Coronavirus Special Report
The coronavirus outbreak not only led to an extended Chinese New Year but has also disrupted the global supply chain. The Chinese government mandated shutdowns and quarantines have immediately impacted some manufacturers. However, the full extent of the disruption is yet to be fully known.
IC, passive components and DRAM manufacturers who operate out of China have experienced delays in shipments, and they are only expected in partial batches over the coming weeks, thus causing extended lead times.
The CPU market was flourishing leading up to the Chinese New Year, but the lack of manpower and shortages of other components have brought the desktop market to a standstill. It is unlikely the same trading activity seen before the holiday will resume until April at the earliest – assuming demand picks back up to the same levels.
Internet-related industries are doing well as they have allowed employees to work from home. With cloud services usage increasing, demand in the server business has increased and is indirectly driving up demand for other commodities.
We are seeing customers going to the open market to buffer demand as uncertainty of the extent of the virus’ effect on the market, which is causing a spike in component prices. For instance, HDD production and raw materials produced in Asia have resulted in HDD pricing to spike at a 3-5% rate.
Manufacturer Status:
Due to the coronavirus outbreak, all companies and factories in China are required to provide detailed antivirus measures that must be checked by civil servants before being allowed to resume operations. The Chinese government is prioritizing applications and check processes for all medical related entities, including manufacturing, in order to support surges in demand.
Manufacturers are experiencing varied disruptions … if any at all. Below is a status of what we know as of Feb. 24.
TE (Tyco): The company’s primary plant is in India, which is still operating. Thus, supply has not been impacted for its industrial applications. However, its automotive applications are having shortage issues.
Molex: With sales offices and plants in China, there is concern but, currently, it seems there is little impact on supply. The company stocked up prior to the outbreak to decrease the effects of the on-going trade war between US and China. Distributors are still wary and taking large positions to buffer more inventory.
ADI & Skyworks: With production plants outside of China, such as in Australia and Malaysia, these companies’ scheduled deliveries are on track with the standard lead time.
Vishay: Last week, Vishay sent an official statement on its operational status to stakeholders. Although most of the plants have resumed production, plants in Danshui and Guangzhou will not be fully operational until late February. The key component affected is the IHLP power inductor series. Standard lead times have almost doubled, and there is no firm delivery status as of now.
Its diodes production plant in Tianjin is also not in operation, and no start date has been announced.
Murata: Murata Wuxi, a major plant that produces capacitors, has resumed production as of Feb. 10. Since 2019, the Wuxi plant has run at 70% capacity, therefore, the delay in resuming operations may not cause lead times to be significantly stretched.
Though Murata’s other plants in Foshan and Shenzhen have also received permission to resume operating, Murata is placing strict control on new orders. This is a precautionary measure to avoid lead-time problems caused by double orders and customers increasing safety stock.
Yageo: Vendors have mentioned that there has been a delay in component delivery and that stock offer pricing has increased. Yageo’s plants in Dongguan and Suzhou have resumed work as of Feb. 10. We are hearing prices will increase about 20-30% — primarily for MLCC case sizes 0201 and 0402 effective in March. No official notice has been sent yet.
Samsung: While SSD supply has been constrained for quite some time, output is even more limited after the extended Chinese New Year. Although Samsung’s statement says that certain facilities are operating normally, we are getting feedback from the open market that there is a continued delay in resuming production.
Intel: The company is experiencing delays with its SSDs and desktop CPUS.
Its NAND fab set in China has been delayed in recommencing production. The worst hit series are SSDs S4510, S4610, P4510 and P4610. These components are mostly produced at the Intel Fab 68 in Dalian, China, which is also currently responsible for 64 layers of 3D TLC NAND production.
While Tier 1 customers have been getting most of their allocation from Intel since December 2019, supply is expected to get worse in March. Tier 2 and Tier 3 customers seem to not be severely suffering because business remains slow for them. Customers in other regions also confirm the shortage with low or zero stock levels on SSDs they usually support.
We are hearing the impact could increase SSD prices by an additional 20-30% in March.
Although CPUs are moving more slowly, pricing has remained the same for products that were already constrained prior to Chinese New Year. Intel is pushing distributors to pull in parts as there is an abundance of supply for non-mainstream processors; however, pricing will begin to change if the shipping delays continue.
For 9th generation desktop CPUs, some distributors have received slightly better allocation from now until end of March, particularly on the i5-9500.
Nvidia: The company’s chipset production has been affected as most of its factories are distributed in South China where business has not fully resumed. However, the factory shutdowns have also caused a slowdown in demand within the China server market. Therefore, there could be some availability of Nvidia products.
Finisar: Finisar is facing delivery delays for certain models due to a halt in production and logistic disruption leading to a supply shortage.
Suppliers also predict that Finisar’s optical transceivers will soon be short as China is the dominant region for optic devices manufacturing. These devises are expected to see a surge in demand this year, because they are associated with the 5G station development globally.
Kingbright: While production has resumed at the company’s Shenzhen factory, output is expected to grow slowly. Expect lead times of 12-14 weeks on new orders.
SK Hynix: Eight hundred factory workers were quarantined after a trainee came in contact with a person infected with the virus. Impact isn’t expected to be substantial since the employees sent home represent a fraction of their overall labor force at the Incheon production facility.