The Greensheet: October 2020

GENERAL NEWS

Wafer shortage continues to cause market disruptions

Currently, the global 8-inch foundry rate continues to approach 100% utilization. Demand has risen, and supply has been affected by an uneven supply of 8-inch foundry equipment. Because of this, supply has struggled to meet demand by about 20% and companies, including ST Micro and NXP Microcontrollers, are facing shortages.

On top of a spike in demand from the industrial and consumer sectors in Asia, the Chinese government’s financial push to grow local IC brands has led Chinese manufacturers to buy up wafers, further straining supply. With the U.S. government putting restrictions on SMIC, China’s biggest semiconductor foundry, already-limited foundry capacity could be crimped further and result in additional wafer supply hoarding.

The overall capacity for the 8-inch wafer, a key component in flash cards, may not be enough to cater to all the various chip manufacturers, which could also lead to price fluctuations for flash and memory chips.

Finally, wafer manufacturers are focusing more on adopting new production technology than increasing production output.

Asahi Kasei production plant catches fire

Asahi Kasei’s Nobeoka Plant in Japan, which produces large-scale integrated circuits for audio and voice systems as well as raw materials for crystal oscillators, caught fire on Oct. 20. We are hearing varying initial reports of limited supply; however, the market for these oscillators has already been tight due to the pickup in 5G technology production.

As of Oct. 27, the company has yet to give an update on the impact; however, it will be a few months before the impact of the fire is fully felt in the market.

Demand for peripheral goods rises from increased home usage

Currently, the supply for Wi-Fi cards is tight. Distributors are reporting that Wi-Fi card manufacturers are having trouble delivering orders that were placed months ago, caused by a steep increase in Chromebook and laptop demand.

Intel, for example, is experiencing tight supply and only specific larger clients are receiving allocations, which has resulted in spot market price increases. It’s likely that other major manufacturers are in the same situation.

Secondly, demand for optical products, such as Ethernet optical transceivers, is on the rise due to the 5G boom in China. Demand for products ranging from 1GbE to 400GbE is strong. According to sources, lead times have stretched to 8-10 weeks on products with a higher data rate, such as the 100 GbE specification transceiver.

The increase in home usage demand also includes audio products, like USB audio headsets. This has lead Logitech, a top audio brand, to face supply constraints as production struggles to catch up to the global spike in demand.

CPUs

AMD Ryzen 5000 Series desktop, Vermeer, announced

AMD recently announced the new Ryzen 5000 series, “Vermeer”, (AMD Ryzen 9 5950X, Ryzen 9 5900X, Ryzen 7 5800X and Ryzen 5 5600X), which is its latest 7NM desktop CPU with Zen 3 architecture. These high-end desktop CPUs are targeted at gamers, content creators and PC enthusiasts.

The official launch date is Nov. 5, which is just in time for year-end online e-commerce events – including Singles’ Day, Black Friday and Cyber Monday, as well as festival season.

We believe that open market availability for its predecessor, Zen 2 Matisse (Ryzen 3000X and Ryzen 3000XT), will be limited soon, which occurs whenever a successor is launched.

Chain reaction by Nvidia GeForce RTX 30 series graphics card

The PC market was hyped when Nvidia first launched its latest GeForce RTX 30 series graphics card. Furthermore, Nvidia’s 2nd generation RTX architecture stimulated demand on high-end desktop CPUs, such as Intel’s i9 10^th Gen and 9^th Gen due to the compatibility of these products.

As such, if builds include any of the Nvidia GeForce RTX 30 Series Graphics Cards (GeForce RTX 3090, RTX 3080, and RTX 3070), then contingency plans should be built to include increased lead times or a shortage.

Apollo Lake taking the ripple effect from Gemini Lake and Gemini Lake Refresh

As Chromebook demand and spot market pricing continue to surge, supply for the preferred Gemini Lake and Gemini Lake Refresh remains inconsistent in the open market. Because of this, we’re seeing customers revert to the predecessor, Apollo Lake, to bridge the gap.

Though Apollo Lake supply is limited in the open market, mobile N3350 pricing has surged by approximately 50% since June 2020. It will continue to rise if supply for its successors, Gemini Lake and Gemini Lake Refresh, remains limited.

Intel has also announced product change notifications for Apollo Lake:

Intel Third 10NM Fab has launched

Intel’s long awaited 10NM Fab 42 is fully operational. This could lead to an easing of the current mobile Ice Lake and Tiger Lake supply constraint or could be a tell-tale sign that the 14NM Fab, which produces Gemini Lake, Gemini Lake Refresh, Kaby Lake R, Whiskey Lake and Comet Lake, is nearing its end.

For example, Intel has issued product change notifications for Kaby Lake R:

ICs

MOSFET manufacturers shift production to offset shortages

With demand increasing for mid to high-end products, MOSFET leaders are now focusing on higher voltage capacities. Generally, lower voltage MOSFETs are required for faster charging capabilities in mobile phones, but it is rumored to potentially create shortages in the long run for low and medium-powered MOSFETs.

Thus, many customers are now leaning on NXP for diodes and OnSemi for MOSFET production.

Spike in demand results in extended lead times for TI

TI supply has been relatively stable for parts used in commercial and 5G applications. However, a surge in demand from automotive customers has caused lead times to stretch up to 16 weeks for automotive-grade items.

Furthermore, an upside in demand for power management and commercial application products, such as the BQ, CSQ and TTS series, has also caused lead times to stretch from the normal 8-10 weeks to 14-16 weeks.

Renesas continues to face lead time stretches

We are seeing lead times continue to stretch for Renesas. Although there is no official statement from the manufacturer, supply has been tight since the beginning of the COVID-19 pandemic.

Lead times have stretched from 12-16 weeks to up to 20 weeks for automotive parts.

Molex production still badly affected 

Distributors are reporting that Molex lead times are increasing, and delays are being seen in backlogs. Lead times for parts originating from India are stretching up to 20 weeks; however, parts originating from the Philippines and Malaysia have not experienced any lead time stretches.

We are hearing that production may shift for parts produced in Ireland. Supposedly, the factory is going to close and stop production by the end of 2020. The 95540 series, for instance, will be shifted from Ireland to Malaysia for production.

AMD expanding its market share

AMD is looking increase its market share against competitors and grow through its $35 billion acquisition of Xilinx. While AMD specializes in CPUs that serve as computers’ digital brains, Xilinx makes FPGA microchips that can be reprogrammed after they are produced. Because of this, both companies lead in rapid prototyping and in emerging technologies, including in the latest 5G telecommunications infrastructures.

Xilinx has also announced that there will be a 25% price increase on all Spartan 6 (XC6SLX), Virtex 6 and 7, and Kintex 7 (XC7K) FPGA family products.

In order to lock-in products at the current prices, customers must place product orders by Dec. 23. The new pricing will take effect for shipments expected after April 2, 2021.

MLCC shortage in mobile and automotive applications approaches

Overall, we are seeing stable lead times for MLCCs across all brands. As predicted, though they are not currently in shortage, we are seeing an upward trend in demand from mobile and automotive applications.

Demand for Yageo’s 0402 case size, 104 – 105 capacitance is rising. Similarly, we are seeing a surge in demand for Samsung’s 0402 and 0603 case sizes. While lead times for most sizes and capacitance are stable, capacitance values 105, 106 and 226 are increasing.

Murata, on the other hand, is focusing on the smaller case size, 0201,1005, which is more profitable for them. Currently, lead times are stable, except for high capacitance products, like 106 and 107, which distributors are only receiving small allocations.

Taiyo Yuden is also experiencing a surge in demand for small case sizes due to the ramp up of mobile production, and distributors have shared that their inventories are moving fast.

Oppositely, we have noticed that automotive customers are focusing on bigger case sizes, such as 1206 and 1210, which are currently in hot demand.

Finally, demand is strong for applications like 5G base stations, gaming applications, servers and computers/notebooks. As a result, distributors have mentioned that parts with a capacitance value of 105, 106, 225 and 226 with voltage of 1kv and above are in short supply.

MEMORY

Memory demand to rise at the beginning of 2021

With the economy slowing down, production, capacity and big data projects have also slowed – causing supply and demand to be balanced. Currently, there are enough server module inventories for end-users and spot market suppliers, if needed. However, it’s expected that server projects will ramp up in 2021.

Samsung is using this opportunity to shift production capacity toward its new D-die modules. End-users with scheduled projects for C-die, or those who are just not ready for the transition, can look to the open market for buffer stock and quick shortage purchases.

In addition, heightened demand for tablets and laptops is currently creating supply gaps for PC modules and memory chips.

There is also some diversion in PC module speeds as memory manufacturers push customers to use their newer 3200Mhz products instead of 2666Mhz. This technology diversion could create some supply gaps in this space.

Flash market to experience supply shortages

There are signs that the flash market could experience supply constraints. Gaps caused by the pull-in for flash memory from the Chinese market, coupled with the wafer shortage, could result in manufacturers not being able to fulfill orders.

We are already seeing Macronix experiencing shortages, and it is expected that other brands could be facing similar supply issues soon.

STORAGE

PC manufacturers to shift away from HDDs toward SDDs

Prior to Golden Week there was a spike in HDD demand, which was mostly driven by Chinese data centers and cloud storage providers looking to increase inventory levels before new U.S. export controls were put in place.

Now, the storage market is growing and larger capacity drives (12TB and above) are becoming a preferred, cost-effective alternative for manufacturers. In contrast, the supply of smaller capacity drives is flat as overall market demand remains weak. Look for HDD manufacturers to focus on large capacity drives to maximize Q4 profits.

SSD prices continue to fall and are expected to drop an additional 5-10% by the end of 2020. Suppliers that are sitting on SSD inventory may be pressured to release stock at a discount. This may be good news for the PC builders that use SSD-based storage.

If SSD and NAND flash pricing continue to decline, more manufacturers could adopt SSD storage and push this medium into the mainstream PC market. Because of this, we expect more notebooks to have SSDs in its default configuration instead of HDDs, forcing HDDs to become a secondary choice for PC makers.

A bustling time for GPUs

The GeForce RTX 30 series graphics cards are in hot demand since the launch of Nvidia’s new lines. It was reported that Samsung’s 8nm wafer, used in the RTX 30 graphic card, has had a lower yield rate compared to previous versions. The spot market pricing has risen over 30% higher than the official price for both 3080 and 3090, and it could potentially increase further.

Due to overwhelming demand, enterprise users are being forced to switch back to the previous RTX 20 series. In order to catch up on the supply and ease production tightness, Nvidia postponed the launch of the RTX 3070. Nvidia has also canceled its planned December release of its 20 GB 3080 and 16 GB 3070 to better meet existing demand.

Nvidia’s direct competitor, AMD, is going head-to-head against Nvidia’s RTX 30 series through its upcoming launch of the new “Big Navi” GPU – Radeon’s RX 6000 series, which is also expected to be released at the end of this month. AMD’s “Big Navi” incorporates the TSMC 7nm die and its yield rate is reported to be higher than Samsung’s 8nm (used in Nvidia’s RTX 30 series). Hence, AMD may have an edge over Nvidia in supply.

Historically AMD has set a lower price benchmark than Nvidia. If both Nvidia’s RTX 30 series and AMD’s “Big Navi” series are comparable in term of performance, then pricing might be a deciding factor on who will emerge the victor in the graphic space.