The last few weeks have seen improvement in the market on smaller 0201/0402 case size MLCCs as manufacturers work to supply end customers who have been short on product for the better part of the past two years. Allocation has been freeing up and production is closing in on meeting demand. However, there is still a fair amount of skepticism that the recent supply shift of these small case size MLCCs is more of a band-aid than a long-term fix. We are anticipating the shortage to run well in 2020 on most case sizes. Larger case sizes such as 0603/0805/1206 and above have seen a spike in demand as production at manufacturers has focused on smaller caps with higher capacitance, thus the price of larger, less profitable caps has skyrocketed due to lack of available stock. In response to the automotive sector’s demand, manufacturers such as Murata and AVX are planning new facilities that focus on the sorely needed large case size MLCCs to help stem the bleeding. As the amount of time needed to ramp up and produce parts will be significant, there is no clear date when these facilities will be functional. Current lead time orders from manufacturers on automotive grade MLCCs are expected to be pushed out as demand continues to increase and resources are funneled into smaller case size production.
Much like the MLCC market, the main factor behind the resistor shortage is the automotive sector. The driving force behind this increase in demand is the ever expanding electronification of cars. Electric cars and their correlating charging stations, automotive control boards, infotainment systems, and self-driving functions are all key contributors to the sparsity of automotive grade resistors. As a result, major manufacturers have focused production on these parts to be the “go to” supplier as this market takes off. Though there is a significant effort from manufacturers to allocate their bandwidth to these automotive grade parts, and we are seeing significant lead times that in some instances are upwards of 90+ weeks. Vishay CRCW series and most automotive resistors in case sizes 2010 and 2512 are the main parts seeing significant lead times. As marquee manufacturers such as Vishay, KOA and Panasonic are looking at increasingly long lead times, smaller manufacturers like Yageo and EverOhm are seeing this as an opportunity to penetrate the automotive market and the production of auto grade parts has taken precedent over commercial grade. Due to the prevalence of their parts, these smaller operations are passing along price increases to capitalize on the lack of stock available. In an effort to match demand, both KOA and Yageo are bringing new production facilities focused on automotive grade resistors online, but the time frame for these facilities to be functional is unclear and the most conservative estimates project issues on these well into Q3 of 2019.
The connector market is not immune from the global shortages as we are seeing brands like TE Connectivity/Tyco and ERNI with lead time pushed to 25+ weeks. In some severe instances, the parts placed on orders with an initial 25+ week lead time are being pushed out to 63+ weeks after the order has been placed. Compounding these issues is that major connector brands are playing favorites, and allocating stock to larger OEMs and CMs over smaller to mid-range companies. These conditions have no real end in sight and are projected well into 2019, if not longer.
There hasn’t been much improvement in the MOSFET space since our last Greensheet. In fact, most conditions have worsened due to the insufficient supply of wafers. ON Semiconductor reportedly cannot find replacement suppliers for the wafers that caused the production issues and due to that, lead times have continued to stretch. Price increases are coming from ON Semiconductor in Q4 and going forward, pricing will be reviewed on a semi-monthly basis going into 2019. Steep demand on parts like S17 series Vishay MOSFETs are also being impacted due to demand in the commercial sector stemming from upcoming transitions to 5G applications on mobile devices. We are seeing current lead times at around 33+ weeks with most agreeing that it will be stretching come 2019. Infineon is also seeing lead times grow with their BSC and IP lines, even though they have been the most proactive in investing in new production facilities in hopes that it will help their supply issues. Similarly, ON Semiconductor is planning on investing several million in the coming fiscal year into production to offset their issues producing the FDC line. The shortage is so severe that even smaller brands like A&O Semiconductor are starting to see lead times on their AO and AON series increase from 20 weeks as demand from end customers has their production facilitates cannot keep up with demand. ST Micro Power MOSFETs (SMA/SMB/SMC) in both automotive and non-automotive versions are looking at lead times of over 40 weeks with increasingly constrained inventory and backlog. Most companies are bringing fabrication facilities online sometime in 2019 but the timeframe is looking closer to Q3 of 2019, which means that supply chain issues could last well into 2020.
Projections as to when the shortages on 14nm PC processors will abate are stretching from Q2 into Q3 of 2019. The decision to use TSMC for certain lines of processors like Atoms and a reported expansion of capacity at production sites in Vietnam and Ireland will help, but recent market trends and transactions on Core processors signal more trouble ahead. The premiums for certain mobile processors are outrageously elevated, but parts are moving almost instantaneously. Though hardly surprising, even the newly launched Whiskey Lakes are in the mix and projected to get worse. Desktop has been more quiet than mobile and the pricing in this space has been quickly receding from the high points reached in mid-September. Some weak demand has lent a hand in clearing up supply gaps but there is still considerable ground to make up in Skylake for whatever orders are left. Coffee Lake has recently become more of a focal point for customers looking to shore up supply. The 9th generation Coffee Lake Refresh processors are moving well and there is concern that pricing here will start to creep up. Chipset supply has shown some signs of modest improvement of late on some Cannon Lake models but others remain extremely challenged and relief is not expected until the New Year. Production of the B360 was reported to be cut by 30% in October, likely due to overall capacity constraints.
The supply picture for Purley processors has achieved a state of normalcy and we’re just now seeing pricing reach a point where cost saving opportunities are achievable. Still, concerns about supply in December and January persist. The consensus among our customers and suppliers alike is that the recent improvements will recede as capacity has been shifted to confront the more severe supply issues taking place in the PC segment. The whack-a-mole approach to putting out fires is believed to bring uneven, fleeting relief. More than a few customers are already taking action to get ahead of any potential allocation shortfalls, especially with so much uncertainty looming with the Cascade Lake launch in Q1 of 2019. Shortages on E3 Kaby Lake Xeons, for which supply has been prone to sporadic hiccups over the last twelve months, cropped up in early October and are expected to run through the end of the year.
Yield rate issues for the chipsets included in the Nvidia RTX 2080Ti graphics cards are driving the long delayed delivery. Sample pieces sent to customers are found to be facing display artifacting and instability issues. Design faults within the GPU are likewise contributing to the delays. Though design fault issues are easily resolved, Nvidia is taking its time to rectify the problem as they want to move their older Quadro P5000 and P6000 series first. Nvidia is currently committing to delivery by end January 2019, but that appears optimistic and significant gaps are expected once product is shipping. Customers have been looking to the RTX2080 for GTX1080Ti as replacements, with some even looking for the GTX1080 Ti chipsets for the manufacture of the full cards.
The newest series of Samsung SSDs, the SM883, has seen healthy supply and there is plenty of stock available. Samsung has been cutting pricing for all SSD models but until recently the price cuts have leveled off. There is still quite a bit more softness in the market, especially looking back a year ago this time, particularly on volume deals. Many suppliers are doing their best to clear out SSD stock and keep inventory levels low heading into 2019. There is still quite a bit of speculation as to the fact that pricing per byte has yet to bottom out. We expect to see more activity on the soon-to-be EOL PM863a series in the weeks ahead. Already, a number of capacities have run short, while others have seen substantial savings opportunities.
The WD Gold series is scheduled to EOL by end this year with a last time of buy due by the end of December. 4TB and 6TB capacities are still the most requested from this series. Although there’s still time to the final call, distributors are seeing lead times getting longer, stretching from 3 weeks to more than 4 weeks now. Meanwhile, transactions for 1TB and 2TB capacities are tailing off. With WD having completed the acquisition of HGST, the HGST Ultrastar enterprise HDD series has been discontinued. The new series to be launched will be the merge of both series branding “Western Digital Ultrastar.” Distributors also commented that Q4 is usually considered as the traditional peak season but this Q4 seems a bit ‘unusual’ with market activity not as active as expected. Pricing has been stable as a result. Seagate has been monitoring open market activity and taking active measures to dissuade distributors or resellers from selling outside their own territory. A scheme by which deposits are taken for each order and only released if there is an instance of open market activity reported at the end of quarter has been implemented.
Finisar Optical transceiver lead times have stretched from standard 4 weeks to 6-8 weeks. Delays are pegged to the manufacturer shifting production from China to Malaysia in order to avoid tariffs. It affects all part numbers included existing “COO Malaysia” models due to the sudden increase in capacity.
There hasn’t been much movement in the market with regards to DRAM chips due to soft demand in phone, server and notebook markets. Mobile/phone demand took a tumble due to the already available replacements in the market. Servers have been facing demand uncertainty, causing some shortening of production. Finally, PC and notebook production was set back due to the shortage in Intel CPUs. As a result, distributors have been in discussions with manufacturers such as Micron, Hynix and Samsung to reduce their outstanding order quantities and lower demand forecast for Q4. Distributors are keeping their inventory as lean as possible and are working to promote one-off deals at more competitive pricings to clear inventory. Outlook for DRAM chips does not look good, with distributors expecting a dip in pricing in the second half of Q4.
We are seeing major changes in the SLC NAND flash space. Cypress Semiconductor Corp, a leader in embedded solutions, just announced that they will not reinstate several distributors from their distributorships, which goes into effect January 2019 . Cypress also announced its joint venture with SK Hynix, in an agreement for an initial five-year period, to manufacture and sell Cypress’ existing single-level cell (SLC) NAND products, focusing on 1G to 16G densities, and to invest in next-generation NAND products. The joint venture will be 60% owned by SK Hynix System IC and 40% owned by Cypress, and it will be based in Hong Kong. With that, we will closely monitor how the supply in the coming year will be affected by this joint venture.
Prices for all modules are going down fast and, as with similarly-depreciating SSDs, the bottom is expected to be reached sometime around the middle of 2019. The most heavily discounted are server modules. PC module pricing is quite varied across manufacturers and there have been pockets of opportunity for savings vis-à-vis contract pricing on occasion, especially with Samsung parts manufactured in China, the flow of which has slowed due to tariff implications.