The Greensheet

May 7, 2019

IC

Connector and relay shortages are worse than ever

Practically all connectors are facing record-breaking shortages, with some lead times extended to 100 weeks or more. Because of international pressure for non-conflict raw materials, there is a domino effect happening – manufacturing costs are increasing now which will lead to higher retail prices. TE Connectivity specifically is struggling to scale up production and expand its workforce – a necessary measure to meet demand - due to consequential cash flow constraints.

As mentioned in the November 2018 Greensheet, demand, and corresponding supply, for security relays is difficult to forecast due to market volatility. With higher-than-expected demand in Q1, lead-times stretched to 100+ weeks – some lines still haven’t shipped 2017 orders. Unfortunately, options are limited as alternates for security relays do not exist due to unique, inimitable printing. However, demand in Asia is decreasing so there may be some light at the end of the tunnel. It’s unlikely, though, that major makers such as TECON, Ernie and Panasonic can fully catch up … but any relief at all will be helpful.

Demand stabilizes for MOSFETs, but lead times are still a concern

As production capacity and wafer shortages become more and more of a challenge, MOSFET manufacturers are focusing production on high voltage, high value MOSFETs to maximize profitability. At the same time, growing market segments such as renewable energy resources, automotive and consumer products have ever-increasing needs for low power, high efficiency MOSFETs. The result has been an imbalance of supply.  However, MOSFET manufacturers seem to be correcting some of these shortages, based on lead times improving in the market.

Both Infineon and Vishay are seeing improvements in automotive MOSFET lead times, which have been severely constrained. Lead times for Infineon IPB80N/IPB100N/IPB75N/IPI80N/IPP100N series have improved to 14-26 weeks. Similarly, Vishay’s auto-grade SQJ series is enjoying shorter lead times – 12 weeks and decreasing – as they shift their focus to capturing a greater market share within the automotive space.

On the other hand, Power MOSFETs remain constrained with lead times hovering at 40+ weeks. Affected PNs are IPDXXX (TO-252 package), IPWXXX (TO-247 package) and SPB11NXXX (TO-263 package). At the same time, supply for Vishay’s LFPAK56 and LFPAK33 packages are severely constrained. SiR8/Si7/SiS4 lines appear to be the most difficult to find at the moment with most lines on allocation and lead times extended to 30+ weeks.

The production process for power MOSFET is time and labor-intensive. Manufacturers are seeking efficiency through mergers and acquisitions, and by investing in their core production facilities to increase productivity. While M&A is the preferred option, neither have provided enough production output to combat significant increase in global demand.  As a result, we anticipate lead times will continue to remain lengthy for MOSFETs.

Broadcom announces price increases to distributors

Broadcom’s CCX Division, named “Compute Connectivity,” recently announced to distributors price increases effective Q2 2019, which will be applied to all of Broadcom’s inventory and backlog for their networking and switching customers globally. Brands such as PLX, Avago and LSI will not be affected for now.

Broadcom also informed distributors of price increases for VOIP and POS related components. While the company has not officially announced this to customers yet, vendors speculate their largest customers may be unaffected. For small-to-medium customers, however, the impact may be substantial.

Capacitor market continues to soften … for now

USA distributors are finally holding more MLCC stock and loosening many of the restrictions placed on them during the peak of the shortage. Murata has been slowly shifting production to their more profitable lines, namely case size 0603 or smaller. Many manufacturers have followed their lead leaving Samsung and Taiyo Yuden as the dominant manufacturers in the large case size market. For users of general-purpose large case size MLCCs, shortages are expected in either Q4 of this year or 1Q20 as the number of manufacturers operating in this space decreases.  Now would be a good time to secure buffer stock. In other region, however, there is an overstock issue because of these components going EOL. The effect is prices are remaining steady or slightly increasing.

AVX’s TAJ series prices are high – buy now if in the market

Cost has risen sharply for AVX’s general purpose SMT chip tantalum capacitors (TAJ series). Distributors are urging their customers to submit orders by the 2nd week of May. This price increase is caused by a decreasing number of suppliers who can process tantalum raw materials into tantalum powder, thereby significantly reducing AVX’s capacity for production. The price hike is expected to last 2 quarters until the situation can be resolved.

5G ramp up is causing inductor market lead times to increase

For 5G-related inductors, such as the MB, LB, CB and BR series, lead times have aggressively increased due to heightened demand. Only current customers with active projects are receiving allocation, and orders for new projects and customers remain unfilled. This situation is expected to worsen as more 5G projects ramp up. As it stands, no word on increased production capacity or price adjustments.

As Taiyo Yuden implements its plans to expand production, the company is shifting to higher-capacity factories. The prediction is high-runner inductor lead times may increase from 8 weeks to 10-12 weeks.

 

CPU

Desktop supply situation is improving but by June is expected to worsen

The 3-month period from February through April was the worst yet for the desktop segment, and while supply is becoming more abundant in recent days, there are plenty of signs that this is a momentary reprieve. We’ve seen some orders in the first few days of May that portend trouble ahead.

To date, low core count models have been the most challenged in the year-long shortage run. While there are some promising signs for improvements overall, the expectation is that these models will not fully recover until early 2020.

We’ve fielded some inquiries on the 9th Generation Coffee Lake Refresh line but market availability has been limited outside of a handful of SKUs. We expect to see more supply come on line in mid-June. Intel's full Coffee Lake Refresh roll-out has been slow, with the first K-Series chips arriving in October 2018. A few more models have trickled out in the interim, but it's easy to assume that Intel's ongoing shortage of 14nm production capacity has played a role in the delayed arrival of the full complement of chips.

14nm Chipsets are active again

Since Q3 2018, we’ve heard that Intel will stop production of its 14nm chipsets, namely the B360, H310 and H370. In the past week, activity on these has been brisk with some customers looking to shore up supply for the August/September timeframe. The migration back to the 22nm chipsets – the B365 and H310C -- involves a motherboard redesign, which is a complicating factor that has heightened expectations for shortages in the months ahead.

Purley supply is starting to tighten up

It is hardly surprising that supply for Purley processors, particularly Gold 61XX and Platinum 81XX models, have recently tightened up on the heels of the Cascade Lake launch. As mentioned in last month’s Greensheet, we’re hearing that adoption of Cascade Lake might be slower due to the marginal performance increases – especially at the higher end of the stack, but nothing that a good supply constraint on Purley couldn’t help moving along. We’re hearing that rebate support for Purley has been pulled back and lead times for booking orders have stretched in the past two weeks alone. Data suggests that the second half of the year should be strong for enterprise spending on data centers after a long pause in Q418 and Q119, adding to the pressure on Purley supply.

AMD’s gains in market share starting to emerge for notebook

AMD Ryzen CPU saw the biggest jump in market share in 1Q19 since its late 2017 launch, according to market research performed by an investment advisory firm that Fusion partners with. It now has 11.9% of the laptop market share overall, and gained 5% for Ryzen to have an 8.1% market share.

After two major OEMs launched Chromebooks using a new dual-core AMD A4 processor at CES 2019, Intel’s market share has fallen 8% since 4Q18 to 84%. In the desktop space, market share has been more static with Intel having a modest increase in its share of the market.

 

Finished Goods

SSD prices keep falling

Samsung SSD pricing has decreased approximately 10-15% thus far in Q2. Their strategy appears to be to gain market share in 2019 and attempt to stay competitive with open-market pricing. As a direct result in April, Intel and Micron have begun to aggressively decrease their pricing. Rumors have indicated that Intel is considering dropping the SATA SSD series; however, they will continue to support its PCIE SSD.

SSD prices are directly correlated with NAND Flash chip pricing, and expectations for Q2 are that NAND Flash pricing will further decrease ~10%. However, some outlooks from the market indicate pricing could stabilize in Q3 and possibly begin to increase once again. In contrast to typical pricing correlations, this should not have an immediate effect on SSD pricing because there are sufficient stock levels in the market. Come Q4 though, we could see prices begin to increase.

Overall demand for HDDs is dropping, but enterprise storage is the major exception

For the price conscious, HDDS are still a popular product, and most market activity has been a direct result of cost per gigabyte. Despite 12TB and 14TB being touted as the new mainstream, the cost per gigabyte for an 8TB enterprise HDD is overall less expensive. As a result, we are still seeing strong demand for 8TB HDDs, and forecasted shipping volume for large capacity HDDs – 12TB, 14TB were lower than expected in Q1.

HDD manufacturers continue to be optimistic for 2019. They are expecting there will be a growing demand for high capacity HDD, and they are anticipating the spec-in and broad acceptance by the enterprise market – especially data centre developers.

Because SSD prices are falling, HDD prices are expected to drop in Q3 – or even this quarter. Pricing for Western Digital 8T/10T/12T has dropped by approximately 5% in the past few weeks and may continue to fall. Comparatively, WD pricing for 14T SATA HDD is about 2-5% lower than Toshiba. However, pricing for lower capacity 1TB and 2TB HDD should remain the same because it has already bottomed out to manufacturing cost.

 

Memory

Except for LPDDR, DRAM manufacturers are restricting on-hand supply and decreasing prices while waiting for 5G production to grow

DRAM demand is unstable as customers are purchasing components when needed to avoid excess inventory.

Manufacturers are rapidly dropping the average cost (ASP) of DRAM and NAND (SSD / eMMC) to try to stimulate a recovery in demand, but demand is expected to continue to fall well into Q3. As such, we have been observing a steady drop in ASP month to month across all categories including not only DRAM chips, but also VRAM chips and NAND Flash.

Vendors do expect DRAM demand to increase as production for 5G-enabled devices ramps up for both phones and data centers. To prepare for this, manufacturers are taking a strategic approach to adopt new fabrication plans that target crucial parts needed for 5G production. These builds are expected in Q3 and Q4.

Conversely, LPDDR (Low Power DDR) demand is still strong with supply allocations becoming tighter than ever. This is coupled by production restrictions and an increase in demand from mobile and consumer applications. Customers are seldom given full allocation on their demand forecasts and distributors speculate that prices will increase at the end of Q2.

Widespread failure concerns for Samsung C-die (18nm) causes ripples in the module market

Failure rates for Samsung’s C-die (18nm) have been reported as high as 4%. Tier 1 and tier 2 customers have taken a variety of approaches to work around this issue. Many tier 1 customers have imposed date code restrictions, whereas others have switched to the B-die entirely. Some customers have used this as an opportunity to return goods that were previously bought at a higher cost in order to exchange them for goods at the current, low market value.

Despite Samsung’s issues, there has been no significant impact on Hynix or Micron as memory prices as a whole have dropped 10% from last month. There are indications that pricing on the B-die could increase as lead-times for 16GB and 32B begin to see increases.

Aside from the B-die, suppliers are reporting that supply will remain healthy until Q3. Historically, manufacturer pricing on memory modules see an uptick in cost in Q3.

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