Hong Kong (as of the first week of November). Affected airlines believe that this backlog will increase and sustain through mid- to late-December. Some carriers report at least two weeks of backlogs. These backlogs are starting to impact regional airports, particularly in China.

Converge is keeping in close contact with its providers to stay on top of this situation.

As in all markets when demand exceeds supply, rates are being impacted. Add in the push of consumer goods to the United States for Christmas, this perfect storm has caused spot market pricing to double (currently up to $4.50/kg) since August.

To manage through these capacity constraints, the Converge freight and logistics teams work with multiple forwarders and these constant communications allow Converge to capitalize on excess spot availability. Leveraging our mix of vendors allows Converge to take advantage of the best transit time versus cost by obtaining multiple quotations. Currently, Converge is reaching out to its network and reviewing options for advanced bookings through calendar year-end.

2010 to bring more shortages and price increases on CCFL LCD panels

2009-11-11T15:39:00.003-05:00

Converge LCD Update.

Strong demand from China for TV panels led the recovery in the LCD business in early 2009. As production capacities expanded, however, most panel makers remained cautious about the market outlook in 2010. One reason is fear of surplus, particularly when sales numbers fell below expectations during China's Golden Week holidays in early October. Sony's aggressive pricing strategy and its recent collaboration with Foxconn have also created concerns among panel makers about diminishing profits for TV panels. As a result, TV panels will likely continue a downtrend in pricing in the near future.

Since LEDs found their way into many LCD panels and replaced traditional cold cathode fluorescent lamps (CCFLs) as the light source, there has been an ongoing shortage of models with CCFLs. The trend has intensified, particularly on 14.1", 15.0", 15.4" and some 17.0" panels. Many of these models were discontinued in the past six to 12 months. With just a quick look at the recent demand from the service industry, it is apparent that 14.1" to 15.4" panels are in the highest demand in today's market. It is estimated that this trend will continue well into 2010. The market prices on these highly allocated sizes are expected to continue to rise due to this shortage.

The market for desktop monitor panels has been rather quiet, compared with netbooks and televisions. Pricing remains stable as neither demand nor supply has fluctuated significantly. The introduction of Windows 7, with its newly incorporated touch screen capability, is speculated to ignite a new wave of demand for desktop panels. Currently, the market impact has been modest and will likely continue to be so until more users and software makers begin to adopt Microsoft’s new operating system.

The industrial LCD market continues its calm and steady pace. There may be some short-term instability in the supply chain once the rumored merger between Canon and Hitachi takes place, but the impact is expected to be minimal as each company has a rather modest footprint in the panel industry.

Converge reports significant volume requests for 3.5" SATA HDDs

2009-11-11T15:34:00.000-05:00

Converge Storage Update.

3.5" Drives.
We are seeing significant volume requests for 3.5" SATA HDDs in the 320GB through 1TB range. This increase is indicative of widespread shortages across all manufacturers. Box builders are turning to the open market with the largest volume demands seen in CY09. Meanwhile, the requests are less part number specific and more specifications driven in an attempt to secure the volumes needed to maintain production levels. As anticipated in October’s Market Insights, the result is a relative stabilization of contract pricing with an uptick in spot market prices. Again, this trend is expected to continue through Q409 and likely into Q110.

2.5" Drives.
While demand remains steady in the 2.5" market, we are not seeing the same shortage issues as in the 3.5" market. Builders are able to secure the supply needed to maintain production and are turning to the open market for cost savings opportunities and service support for EOL drives. However, we are not seeing the available inventory to support the price point variance requests, suggesting a leveling in the market. As we approach the end of what is traditionally the most robust manufacturing period of the year, it is unclear which way the market will shift. As previously reported, most of the activity is centered on the 160GB–500GB SATA 5400 RPM HDDs.

TI OpAmps returning to a status of significant shortages.

2009-11-11T15:27:00.001-05:00

Converge Semiconductors and Integrated Circuits Update.

The market is settling into a consistent pattern of spot shortages and extended lead times, being driven by the following:

Texas Instruments (TI) continues to lead the way among companies facing shortage problems with its DSPs, TPS series of converters and SN74 logic series; once again being joined by their OPA series of OpAmps. After quieting down for several months, the OpAmps look to be returning to a problem status of significance.
There is no change in the capacitor shortages on Murata ceramic high-CV caps and AVX tantalum caps.
Freescale processors and Altera PLDs continue to be short, with the Altera products heating up considerably over the past several days and Broadcom's delivery on some of its BCM5 series Ethernet controllers turning out to be less significant than expected.
NXP logic, controllers and LCD drivers have also become tighter over the past several weeks, as have some Tyco high-density connectors.
Voltage regulators have also started to show tightness recently, with Infineon and Fairchild leading the way.

The Intel Atom market explodes, driving spot market volume

2009-11-11T15:24:00.000-05:00

Converge CPU Update.

As discussed in previous editions of Market Insights, the CPU demand mix for production builds has shifted away from desktops to notebooks and lesser-priced netbooks, which have become the secondary computer of choice. This, combined with the overall mix of reliable and inexpensive technology that has reduced the average cost per chip, means that opportunities for cost savings are abundant for CPU buyers.

In the desktop market, we have identified some encouraging trends for price savings in each of the principal price bands. Currently, the Celeron D 430, E2220, E5300, E7400, E8400 and Q9400 are all available at a cost savings. This represents parts that trade in the $30, $50, $60, $100, $160 and $180 price brackets, respectively, with potential cost savings up to 12%. This is usually caused by oversupply of a particular or similar model.

The picture is somewhat different in the mobile market, where T3000, T4xxx, T6xxx and P7xxx models are in healthy demand when prices fall below their unofficial direct cost, but more often than not we are seeing uneven shortage demands and a sell price of 1% to 2% on either side of direct pricing.

The netbook market and the Intel Atom family are driving unit volume growth in the CPU spot market. After an initial sluggish beginning for the Atom in the spot market, sales have now soared, with primary demand driven by the motherboard and chipset bundle. Demand for the low value/low power Atom chip is the greatest in Asia, while U.K. and U.S. manufacturers tend to prefer their Atom-equipped computers be prebuilt before shipping into their particular markets.

Converge is also continuing to observe steady demand in the server, embedded, industrial and repair markets.

Contract manufacturers tracking Micron chip shortages

2009-11-11T15:22:00.002-05:00

Converge Memory Update.

Pricing continues to increase at a rapid pace for both DDR2 and DDR3 memory modules. Earlier in the year market expectations were for another down year for the memory market, and yet at the close of business for October, the DDR2 and DDR3 markets had experienced eight straight months of rising prices. Clearly, computer builders did not see this coming or they would have forecasted for more supply in the second half of 2009. Most builders are getting caught short, and savvy buyers are finding that the spot market has been instrumental in assisting with supply shortages. The sweet spots are still 1GB and 2GB PC800 for desktops and notebooks, and 2GB DDR3 PC1066 and PC1333 for desktops.

While it appeared that DDR3 had stabilized for a few weeks in October, activity has once again picked up as we close out the first week of November. DRAM manufacturers have their hands full as they decide which technology to produce more of so they can take advantage of these high resale prices. Converge believes November will continue to bring shortages for modules as well as for chips. While all the talk is about module shortages, the chip market is also experiencing severe shortages. Micron parts in particular have been on a lot of contract manufacturers' radar screens for shortages, with lead times running 10+ weeks.

Converge expands Reverse Supply Chain Services

2009-10-29T09:59:00.001-04:00

The market may have stabilized, but demand by manufacturers to streamline their reverse logistics operations is skyrocketing. To meet this challenge, Converge recently expanded our global processing center and hired additional supply chain professionals in all phases of the business. This expansion has increased our overall capabilities to meet growing demand by major technology manufacturers to control costs and boost the efficiency of their service and repair operations.

Our new laboratory in Peabody, MA is ultra-modern, combining the security and specialization required by our customers with thorough electronic components service, repair, storage and shipment services around the world. The lab is complete with testing equipment and protocols identical to the testing schemes of the leading ODMs.

Management of reverse logistics can be a significant cost for large electronics companies. Reverse supply chain partners provide enormous value handling unsold and returned products by establishing just-in-time procurement services which streamline service inventories and manage product returns more efficiently.

The link to vendor-managed inventory (VMI) provides more information about these services, and details about the new expansion can be found here.

If you have any comments or questions, please contact us.

Customs, Trade and Commerce first-ever meeting on counterfeiting of semiconductor products

2009-10-15T11:24:00.003-04:00

Converge Freight and Compliance Alerts.

On Sept. 22, officials from U.S. Customs and Border Protection, the Office of the U.S. Trade Representative, and the Department of Commerce concluded the first-ever meeting with customs authorities from all six major semiconductor-producing economies to discuss the problems posed by trade in counterfeit semiconductor products. The meeting in Jeju, South Korea, preceded the annual Governments/Authorities Meeting on Semiconductors (GAMS), which gathers industry representatives and trade ministry officials from China, Taiwan, the European Union, Japan, Korea and the United States to address topics of importance for the global semiconductor industry in areas such as trade, the environment, intellectual property and regulatory requirements.

According to a joint statement issued after the Sept. 22 meeting, participating officials:

Reaffirmed their commitment to protect and enforce intellectual property rights
Shared their experiences and best practices in combating counterfeit semiconductors, from both import and export customs-control perspectives
Presented options for enforcement actions among GAMS members as well as increased cooperation between members and industry
Underlined the importance of having access to information on products and processes from the semiconductor industry to facilitate the identification of suspected counterfeit products
Agreed to undertake enforcement measures, as appropriate, against semiconductor counterfeiting
Agreed to keep other members informed and to report back on their activities at the 2011 GAMS

The joint statement notes that the worldwide semiconductor industry represents a market valued at approximately $250 billion in 2008. Counterfeiting of semiconductors poses an increasing threat, not only in economic terms for the companies whose products are counterfeited but also to the operation of critical technologies. Semiconductors are increasingly a core technology used in products ranging from mobile phones and car-braking systems to medical devices and satellites.

While these efforts are essential to the livelihood of the semiconductor business they have the potential to add lead time to the delivery of parts crossing international borders. Importers are likely to face increased cargo inspections and requests for documentation.

Dedicated professionals at Converge review all import / export documentation for accuracy, prior to submission to customs, in order to minimize the opportunity for the inspection of cargo. This includes validating manufacturer part numbers, accuracy in pricing and verifying classifications. Additionally, we work closely with manufacturers to assure product is properly classified and to have datasheets available upon customs’ request. Participation in programs such as C-TPAT also highlights Converge’s commitment to all areas of compliance with U.S. and international agencies.

Converge predicts price stabilization in 3.5” storage market

2009-10-15T11:22:00.000-04:00

Converge Storage Update.

3.5" drives
While higher-capacity 3.5" HDD direct pricing continues to slide, Converge is tracking a growing number of part number–specific shortages, with spot market pricing rising accordingly. These opposing trends lead us to believe that there will be stabilization in contract pricing in the near term while manufacturers increase production to meet demand. Most reports suggest that this will be the case for the remainder of 2009. This is specific to the 500GB through 1TB SATA HDDs. Meanwhile, we are seeing a slight uptick in open-market pricing in the 80GB thru 250GB IDE and SATA interface drives, with the 400GB capacity unchanged month over month.

2.5" drives
There is little change to report in the 2.5" storage market since last month. We still are experiencing strong production demand, as is typical for the fall manufacturing cycle year over year. Most of the spot market activity is centered on cost-savings opportunities for volume purchases in the 160GB to 500GB SATA 5400, RPM HDDs. The more sought-after brands appear to be Western Digital and Fujitsu. Meanwhile, service activity is centered on the Toshiba and Fujitsu brands. This appears to be reflective of changes in market share reported amongst the major HDD manufacturers for this market segment.

IC shortages and extended lead times continue

2009-10-15T11:20:00.002-04:00

Converge Semiconductors and Integrated Circuits Update.

The integrated circuit market has remained fairly consistent over the past month. Spot shortages and extended lead times are continuing for most of the manufacturers that experienced problems in September.

Converge is currently tracking parts that might experience shortages and delays in the following areas:

There has been some slight movement in lead times on TI DSPs, TPS series of Converters and SN74 Logic series out to 20–21 weeks.
Capacitor shortages are continuing with Murata Ceramic High CV caps and AVX tantalum caps leading the charge.
Broadcom has begun to deliver on some of its BCM5 series Ethernet Controller’s, but others still are causing delivery issues for the company’s customers.
Anticipated shortages on Dialight LEDs have yet to materialize, but we have seen increasing tightness on Pulse "H" series of Magnetic Transformer Modules and Microsemi is still having shortages on both military and non-military diodes.
ST Micro also has started to see some extended lead times, but there are no new concerns for On Semi, Maxim, National and Fairchild.

CPU market speeds along with no clear leader

2009-10-15T10:37:00.002-04:00

Converge CPU Update.

In this month’s Market Insights, we examine briefly several of the current trends and continue the commentary on the Intel Calpella as its launch approaches.

A busy market, with many different contributors.
The CPU market has picked up speed again, with several sharp shortages and pools of excess inventory, and without any one particular family of processors dominating the market. The market is very fragmented, but the overall picture is of healthy push and pulls on demand.

Old favorites have a last hurrah.
End-of-life cost savings or shortages are a common occurrence in the spot market. As a CPU passes out of mainstream production it can accumulate in excess or dive into constraint. It is rare that a family of CPUs that has been end-of-life for a number of years reappears into the supply chain in volume. During September, the Intel Core Duo Napa, and Santa Rosa E4400, E7200, T7800, T9600, T2390 and T8100 models provided some of the best value in the spot market. The actual current end-of-life models, such as the T3200, T6400 and E7400, quietly sold at stable price points, which suggested that they still have pockets of demand in the market.

This is indicative of the delays in the launch of the Calpella family. Some OEMs are pushing on with October launches of the i7-920, i7-950, i7-975, i7-720qm, i7-820qm and i7-920xm models. An uncertain market keeps the current Intel Montevina family of CPUs in steady demand.

AMD mobiles’ price variances.
The run on AMD’s older Turion TL series of CPUs largely has come to an end, but the newer TK and QL models have replaced them with excellent opportunities for cost savings. The key issue is that volume and regional differences in pricing are quite sharp, driving price variations in the market. Some of the desktop Phenom, X4, 9850 and 9750 parts also carry similar spot market savings.

Surprise twist: Converge reports DDR2 demand slaughters DDR3

2009-10-15T10:07:00.000-04:00

Converge Memory Update.

In a strange twist, the spot market is experiencing a great deal of demand for DDR2 modules when most were anticipating an uptick in demand for DDR3. Spot market pricing has soared over the past four weeks for 1GB and 2GB PC800 material. The 1GB PC800 desktop module has gone from $14 in mid-September to $23 by the close of the first full week of October. Demand remains high and spot market activity has been strong, especially for the 1GB desktop and notebook modules. Although demand for 2GB PC800s does not appear to be as strong, the spot market still has managed to spike from $30 three weeks ago to an average of $43 per module by the first week of October. Converge believes the surge for DDR2 will continue for at least the rest of October and maybe even into the first half of November. We could blame “Golden Week” for the surge in price, but the bottom line is that most material comes from everywhere but mainland China. The supply channels in Asia were open but the amount of product simply was not there.

The DDR3 market still is limited in supply, but demand has not been very strong the past few weeks. Pricing has stabilized after several weeks of increases throughout the month of September. If there is any uptick in demand for DDR3, we anticipate it will occur in the next two weeks.

Get Counterfeit Inspection Training with IDEA on October 1

2009-09-25T15:33:00.002-04:00

The Independent Distributors of Electronics Association (IDEA) has just announced that it will provide a half-day Counterfeit Inspection Training Seminar in Los Angeles on October 1, 2009. The seminar offers both lecture and hands-on training, with attendees using microscopic magnification to examine real components. The curriculum is based upon IDEA-STD-1010-A: Acceptability of Electronic Components Distributed in the Open Market.

The seminar will be held in conjunction with the IMAPS/NASA Workshop and Exhibit, Counterfeit Electronic Parts; Awareness, Avoidance, Detection and Mitigation on October 1, 2009.

For more details on the IDEA Counterfeit Inspection Training Seminar, view the press release, or visit http://www.idofea.org/register-lax.

3.5” drive market experiences price volatility

2009-09-16T12:24:00.001-04:00

Converge Storage Update.

3.5" Drives.
The downward trend in the 3.5" market continues month over month, with pricing in higher-capacity drives still falling, which is especially evident in the 500GB, 750GB and 1TB SATA HDDs. We have also been monitoring contract pricing in the spot market for some 1TB drives in the low-to-mid-$80s range. Meanwhile, there is some part-number-specific production and service demand in this same capacity range commanding a premium price with manufacturer delivery dates up to two months out. With supply levels shrinking, we expect stabilization in prices or even an uptick in the coming months for this segment. Demand continues for the 250GB through 400GB HDDs in both the IDE and SATA interfaces, with little change in pricing over the last 60 to 90 days.

2.5" Drives.
Converge is not observing the same price volatility in the higher-capacity 2.5" HDDs as we are in the 3.5" market. This is in contrast to the August Market Insights update, when we were experiencing significant swings week to week. Demand remains strong for both the production and service arenas. As in our last report, most of the activity is in the 160GB to 320GB SATA range. However, we have received requests for 400GB and 500GB of the same interface recently. Similarly, demand for the IDE interface has remained strong month over month, with price points stable.

IC and semiconductor word of the day: shortages

2009-09-16T12:21:00.001-04:00

Converge Semiconductors and Integrated Circuits Update.

Converge is currently tracking parts that might experience shortages and delays in the following areas:

Capacitor shortages continue with some Tantalum components but are frequently found with ceramic, which includes Murata, Yageo, Vishay, Sanyo, Kemet (Arcotronics) and AVX.
TI shortages are the most prevalent, with the primary line being the TPS series of controllers. However, Converge is also tracking Logic SN74 shortages as well. Some logic lead times have stretched from eight weeks to 18 weeks. TMS microcontrollers are still tight. These factors could lead to most TI lines being affected in varying degrees.
Xilinx, Altera, Freescale and Broadcom lead times, which were already widening, are definitely becoming an issue -- especially for Broadcom, which has been experiencing a number of issues recently.
Microsemi nonmilitary diodes lead times, which were already long, are now stretching out from 18 to 30 weeks.
We are tracking preliminary indications that Dialight LEDs may be the next problem area, with some lead time reschedules just very recently surfacing.
ROHM has recently announced that a significant number of its resistors have been placed on allocation as well.
Last, Converge is tracking an increase in activity for On-Semi, Maxim, National, Pulse and Fairchild components.

OEMs wait for a Capella to take the stage

2009-09-16T12:19:00.001-04:00

Converge CPU Update.

Converge is tracking an increase in demand over the August period as indications for September suggest that the holiday peak season has begun. Repair markets have been steady in demand, but cost-savings opportunities are becoming fewer as shortages dominate.

Shortages replace savings.
Microprocessors, which spent the early summer period as a cost-savings opportunity, lurched into shortage during August, with the Intel N270, T9400, T9500, T9600, T3400, E6300, E6320 and E5400 all being sought-after parts. For example, Converge observed a swing of 30 percent in the market price on the T9400, which is an unusual trend during an otherwise stable summer.

Some older reliable processors, such as the Q6600, are stuck in short supply. We have mentioned this model many times in our Market Insights updates over the past year, and it stubbornly remains in demand, with market supply limited.

The repair market was also hit by this late spike in pricing, as it principally affected older parts that were sliding into end of life. However, demand remains steady, with normal supply availability.

Awaiting the Capella arrival.
As we look toward the end of the year, Converge is anticipating the arrival of the Capella family of microprocessors. It marks quite a departure for Intel's mobile market, as Intel seeks to match AMD's Fusion platform. This new family of CPU, chipset and Wi-Fi card will ultimately make the Intel Montevina obsolete, making many OEMs nervous as they seek a consistent brand for the peak holiday season. The arrival of Capella microprocessors was originally scheduled for the third quarter this year, but we understand that delays are expected, with a new release schedule to be announced shortly. The CPUs will feature the i5 and i7 part numbers, which were introduced for the desktop CPU range earlier this year.

Also of interest will be the OEM or TJ models that are expected in the market. Tier-two and tier-three manufacturers, who traditionally do not have access to these processors, will look to the open market to provide the first supply of the T4xxs and T6xxs replacements. Converge will provide updates on developments in future editions of Market Insights.

NOR, NAND technology – not just a flash in the pan

2009-09-16T12:17:00.000-04:00

Converge Memory Update.

The memory market continues to rebound, with all indicators pointing to a recovery in more than one commodity. In addition to a DRAM recovery, the NOR and NAND flash memory market has been extremely active. The volume of requests for Spansion and Numonyx flash memory has tripled over the last two months. Supply is tight and quantities are limited for NOR flash, with demand from contract manufacturers significant. Spot market transactions are occurring daily and volumes remain high. While Numonyx continues to grow as a new company and Spansion continues with its reorganization, demand for NOR flash and MCP memory (cell phones) continues to increase, with neither company prepared for an uptick in demand.

The NAND flash market is also experiencing various shortages, ranging from 8GB modules to lesser capacities. Currently, Converge is tracking an increase in demand for Samsung NAND flash, which various flash buyers have attributed to the upcoming holiday build season. NAND flash is still priced reasonably low, and we feel that many contract manufacturers are restocking ahead of an impending price increase.

Lastly, the DRAM market continues to rise. Since late March, DDR2 and DDR3 have steadily increased in price each passing week. Converge is tracking demand for both DDR2 and DDR3 notebook and desktop modules. Due to the large gap between contract and spot market pricing, box builders are still not prepared to take in any inventory at this time. This could change as most 1GB and 2GB DDR2 PC667 and PC800 inventory continues to evaporate in the spot market.

Converge Asian Operations Not Affected by Typhoon

2009-08-13T12:32:00.002-04:00

We are fortunate to report that Typhoon Morakot has not affected any Converge facilities, employees or key suppliers in the Asia region. The typhoon hit the Philippines, Taiwan and China over this past weekend. Taiwan received more than 80 inches (two meters) of rain, inflicting the worst flooding the island has seen in 50 years. In China, news reports say upwards of 10,000 homes were destroyed by flooding and ferocious winds.

As a company with significant presence in this area, Converge is deeply saddened by the severe damage and loss of life caused by this storm. Our managers in this region are exploring ways to provide any support they can to help in the recovery.

We want our customers, employees and business partners around the world to know that we are experiencing no shipping delays or business slowdown of any kind from this event.

Prices eroding faster than the Florida coastline

2009-08-12T14:38:00.001-04:00

Converge Storage Update.

3.5" Drives.

In July's Market Insights, we reported that prices were eroding for the 500 GB capacity. Over the last several weeks, the 750 GB and 1 TB capacities have joined this occurrence, with open market pricing in the low $50 range and low $70 range respectively. This is in contrast to 750 GB pricing in the $70–$75 range and the 1 TB capacity at $90–$95 only two to three months ago. On the positive side, pricing for the lower-capacity HDDs has remained stable month over month. Overall, demand remains strong for this period of the year.

2.5" Drives.

The predictions of growing demand and shrinking supply are beginning to take shape in the 2.5" market. We are tracking significant volume requests for SATA HDDs in the 160 GB to 320 GB range. Meanwhile, pricing is becoming more volatile day to day. The service space remains active as well, with part number–specific requests for the aforementioned interface and capacity range. We expect this trend to continue for the balance of the quarter. Similarly, demand for the IDE interface has not weakened. However, activity in this interface appears to be more excess supply and cost savings driven.

Gauging the fallout from the Tessera ruling

2009-08-12T13:45:00.001-04:00

Converge Semiconductors and Integrated Circuits Update.

Overall, general IC activity has remained relatively flat compared to last month. However, the shortages discussed in last month’s Market Insights report for the Xilinx Virtex 5 product line continue, as do those mentioned from TI, Altera and Freescale. Activity for ST Micro has increased over the last several weeks, most likely out of concerns regarding the ITC's Tessera ruling. Consumer/telecom demand is still subdued, but demand in the industrial PC and embedded technology sectors are showing some signs of life.

Fallout from the ITC's Tessera ruling has been difficult to gauge, as specific information regarding the judgment has been slow to emerge. Some suppliers have adhered immediately to what they perceive will be the strictest letter of the law, while others have been quick to move inventory to make it available for sale in anticipation of enforcement. In addition, increased customs enforcement by nations in Asia and Europe have made it much more difficult and time-consuming to move certain products, including FPGAs, from one region to another. Converge is advising our customers to add an additional one to two weeks to lead times on parts originating from these countries.

New mobile CPU T4300 is not exciting consumers

2009-08-12T13:36:00.002-04:00

Converge CPU Update.

As the summer heats up, the spot market remains cool with no sign of the big shortages that headlined the news in previous years. At this time, we don’t anticipate any late surge. Instead, a spread of demand pockets contributed to respectable CPU demand in July. Currently, we are tracking the following trends:

OEM TJ models see a sluggish changeover.

Demand for mid- and low-range mobile CPUs is continuing for end-of-life technology, while newer models lurk in the shadows. We’ve been anticipating the Intel T4300, T6600 and T3000 chip series to reach mainstream demand in early summer; however, many OEM builders prefer the end-of-life models, as the supply of new parts and customer interest is slow to develop.

At this point in the season, following the Computex event, we would expect to see a big rise in interest surrounding newer models. Relatively flat demand, a large price gap to the new models and a limited supply has conspired to a market reluctant to make a significant move. The T4200 for example is selling at $70+, while the new model T4300 is in short supply, more expensive at $80+ and only boasting a 0.1 GHz faster speed, which is not exciting consumers.

Elsewhere, Atom CPUs are slowly creeping into the spot market in bundle deals complete with chipsets and motherboards.

Xeon savings a worthy quest.

Large cost-saving requirements for Intel Xeon 5140, 5160 and E5420 swept the market in July as customers were actively searching for savings. While a cost reduction of 6% on desktop parts is a good find, for Xeon processors it is not unusual to find 20%+ price differentials from region to region. The supply is uncertain, and volumes are less than mobile or desktop requirements. However, the size of the savings opportunity makes it the best value in this market.

Old favorites headline the desktop market.

The Intel E8400, the popular desktop CPU, has been highlighted in previous editions of Market Insights over the past year. It is not yet scheduled for a price drop, meaning demand remains steady. However, the market price has varied wildly during the summer, swinging from a classic 8% cost-saving part to shortage and back again.

The Intel Q6600 and E4600 processors lead the list of parts in demand and as a result are commanding a premium price. Demand in the spot market for high-end Core I7 desktop processors remains low, resulting in minimal cost-saving opportunities. Converge will be monitoring demand patterns for high-end CPUs and the low-end Atom mobiles in the coming months.

Are DRAM manufacturers squeezing market supply to raise prices?

2009-08-12T13:30:00.001-04:00

Converge Memory Update.

The DRAM market continues to show signs of improvement. We are currently tracking increased demand from module manufacturers for 128x8 DDR2 chips, both in PC667 and PC800 speeds. Pricing has increased significantly over the last five months. For example, the average price for a 128x8 DDR2 chip has risen from $0.85 in March to roughly $1.50 in the second week of August. There are mixed opinions on why the market has become so tight for these modules. Many end users believe that DRAM manufacturers are squeezing the supply from the market in order to increase prices. Some are claiming that their demand volume has remained steady throughout the past five months and there should be no reason for the market to heat up, while other end users are experiencing improving business conditions as we head into the second half of the year. All of this could also be leading to an increase in demand.

Either way, the market is steadily improving for both DDR2 and DDR3. The key to sustaining these improvements is to stay the course and avoid drastic spikes and dips in spot market activity. Any sign of inventory "dumping" will erase some if not all price increases in the memory market this year.

No significant shortages seen in 2.5" drives

2009-07-15T14:46:00.002-04:00

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!

2009-07-15T14:38:00.003-04:00

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

2009-07-15T14:31:00.001-04:00

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.