The Greensheet: August 2019

CPU

XCC Skylake-SP plunges and will remain tight throughout 2019

After reporting last month that Skylake-SP Xeons were seeing stability in pricing and availability, things changed drastically for the XCC segment (61XX and 81XX models). In the second week of July, pricing on the limited supply of certain models increased to as much as 15%. This may be a warning sign that there are going to be missed shipments in Q3 2019 and possibly others. Allocations and other restrictions are being placed on end-customers. Last minute upside requests are being outwardly dismissed.

In addition, LCC and HCC models (41XX and 51XX) are expected to become scarcer in the days ahead.

Supply for Skylake-SP is not expected to recover until Q1 2020.

While it seemed like Cascade Lake was gaining momentum, an unforecasted surge in demand for Skylake is largely to blame for the current state of affairs. Of course, turbulence at this point in a product transition is all too common and grumbles about this being a ploy to kickstart the move to new technology have grown in earnest. Intel’s possible grant of a waiver to begin selling to Huawei again is pointed to as another cause, as supported by the coincidence of this news and the initiation of trouble.

Mobile is expected to be tight through Q4 2019

Supply for Core model mobiles has been more constrained than ever over the last 16 months with shortages in Kaby-R models during April 2018. This latest wave of supply gaps can be attributed to increasing demand of notebook shipments during the last quarter, which was a welcome development for manufacturers under pressure.

Ninth generation Coffee Lake-Refresh i7s has joined the mix in recent weeks. Lead time orders have been facing difficulties to deliver on time and official notices have spoken of pulled back supply and the higher potential for missed shipments in Q3 2019.

Desktop market still constrained but stability is in sight

Generally, Coffee Lake desktop supply remains tight for the i3-8100, i5-8500 and i7-8700, the last of which has been particularly problematic of late and has seen price increases of 3-5%. The Chinese market has seen a bevy of transactions on this model in recent days. The protests in Hong Kong and the resulting delay in shipments are pointed to as a contributory factor. Still, order velocity overall is waning and prices are generally receding, if incrementally, at least partially confirming the expectation that much of the shortages in desktop will be resolved by next month.

Celerons like the G4560 and G3900 have been flaring up of late and are expected to run tight through this month. Supply for the i3-7100, one of the most volatile parts of the past two quarters with pricing cresting at a 22% premium in June, has recovered, aided in part by demand abatement.

Trading activity on AMD parts are limited despite constraints

As much fun as it is to see AMD’s emergence, particularly in desktop with the launch of the Ryzen 3000 series in July, the supply chain remains restrictive. AMD has always kept very close eye on market activity on all processors and the new product launch is no different with suppliers reporting severe penalties for running afoul of guidelines for selling product.

Supply for AMD’s flagship 3900X is virtually nonexistent as AMD struggles to make deliveries.

MEMORY

Geopolitical issues continue to affect memory market

The ongoing Korea-Japan trade war has the memory market in a state of flux. Distributors of memory products have seen an increase in pricing across the board. In addition, there is speculation that Japan may restrict the flow of other materials (such as wafers or other semiconductor manufacturing equipment) to Korea to put more pressure on their government.

During a recent Q2 earnings conference call, Samsung announced they have no plans to reduce production of memory as a result of the restrictions. However, it is evident that inventory levels will be decreasing throughout the coming quarter.

Crucial has put an immediate hold on all new orders, and it is unclear how long the hold will take place. Tier 1 OEMs with contracts in place may have security in their flow of product in the short term, but many Tier 2 and Tier 3 customers have been left to fend for themselves.

Module pricing is on the rise as suppliers hold back stock

Module pricing was the first to react in the spot market with prices ramping up early in the first half of July. Although pricing has gone up, vendors and suppliers held back stock and quoting to accumulate demand. Overall, there was an estimated 15-20% increase in pricing for most DIMMs. 4GB/8GB/16GB SODIMMs and UDIMMs disappeared from the market quickly and official pricing rose week over week throughout the month. RDIMM pricing has been slower to react and pricing remained somewhat stable in the market, despite frequent price checking.

Overall DRAM market pricing has risen roughly 13% over the past month. 8GB DDR3 and 8Gb DDR4 are leading the rebound in pricing and are up almost 12% and 7% respectively.

NAND flash chips, which were at an all-time high at the beginning of July, showed little price fluctuation and increased only 3%. However, the Toshiba power outage at a NAND production facility has caused further complications and, in anticipation of a material shortage, SSD manufacturers have increased pricing by approximately 10%.

IC

Overall MOSFET lead times become more stable

Starting in the beginning of 2019, many factors have led to uncertainty within the MOSFET market from the US-China trade war to the 5G roll out. However, as of Q2, lead times on MOSFETs have become comparably more stable – aside from several key exceptions.

For example, there is a backlog of orders for Vishay’s PowerPak line, which is mostly used in the telecom market. The company will need to fill the backlog before lead times level, but it is projected they will catch up well before the end of 2019. Lead times have steadily improved on 75% of Vishay’s products with an average between 18-20 weeks.

Lead times for On Semi have generally remained between 16-20 weeks; however, their FDC and FDN series lead times are currently over 36 weeks due to capacity issues. Demand is projected to increase as a result of the 5G roll out and electrical vehicle production increase.

Similarly, Infineon has reported lead times stretching across its OptiMOS™ power MOSFET series. The surge in demand is also likely due to the 5G roll out.

Supply on low-to-medium voltage MOSFETs have begun to stabilize to 12-16 weeks as automotive, and high voltage MOSFET lead times are stretching up to 52 weeks.

The Infineon and Cypress acquisition is moving forward

As we reported in the June edition of The Greensheet, Infineon Technologies and Cypress Semiconductor announced the companies have signed a definitive agreement for Infineon to acquire Cypress. The companies are expected to be integrated after the acquisition receives final approval by the commerce departments of the countries where they do business.

The acquisition is scheduled to take roughly a year to complete, and it is uncertain exactly how many changes will occur within both organizations. However, this strategic development is expected to open additional growth potential in the automotive, industrial and IoT sectors.

There are options to overcoming signal relay lead times

US Distribution is still reporting lead times on TE signal relays of over 52 weeks. TE is reporting that lead times are expected to start improving by Q1 2020. TE has asked distributors to continue to take orders on signal relays to ensure the company can better forecast demand at the beginning of 2020.

Lead times have improved slightly on Panasonic AGQ-series signal relays from 45+ weeks reported throughout Q2 to about 36 weeks as of Q3.

Due to lead time issues among major brands, smaller relay manufacturers such as Hongfa, American Zettler and Nexem are starting to see gains in their market share by these gaps. For example, HFD4 series from Hongfa and UC2/UD2 series from Nexem can be supplied on relatively shorter lead times and can typically be considered crosses for Panasonic and TE.

FINISHED GOODS

Nvidia’s RTX Super series has launched

In July, Nvidia’s new RTX Super series entered the market. The product range covers the RTX 2060 Super, 2070 Super and 2080 Super. RTX 2060 will still be available; however, both RTX2070 and RTX2080 will be replaced by the new Super series.

Technical performances of the card have shown a 25% increase compared to the previous version, and market prices seem to remain at the same level of the legacy range.Band makers have shifted production capacity to the new Super series quickly.

Disruption and price increases for SSDs

In the months since Toshiba’s power outage, we are witnessing the effects of it on the market.

While the real impact of this power outage will arrive in Q3, manufacturers have expressed that lead times have been extended. They are also expecting a price revision in August in response to raw material price increase. In the meantime, manufacturers have buffered enough NAND flash stock in anticipation of the situation.

Prices of the current NAND flash-based storage have seen a 7-10% price increase in July. Vendors are saying that even though there is an increase in pricing, there is still a healthy supply of stock with no forecast of a shortage. However, in a bid to get ahead of a potential shortage and ensuing price increase, customers are trying to stock up on parts.

Production of Samsung SSD is slowing down

In Asia, distributors and brokers have stopped quoting Samsung SSD. We have heard that Samsung is cutting down on production although they have not increased their prices yet this quarter. As a result of the Korea-Japan trade war, it is expected that they will increase them in the coming months.

Several factors will lead to increased HDD prices

Seagate has started supplying the new enterprise HDD, and price increases may come soon. Factors for price increases include Toshiba’s power outage, and the shortage of NAND. The price for the new Seagate series HDD reflects that the overall market demand for HDD in Q2 is not strong enough to drive prices up. The price for existing models has slightly dropped to match up with the new series.