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The Greensheet: March 2020

March 20, 2020

IC

Disruption occurring in the MLCC and resistor markets

Demand for MLCCs and resistors is increasing. In response, market indications point to a shortage brewing. Some manufacturers like Yageo are further increasing their MLCC prices, which were already increased before Chinese New Year. Other manufacturers like Murata and Taiyo Yuden have yet to announce price increases, but they are not negotiating price.

In addition, shipments are being allocated by most manufacturers and end customers are beginning to pull in stock themselves because distributors stock is moving rapidly.

Walsin beginning to deliver to existing customers

Walsin has begun filling its existing 1.5-month backlog. However, the company is not accepting new orders – in part to complete the existing orders and to curb a greater production shortage. Before the pandemic, the company delivered 30-40 billion parts, but since has only shipped 20 billion. These supply constraints aren’t expected to subside until June 2020 at the earliest.

As of the first of March, reports indicated its factory was only operating at 70% due to the manpower shortage caused by COVID-19, which is rumored to have resulted in sales decreasing about 50% monthly.

As a result, pricing will increase for resistors. The company will most likely follow Yageo’s lead for its ceramic capacitors (MLCCs) prices, and assign allocation to distributors and dealers.

Taiyo Yuden RF series production running smoothly

Taiyo Yuden distributors have been optimistic that the RF series supply chain is going smoothly as parts are all produced in Japan.

However, MLCCs produced in Dongguan & Jiangsu plants located in China are having delivery issues. It has cut off backlog orders and told customers they will have to deliver their outstanding orders first before accepting new ones.

CPU

8th and 9th Gen Desktop supply improving with 10th Gen set to launch

After consecutive months of rising prices and demand, the desktop market is for 8th and 9th generation processors.  Pricing has been creeping downward and approaching official pricing levels after a sustained run of 30% premiums. We are unsure of what’s to come next as we are seeing strong demand signals for April and May with China factories coming back online this week.

Suppliers, on the other hand, have expressed concern over Q2 revenue numbers, with a soft April expected.  Market inquiries have been steady, but transactions limited. A few sources have reported distributors in Asia will receive more discounted pricing in Q2 to increase numbers. Additionally, Intel has reportedly lowered revenue targets.

10th Gen Comet Lake processors will begin mass production in Q2 with initial deliveries of i5 and i7 models with the F-suffix coming in April. Retail box parts with the F-suffix, calling out graphics disabled, will comprise the bulk of this first wave.

400 Series chipsets, compatible with the Comet Lake processors, are already available in the market though they are showing . The B460 seems to have no issues while the Q470, H410 and H470 are showing signs of constrained supply. 300 series chipsets are expected to run short in Q2 as production ramps down.

Server market is still tight

Cascade Lake pricing has shown relatively little movement in the past month but is still elevated given the impact of the coronavirus outbreak. Order velocity has been steady, but we’re expecting to see an uptick in the weeks ahead based on demand feedback. Suppliers are confident the market will rise through the end of the year and are offering parts at premiums anticipatorily. Cascade Lake Refresh enquiries have been accelerating in the past week, although there are reports of problems indicative of a larger capacity issue that have surfaced.

Skylake XCC has seen a resurgence in recent days, but it is unclear if this is part of a broader trend of tapering production or a momentary spike in demand. Because of this unknown, we are keeping an eye on this situation.

Gemini Lake Mobile Celeron processors problematic

We’ve seen a considerable upswing in demand for Gemini Lake processors, particularly on Gemini Lake Refresh, as customers are reporting supply gaps through June. A surge in orders for low-cost Chromebooks, favored by schools, is likely behind this increase. We’re hearing that Intel is going to be ramping down the production of Gemini Lake processors in Q2 to devote more capacity to higher-cost processors, which will continue to strain supply.

Additionally, our sources mentioned that we could see a resurgence of Gemini Lake predecessor Apollo Lake parts coming to market.  Intel reportedly lost out to AMD on supplying processors to Google for it’s branded Chromebooks, and the Apollo Lake processors could offer a way to remain competitive on pricing.

Laptop shortage could give rise to processor shortage

Existing inventory for laptops is moving quickly to accommodate a surge in demand from quarantined employees and students. Suppliers are expecting there will be limited mobile CPU supply in Q2 – likely older generations, namely Whiskey Lake and Coffee Lake.

Ice Lake and Comet Lake supply will be less impacted. Q1 was very slow for distributors moving mobile processors, and the market is currently filled with stock and incoming lead-time orders. Inventory pressures have brought pricing down accordingly.

AMD supply healthy

AMD deliveries are coming through more frequently with more availability. While the 3960 Ryzen series is tight, there is a lot of availability on 3600, 3700 Ryzen series.  In China, the 3500U and 3700U mobile Ryzen processors are a hot seller with the increase in demand for DIY e-gaming and laptop sales. In addition, AMD Epyc Rome processors have become more widely available in the market. The spread in pricing offered to various customers for certain parts has been quite large, signifying a campaign to ingratiate certain customers and regions.

MEMORY

DIMM and DRAM pricing on the rise

Server DIMM pricing is expected to increase as much as 15-20% in Q2 2020. Manufacturers, such as Samsung, have already made their largest customers aware of this situation. In the wake of the price hikes and limited supply, many large OEMs and CMs are going line down or receiving short shipments with large lead-time gaps between shipments to complete the orders.  Furthermore, expected price increases are prompting some manufacturers to place large orders to protect themselves from price hikes. Additionally, there are several large projects scheduled to begin in Q2 that could take up the majority of the available DIMM stock in the market.

SODIMMs and UDIMMs are especially feeling the pressure of increased pricing as demand increases. Expect price increments of 10-15% during the next quarter.

The ever increasing COVID-19 government restrictions have manufacturers facing global delivery issues. For RDIMMS, many US customers could be facing line down situations. Chinese customers have only received 70% of their RDIMM orders.

While we are seeing increased allocation, we are still not seeing the support for memory chips to improve for March. Thus, we are expecting continued price increases.

Although mobile applications demand has decreased this quarter, the market is still facing disruptions – most significantly the demand for server applications is increasing and Samsung had a fire at its wastewater treatment facility. In response, Micron has increased its average selling price and has begun holding back shipments to observe the market situation. Hynix announced a small percentage price increase, and it’s expected to further increase prices because of the coronavirus’ impact.

With the price increases and Samsung putting more emphasis on manufacturing memory modules instead of DRAM, customers still operating are pulling in backlogs and increasing open-market trading, which is driving the spot market prices up by at least 5-10%.

STORAGE

Mandated quarantines causing increased HDD pricing

The increase in online activity has caused a sharp spike in enterprise HDD demand, which, unlike DIMM production, has already been in a state of limited production. Supply in the market is not expected to catch up for two months and prices could increase.

Distributors of Western Digital & Toshiba products have mentioned the most critically impacted components are in the 4TB – 10TB range, which have been behind on deliveries since Chinese New Year. Seagate distributors have also mentioned that the logistics of making on-time deliveries has become increasingly difficult.

OEMs/CMs reverting to older model SSDs to avoid shortages and lower costs

Production of enterprise SSDs has been slow to catch up to increasing demand, especially for 240GB & 480GB drives. Client SSDs have been in short supply since January, and with limited production and higher demand, the situation has only become more difficult for manufacturers to keep up.

A handful of distributors are speculating larger demand increases at the start of Q2, which will bring OEMs and CMs to the open market in order to secure buffer stocks for the next 2-3 months. Manufacturers, Intel in particular, have mentioned most of their supply will be allocated to their largest OEM customers. Some customers have even begun to revert to older models to bring in larger quantities and lower their costs.

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