In March, Cypress announced price revisions that are scheduled to take effect by the 25th of April 2017. According to sources, the price revision will affect all product lines including; NOR Flash, RAM MCP, NAND Flash, SLC NAND. Moreover, Cypress and Spansion are stretching lead times on the NOR flash, MPN: S29xx25xx, from 6-8weeks to 15-17weeks. This has pushed up the stock price by nearly 30% in the market. On the other hand, Micron will phase out production for NOR flash, MPN:N25Qxx. This has worsened the shortage situation in the market. Customers are running towards tier 2 brands to fill their demand such as Winbond, Macronix, and ISSI. Micron and Tier 2 distributors are expecting price adjustments for the second quarter when Cypress’ new pricing becomes more transparent.
We are hearing from distribution that the ceramic capacitor market is extremely scarce right now due to the influx in automotive demand. Lead times on parts are beginning to reach the 40 week point and distribution is running out of stock quickly. AVX, Murata and KOA are some of the major manufacturers that have been affected.
Like the capacitor market, lead times in resistors market are stretching out to about 40 weeks or more. Rohm, Vishay and Panasonic have been the major lines being affected. This is being driven by the same demand spikes in the automotive industry that have been affecting capacitors. Most Rohm Products in the MCR and MNR series are on allocation and distribution is unsure if they will even accept new orders. Panasonic (ERJ Series) and BCC (CRCW Series) lead times are about 35-40wks, but the manufacturers are still committing to purchase orders. Distribution has been struggling to find crosses that have not been affected by the upside in demand.
Due to On Semi’s acquisition of Fairchild back in the fall, it was anticipated that automotive lines would reflect long lead times or go EOL. Semi’s plan with the acquisition has been to grow new markets while consolidating and cutting costs. Our sources recently recognized that there have been extremely extended lead times on the FSB Motion SPM 5 series which are frequently used in refrigerators, fan and water pumps. Furthermore, lead times in the FSB50 Series are stretching to as long as 20-40 weeks. Sources say it is a capacity issue at this time with no sign of early shipments to distribution.
The month of March saw pricing on Kaby Lake desktops hit price points we haven’t seen before in Haswell or Skylake. Core models are priced 2-3% below the nadir reached by previous generations. Speculation around the reason for the price drops centers on it being a response to AMD’s Ryzen introduction. It seems like it’s been ages since AMD really posed a threat to Intel in any space, but when there was a semblance of competition, prices dipped and more opportunities existed in the market. The prices changes on Kaby Lakes haven’t done much to spur activity as of yet. We expect to see prices rise in April but a full reset to previous levels is not likely given that the market has grown accustomed to these new price points. A number of suppliers have reported that shortages in other commodities, namely memory and SSDs, have hindered trading in PC processors for both mobile and desktop. The prospect of tighter margins stemming from premiums required on DIMMs and drives has resulted in less appetite for production at the market’s margins.
The Skylake EP Xeons are starting to come into focus for their launch later this year and the most striking development on this front is the size of these chips. They are massive and are roughly 70% larger than their Broadwell predecessors. The new platform will require an upgraded LGA 3647 socket (named after the 3647 pins). Skylake Xeon V5 will be going up against AMD’s Zen based Naples platform which is reported to bridge the performance gap that has existed between the two for going on five years now. If performance parity is achieved, we expect to see drastic changes in the pricing of Skylake v5s as compared to Broadwells, which have already reached low points we hadn’t seen in either Haswell or Ivy Bridge. In anticipation of the Skylake launch, we’ve seen a marked turn down in availabilities of the Haswell EPs, particularly on anything above the E5-2650v3. Allocations for these models will become very difficult to come by in volume by June.
FINISHED GOODS UPDATE
As the quarter came to a close, the global shortage on SSDs is still in full effect with no signs rebounding quite yet. Authorized distributors are reporting that Intel is advising them to expect supply constraints to continue throughout 2017 and possibly into Q1 of 2018. Rumors have been circulating the market that Intel has been giving less allocation to Asia as compared to other regions given the lower price points there. Supply constraints have made authorized distributors unwilling to quote any of their incoming stock unless they have received confirmed delivery dates from Intel. Vendors are saying that the usual practice for Intel is to raise price again in Q2 which has caused some brokers and distributors to hold back their stock in the hopes of selling at a higher price in the new quarter.
Issues on Samsung SSDs have continued to rise over the past month. In the US, we are beginning to see some authorized distributors roll out their new Samsung Authorization program that requires end user information for any Samsung SSDs purchases. Additionally, Samsung will increase pricing by 10-12% this week; however, some distributors had already seen an increase in pricing. Samsung has issued a statement to all Authorized Distributors stating that all back orders for the 850 PRO (except 256GB), all 850 EVO, and 1TB 960 EVO need to be cancelled and reissued with the new pricing. Both SM863 and SM863A have remained very short over the past month with very limited amounts of stock available in the open market.
As the slow season approaches in the LCD market, the overall demand for PC notebook panels has decreased during the first quarter. Panel manufacturers have reduced their production on all notebook capacities, and have now mainly been focusing on mobile and TV applications. Over the past month Fusion has been seeing shortages on wide-view-angle in-plane switching (IPS) panels mainly due to Samsung’s exit from the LCD display business. Manufacturers are trying to stabilize pricing to stay profitable, while controlling inventory with limited supply on high resolution slim and non-mainstream sizes like 12.5" and 13.3". Overall, notebook panel pricing has increased slightly over the past month and should continue to do so over the duration of Q2.
Volatility in the memory module market continues to plague system builders, as supply shifts between capacities. Although manufacturers have increased production of the widely used 32GB 2400 RDIMMS, OEMs and cloud-service customers are left with without a solid solution for their upside.
Manufacturers are rumored to have increased production of 32GB RDIMMS, but at the cost of supply for other capacities. Suppliers are seeing decreasing supply of the 8GB RDIMMS and 64GB RDIMMS, while 16GB capacities still remain tight. Module consumers can usually jump the hurdle with strong demand forecasting, but manufacturers have been unable to help with unplanned increases in demand.
Although pricing seems to have stabilized from the sharp increases of last quarter, experts are suggesting DRAM prices are far from their peak. Some experts are projecting that DRAM prices will increase as high as 19% by the time Q217 earnings are published. If they are right, we will surely see sharp increases in module pricing across the board. Manufacturers have maintained a lean inventory approach in order to enhance the value of their products, while taking a disciplined approach with capital expenditures. There have been no confirmed reports of new production capability coming on line, but Micron is rumored to have a new FAB producing DRAM before the end of the year.