The Greensheet is Fusion Worldwide’s monthly report on trends that impact the open market supply chain. Check out our latest report on semiconductors, finished goods, and hardware components.
Here are some highlights from our July Greensheet:
Competition between automotive and industrial customers remains high. Still, these markets may show signs of cooling over the next few months as the AI industry rises and consumer demand recovers. Learn more about market happenings in the full report.
Capacity Issues and Lengthy Lead Times Continue for Cypress
When Infineon closed its acquisition of Cypress in 2021, manufacturing was operating below normal levels due to the ongoing challenges posed by the pandemic. The original intention of the acquisition was to turn Infineon into the largest producer of chips for the automotive industry, as well as enable the company to support the growing needs of the Internet of Things (IoT) market.
However, even as manufacturing slowly returned, lengthy lead times have continued. Shortages are currently effecting MCU series such as the CY7, CY8, and CY9, plus older versions of SPANSION like S25 and S29. These parts are still experiencing extended lead times and are subject to allocation from Cypress.
Industrial and Automotive Customers Compete for Limited Supply
Infineon’s TLE, IPD, and AUIR automotive series are facing prolonged shortages and prices are increasing. High-voltage MOS components, such as IPW65/90, IPB65, and IPP65/IPW90, are also experiencing shortages, with lead times exceeding 50 weeks.
Alternatively, the supply of the SAK and BSS series from Infineon is gradually recovering. However, lead times still vary and are generally high.
Additionally, there has been an increase in demand for Infineon's IKZ and IKW series IGBTs, with the current lead time ranging from 39 to 50 weeks. These series have numerous applications, such as industrial SMPS and UPS, as well as controls. Other uses include FPGAs, solar string inverters, energy storage systems, chargers, home gateways, appliances, and computer servers and systems. Due to these wide-ranging use cases, multiple industries are competing for limited supply in the face of long lead times.
Shorter Lead Times and Cost Savings Emerge for the FM Series
The lead time for Infineon’s FM series, primarily used in automotive, digital, and electrical products, is currently around 20 weeks. Particularly, the F1 series is gaining momentum and has the potential to replace the F2 and F3 series as supply is more readily available for the F1.
Forecasts show that the STM32H is estimated to recover between Q3 and Q4 following a period of constrained supply, lengthy lead times, and consequently heightened pricing. However, the recovery is subject to specific MPNs as overall demand remains high. The MCUs that have been the most affected include the STM32F4XXX, STM32F7XXX, and STM32H7XX, but lead times are gradually decreasing.
Many distributors are discussing establishing fixed-price agreements with manufacturers based on future forecasts. The desire for this strategy may stem from the high manufacturing costs that have yet to decrease. Customers should monitor market trends closely over the next three months, as the forecasts indicate that prices will reach their lowest point.
Manufacturers Offer NCNR PSP Contracts to Combat Competition
Due to the competition with local Chinese brands, online component prices have decreased recently. If cheaper alternative products continue to gain traction, prices could fall further. Power management products are currently seeing the most significant drop as customers continue to seek cost savings.
Manufacturers have begun introducing NCNR contracts known as PSP 100% delays to encourage brand loyalty. These agreements set up a win-win scenario for both parties, with manufacturers benefiting from securing firm demand and customers receiving an opportunity to avoid delays. However, these agreements do not guarantee a specific reduction in lead times.
Gaming Notebook Sales Rise as Desktop CPU Expectations Fall Short
Overall, demand for desktop CPUs from Intel and AMD is considered soft. The 618 Shopping Festival in June was anticipated to increase transactions in the Chinese market, mainly for the Intel 12th Gen Alder Lake desktop CPU. However, sales results following the holiday did not meet expectations.
According to IDC research , sales volume across all e-commerce platforms in the PC market for notebooks and desktops declined by 13% compared to last year. Notably, the consumer's desire for quality products has progressively increased.
Research found that online gaming popularity has led to a growing demand for gaming notebooks, which is an outlier in the PC market. The fraction of sales for gaming notebooks exceeded 50% during the 618 Shopping Festival.
Intel's EOL Notice Spurs Open Market Activity
Intel's EOL announcement for the 11th Gen Tiger Lake mobile CPU has caused lower supply for 11th Gen Tiger Lake gaming H series CPUs. Whereas supply for the 12th Gen Alder Lake and 13th Gen Raptor Lake gaming H series still satisfies demand.
Nonetheless, the EOL notice has triggered most customers to panic-buy these CPUs, and open market activity has increased. Inquiries mainly focus on the i3, i5, and i7 series for IPU and NON-IPU versions. Pricing is on an uptrend, and inventories are running low.
New CPUs Target the Needs of AI, Cloud, and Data Center Customers
Intel is touting the upcoming 14th Gen Meteor Lake as a significant technological enhancement over the 13th Gen Raptor Lake. The 14th Gen Meteor Lake's processor will feature a built-in Vision Processing Unit to perform AI tasks more efficiently. The product will likely launch this year, but the initial stage of the release will include a hefty price tag. Customers with cost concerns may wait to purchase the new processor until costs come down.
If Intel gradually reduces support for the older generation series to focus on the latest addition, there may be another wave of open market activity.
In addition, AMD is already promoting its latest product, the EPYC Bergamo CPU, which features the brand-new Zen4C CPU core. AMD designed this product for the cloud and data center server industry, and its performance reportedly exceeds the market's current high-end server CPU.
Tier 1 customers have received priority for the first batch of shipments of these premium CPUs, which AMD released around mid-June.
Inventory Pressure Heats Up for Authorized Distributors
Server CPU activity remains marginal for Intel and AMD. While spot demand and transactions did pick up in June, opportunities were minimal as Tier 1 customers maintained conservative buying patterns. Prices in the open market have subsequently continued to decline.
On top of the weak demand, elevated channel inventory is contributing to soft market conditions. Authorized distributors have held more extensive stock for some time, with supply sitting at warehouses for up to six months. Manufacturers are only permitting a small percentage of returns for unsold products. This is heating up inventory pressure, and further price reductions have been the consequence.
As customers gradually move towards the AMD Genoa series, the AMD Rome and Milan series have seen the most significant price reductions.
Raw Material and Production Costs Push HDD Manufacturer’s Prices Higher
Seagate and Western Digital announced a 10% to 12% price increase across all series and models, citing rising raw material and product costs. Following the price change, there have been positive trends in demand for higher capacity HDDs 16TB and above.
Due to the sluggish market conditions over the last several months, the supply for SSD remains healthy. SSD manufacturers are consequently reducing production output and enforcing stricter controls on supply to ensure that inventories don’t swing from stable to surplus. Manufacturers are hoping to see pricing recover once open market supply is reduced. However, this will require a significant demand recovery.
Demand for Server Modules Gains Momentum as Shortages Impact DDR5
Demand is steadily increasing for server modules following China's partial ban on Micron products. The ban has driven some customers to amass supply in preparation for limited availability. Those looking to build buffer stock are increasingly turning to the open market as server module pricing has reached an all-time low but has stopped its steady decline.
In addition, manufacturers have begun rejecting all special pricing approvals despite customers' firm demand. Speculation is that costs will gradually inflate at the beginning of Q3.
Similar to the server module demand and after the surge in orders from the AI industry, DDR5 memory has become especially sought-after, and availability is already limited. Higher-density DDR5 server modules remain the shortest product in the memory module market, mainly due to their high-performance computing applications. It will likely be some time until availability improves.
NVIDIA Stock Hits New High After Investors Bet on Chip Industry
Artificial Intelligence (AI) market strength has pushed NVIDIA's stock prices 163% higher this year as investors put their faith, and money, into the future of the electronic component industry. NVIDIA's Tesla series remains amongst the most sought-after products. Still, demand is trending even higher for the NVLINK and SXM4 interfaces as they can perform better than PCIE interfaces.
The uptick in inquiries for these series has resulted in limited availability. Supply is strictly subject to allocation, with most of the orders designated for supercomputer system projects.
Additionally, the Quadro series is starting to see some improvements in supply, with the most significant shifts in the higher-end series. Demand remains consistent, but pricing is on a downtrend.
Intel's Business Strategy Causes Server Lead Times to Stretch
To align with Intel's prioritization of its IDM 2.0 strategy, the company exited its Data Center Solutions Group (DSG) and sold its dedicated server division to MiTAC. Selling DSG is one of many changes Intel has made, as the company had previously exited its Optane, SSD, and networking switch business. It also stepped away from 5G modems.
MiTAC's acquisition of Intel's server business has reportedly caused supply disruptions, pushing back lead times until further notice. Until production capacity has regained strength, they cannot take in any new orders.
Mellanox Booking Prices May Increase Due to the AI Industry
Networking product demand is escalating due to the growing AI industry. Mellanox has been the most notable brand to benefit from this development recently. Overall lead times for high-end performance models are extending, with 200GB switch lead times estimated to be over 30 weeks. In addition, most MCX6 and MCX7 ethernet cards are seeing lead times between 10 – 15 weeks.
Forecasts indicate that this trend will remain strong through 2023. Speculation is that new booking prices will likely increase by 5% to 10% across Mellanox NIC cards and cables. These products provide reliable and efficient network connections for AI systems.
Raspberry Pi Supply Improving, But on a Limited Basis
Specific Raspberry Pi series have seen slight improvements in availability. However, distributors believe this is only a temporary reprieve as the imbalance between supply and demand will take time to stabilize. It is unclear whether there will be enough supply to satisfy the lengthy backorder by year-end. Demand shows no signs of slowing as applications for Raspberry Pi boards have expanded due to some automotive vendors using them for limited applications.
At the moment, the manufacturer is devoting production capacity to support the Pi 4 over the Pi 3. While the Pi 4 is a significant upgrade over the Pi 3 in terms of performance, networking ability, and thermal management, the Pi 3 has remained a viable option for customers with cost concerns. While lead times vary, most are inflated and hovering around at least 30 weeks.
Shortage of DC-DC Converters Spurs Customers to Explore Open Market
Isolated DC–DC converters are now short across all brands, with the most notable brand being Cosel. Cosel has had shortages impact supply for over a year now, and the backlog of orders has only built as production has been unable to match demand. While some customers have stayed loyal to the brand due to quality concerns, others have sought alternative brands with better cost savings opportunities and availability. In particular, the China market has focused on local brands Mornsun and Meanwell.
Demand for these products is sky-high, and customers are becoming increasingly determined to secure supply, as the average lead time has stretched to at least one year. Because of the circumstances, many have turned to the open market and are willing to pay premium pricing.