IC
Fire in Wuxi Affects Infineon and Vishay
As reported in Fusion Worldwide’s February Greensheet, a fire that broke out in a plating Plant in Wuxi, China, still sends a ripple effect through Infineon and Vishay. It is confirmed that the fire primarily affected transistors and high-side and low-side MOSFETs or switches. As a result, distributors and end users, anticipating decommitment notices from manufacturers, began increasing their available supply.
The Wuxi fire has tightened restrictions for authorized distributors selling Infineon and Vishay components. These restrictions will remain in place until the manufacturers can rectify the supply chain imbalance within the next several months.
Vishay's SQ production was marginally affected, but the market impact will be less pronounced. Vishay's MOSFETs were the most significantly affected, especially the SIxxx and SUxxx series. The market will feel the consequences of the production disruption through April, but manufacturers' backlogs are already experiencing constraints, and no future deliveries can be determined.
Vishay intends to re-assign new plate factories to cover demand. The transition will take until April to complete, but it will be an additional five months before production can begin.
Analog Devices' Lead Times Show Signs of Improvement
According to a recently issued official notice, Analog Devices' product lead times will improve in 2023. Half of the company's portfolio has lead times below 13 weeks. This recovery is partially due to strategic manufacturing reductions, such as the production cuts on Linear Tech items with low demand, like the AD7/8xxx series. In the company's most recent quarterly earnings report, Analog Devices clarified that their tactic to address supply focused on increasing internal output and close collaboration with foundry partners.
By October of this year, 95% of Analog Devices products, a total of over 75 thousand unique parts, will have lead times at or below 13 weeks.
Microchip Increases Prices by 5%
Over the previous quarter, Microchip reported that raw material shortages affected production output and pushed lead times further. Certain products, such as EEPROM components, had lead times over 50 weeks. Supply worsened by the new year, particularly within the ATMEL SAM and ATMEGA series, and Microchip was only accepting NCNR orders.
However, Microchip still suffered from spots of low demand as customers pushed out delivery dates for common parts. The loss of revenue from these delays, combined with the rising cost of raw materials, has resulted in Microchip increasing prices for their products by about 5%.
An official notice is still pending, so it is unclear if this will affect only high-demand product lines with inflated lead times or if the increase will apply to the company’s entire portfolio.
It is often a strategic move for manufacturers to increase their prices, but whether these strategies will succeed remains to be seen. Demand may decline as customers seek alternatives that offer cost-saving opportunities.
STMicro Continues to Struggle with Supply of Automotive Parts
The market for STMicro components is slowly recovering, and distributors see more room for price negotiations. However, lingering effects from the COVID-19 pandemic, increased demand for electronics, and supply chain disruptions are causing a persistent shortage of automotive parts.
Another factor is the overarching complexity of the automotive supply chain, which involves multiple tiers of suppliers, and makes it difficult for the industry to pivot during times of disruption. As a result, customers have increasingly turned to the open market for supply, but competition between multiple verticals for the same parts is steep. Consequently, lead times have stretched into the second half of 2024 for in-demand automotive parts.
Thus far, there has been no improvement in lead times for the following parts.
- STM8S
- STM8L
- STM32H7
- STM32F2
- STM32F4
- STM32F7
- STM8AW
These parts have applications for automotive, industrial, medical consumer electronic and IoT products. The lead times for these parts are between 40 – 52 weeks. Sitting at the upper end of that spectrum is the F4 series, but the VNSxxx and L9XXX series also remain in high demand with little availability in the market.
Hardware
SSD Market Demand Remains Flat but Shows Signs of Recovery in the Second Half of 2023
SSD pricing, particularly enterprise SSD, is forecasted to continue the freefall that began in October 2021, as open market pricing is still well below the vendor’s cost. In addition, end customers have also been sending a large amount of their excess supply to the market, which will continue to erode pricing significantly as open market pricing is still well below the vendor’s cost.
Overall, HDD demand is flat, with some bright spots for large-capacity drives like the 16TB and 18TB. Compared to the 20TB and 22TB, supply is healthy, and pricing is competitive. However, customers have hesitated to switch to the new SSD series, making the transition slower than expected. This hesitancy stems from customers’ pre-existing high inventory levels, which will likely deplete around the end of Q2 2023. Until customer inventories achieve a healthier balance, demand will likely remain flat.
Demand has been weak within the past few quarters as storage distributors have tried to avoid holding excess supply. While this is a solid strategy, it is difficult to maintain as the situation is ongoing and lead times have shortened drastically, creating a lack of urgency for customers. Lead times are now two weeks.
However, vendors are optimistic that the storage market will recover around the 2nd half of 2023. This optimistic forecast comes from a shift in buying behavior as overall shipped storage capacity improved in 2022 compared to 2021. Moreover, patterns suggest this momentum will continue in 2023 as the extent of data being generated and stored across various industries is only increasing.
Customer Excess Hits the Open Market for Memory Modules
Customers with excess supply, particularly 32GB and 64GB RDIMM, have begun to funnel their surplus to the open market. The increased open market availability is affecting pricing, which was already exceedingly low. Manufacturers are doing their best to avoid further price erosion for memory modules and have issued an order for distributors to limit the approval of any special pricing for customers.
Over the past several months, a global shortage has affected the supply and demand for 128GB RDIMM 3200. This shortage is primarily the consequence of poor forecasting. Historically the demand for this density has been minimal, but the sudden spike in customer interest has caused prices to increase steadily over the last few quarters. Pricing is currently as much as 20% higher than official pricing and could rise further if supply doesn't improve.
AI Services Could Influence Demand for GPUs
With the spotlight on AI services like ChatGPT and BARD, high-performance GPU vendors are starting to wonder what the implications will be on the market. Forecasts project that the GPU market could grow by at least 15% this year if demand stays strong. Nvidia will benefit the most from this development, as their Amphere A100 and Hopper H100 architecture is amongst the best-performance GPUs available. As a result, the company has already seen its stock increase by 40%.
AI GPU business is forecasted to spike, and manufacturers may prioritize production and supply for AI customers over gaming customers. This situation may cause additional supply issues for a constrained consumer GPU market.
Unstable Supply for Industrial Fan and Raspberry Pi Triggers Extensive Lead Times
Industrial fan supply is worsening, with more and more customers turning to the open market to meet their sourcing needs. The main driver of this shortage is constrained supply in the printed circuit board assembly (PCBA) stage. These raw materials are also vital to the electric vehicle industry, but multiple industries compete for supply, making allocation difficult. The current backlog and material shortage have caused lead times to stretch between 58 – 78 weeks.
Since January, Raspberry Pi has struggled with shortages, and supply is currently volatile. There is an extensive buildup of unfulfilled orders, and vendors cannot provide firm commitment ETA dates. Customers are finding more support in the open market, but available parts are subject to premium rates as open market costs are usually three to five times higher than direct pricing.
Raspberry Pi’s popularity partially stems from its low costs, but the shortage has expanded open market pricing over the past couple of months to 50% – 200% higher than the authorized retailer price. Despite the lack of clarity on order delivery, customers have hesitated to go to the open market because of the inflated costs.
Demand Shifts in the CPU Market Following a Record Low in Q4 2022
CPU sales sunk to record lows in Q4 2022 as shipments for laptops and desktops fell significantly. This situation has mainly affected the PC industry for Intel and AMD, but both companies are taking steps to manage the turbulence actively. The primary strategy has been under-shipping CPUs, which both companies' CEOs have been transparent about since starting this policy. However, AMD stated that this strategy would be employed less in Q1 as demand improves.
In the past month, the tides have changed as activity has increased in the open market for CPUs. This shift stems from customers finally working through the elevated inventory levels from the prior quarter. By the end of Q2 this year, inventories held by end customers will deplete, which has led to forecasts that demand will recover in the second half of the year.
Intel Leverages EOL Announcements to Push Customers to the Latest Technology
Demand for Intel's latest 12th Gen Alder Lake and 13th Gen Raptor Lake series has been slow, which has resulted in Intel leveraging EOL notices to increase orders. This strategy will affect the 11th Gen Rocket Lake desktop CPU, followed by the eventual phase-out of 400 and 500 series chipsets.
The EOL notice on the series chipsets indirectly forces the customers still using the older generations to transition to newer products. Additionally, those using the 10th Gen Comet Lake Desktop CPU are also converting to the latest technology, as they anticipate an EOL notice for the 10th Gen is still pending.
In alignment with the EOL notice, demand has increased for the affected chipsets, especially the 500 series chipsets, such as the H510 chipset. The EOL notice has consequently pushed these parts into shortage, and open market activity has increased for the 12th Gen Alder Lake and Notebook CPUs.
Furthermore, Intel is adjusting pricing for PC customers by removing the special pricing put in place for the 10th-Gen Comet Lake and reducing the cost of the 12th-Gen Alder Lake by 20%. This change in pricing is part of the strategy to encourage customers to turn to their newer products.
Server CPU Customers Turn to the Open Market for Cost Savings Opportunities
Open market inquiries and transactions are increasing for server CPUs compared to desktop and mobile CPUs. Most of the activity has centered on Intel's Ice Lake, Cascade Lake Refresh, and Cascade Lake. This activity could result from Intel removing special pricing on the older series and customers searching for cost-saving opportunities in the open market.
Furthermore, Intel has launched the 4TH Gen Xeon Sapphire Rapids CPU, and supply for the older generations has gradually reduced, resulting in some customers needing more allocation.
Demand for Intel Sapphire Rapids and AMD's Genoa has been minimal, but demand will increase as more customers transition to these products.
