The Greensheet: May 2020

MEMORY

Server Memory market leveling off

After a strong month of April and first half of May, the market for server memory modules has begun to cool down in recent weeks. Customers have shown a willingness to buy, but only at certain price points, indicating that overall supply is very healthy. More than a few have put out feelers about moving product into the market. Official pricing is expected to rise again in June, but demand into Q3 and Q4 remains clouded at best. If a massive order for servers comes to bear as expected, that could send price to rise higher in the spot market again very quickly.

8G LPDDR4 a lone hotspot in otherwise weak DRAM market  

LPDDR4 demand has been vigorous in recent months due to strong order volume for low cost laptops, and the transition to LPDDR5 that has started to unfold. Major users are expecting to finish qualification in towards the beginning of Q3. While most DRAM products have been very weak of late, 8G LPDDR4 is a lone hot spot, with market pricing well above of manufacturer’s guidance.

STORAGE

Enterprise HDD price & lead time concern

Rising logistical costs have been causing pricing and lead time headaches throughout the enterprise HDD market. In the coming weeks, suppliers are expecting a 5-8% price hike partnered with lead times of as many as eight weeks. Because of COVID-19, the number of air freight deliveries has been reduced, resulting in significantly higher shipping costs. Some suppliers are starting to deplete their inventory and are not expecting their next deliveries until the end of May, or in some cases not until Q3.

Western Digital, for instance, has increased desktop HDD pricing by 3-5%, surveillance HDD pricing 4-5% and Enterprise HDD as much as 10%. There is a rumor that pricing could continue to rise until the beginning of Q3.

Distributor pricing on the decline for Intel SSDs

Intel SSDs continue to have poor demand across all capacities and open market customers are starting to take notice. Intel has been able to keep up with the orders from their Tier 1 customers; however, with poor supply in the open market, Tier 2 and Tier 3 customers aren’t so lucky. Some have even looked for alternatives and Micron is seizing the opportunity by offering some of the lowest prices in the market. Currently, Intel does not plan to reduce pricing while demand in the US market remains stable. Distributors are responding by lowering their prices, and in some cases taking losses, hoping to reduce some of their own inventory pressure.

Since April, overall SSD demand has softened starting an eventual equilibrium with demand. Prices are not expected to change during this correction period.

Nvidia to phase out RTX20xx series

OEM production of RTX20xx has slowed, leading to speculation about the launch of Nvidia’s new RTX30xx Series GPU Chipset. Best guesses have the release around the end of Q3 or the beginning of Q4. A last-time buy schedule has not been announced and pricing remains stable. Despite declining demand for the RTX20xx series caused by COVID-19, suppliers have their sights set on the RTX30xx launch. However, most of the supply will not reach the market until September. Suppliers have 3-4 months to move their inventory with most of the demand coming as we approach Q3.

Finisar lead times stretched to four weeks

Finisar’s French manufacturing plant has had difficulty sourcing materials necessary for its FTLX8574 line. Lead times could be as long as four weeks and the impact may bleed into other lines.

IC

TI shifting production to meet demand

TI products remain heavily transacted in the open market. While overall supply for the TPSxxxx series product remains relatively stable, other products, which are manufactured in Mexico and South East Asia, are experiencing delivery delays and lead time stretches. One of which is the SNxxx series, which are mainly manufactured in Mexico and Malaysia.

To ease the delays and better meet current demand, TI is now transferring certain production from South East Asia to China.

Manufacturers prioritizing production capacity as they ramp back up

As factories across the world begin to reopen, manufacturers are allocating capacity to certain sectors – particularly medical, 5G, automotive and mobile.

ADI has allocated 80% of its production capacity to medical applications, followed by 5G, automotive and Apple. Customers manufacturing products in other applications are expected to see allocation issues and delivery delays.

Because of its stretched lead times due to factory shutdowns in Mexico and a tempered reopening in Malaysia, Skyworks is giving allocation priority to 5G and Wifi6 customers only. Customers and distributors have been advised that shipments will be released after mid-May and to expect to see recoveries by the end of June.

Broadcom prices increasing

Broadcom has increased their prices up to 15-20%. Standard lead-times have also increased from 8-10 weeks to 26 weeks or even longer, especially for the BCM series. Logistics and manufacturing challenges in Malaysia, Thailand, Singapore and the Philippines were cited by the company as the primary driver of these changes. Some demand may have been driven by customers double-ordering in anticipation of future disruptions, increasing risks for future cancellations. Open market activity on Broadcom has been robust.

Demand for connectors continues to increase

The COVID-19 lockdown has affected every major brand. Molex, TE Connectivity and Samtec have all been hit with closures, as well as labor, logistics and material shortages. The depth of the impact is expected to be long-term as the backlog of connector demand continues to grow.

TE has a significant percentage of their Asia production done in their India plant. Since India has extended its lockdown until the beginning of June, production is still halted.

Samtec’s order lead-times are currently at least 6 weeks or longer. There are ongoing material shortages being reported and many customers have turned to the open market without much success as distributors are reporting zero or low inventory.

Passive shortages growing

There’s been speculation since late 2019 that another MLCC shortage is on the horizon. That speculation is becoming a reality.

Since the MLCC shortage in 2018, Murata has been reviewing its distribution and allocation strategies. This has led to some supply disruptions with the GCM series for automotive application in heavy allocation, and supply issues being seen on the bigger case-sizes 0402, 0603, 0805 and 1206.

Other than MLCCs, its LQH/LQW inductors and LFB-/DLP/DLM series RF/EMI filters are also affected by the Malaysia and Philippines factory shutdowns. The factory shutdowns caused lead-times for inductor/filter stretches to 24-26 weeks. Customers and distributors are also reporting delays of between 1-2 weeks for confirmation on their orders.

COVID-19 has wreaked havoc on most manufacturers; however, Samsung has been hit especially hard since their factories in Malaysia and the Philippines are still not up and running at full capacity.

As stated on our Manufacturing Status page, the lockdowns in Malaysia and the Philippines have caused Samsung production capacity issues. Less than half of their workforce is allowed at the Philippines plant in accordance to government’s regulations. The plant was at 20-30% of its capacity and expected to increase to 70-80% after Mid-May. In response, Samsung is transferring certain production lines, specifically automotive MLCCs, to Shenzhen, China, but this has been insufficient to meet the global demand. The likely cause is ensuring that the factory is complying with local COVID-19 regulations.

Since the beginning of Q2 2020, there have been shortages and lead-time stretches being reported on Taiyo Yuden inductors and MLCCs.

According to reports on delivery and allocations, the shipments in May have dropped 50% compared to April. The forecast is that the June allocation will be even lower than May. A recovery is expected after the end of June, with production being fully resumed at its Philippines factory.

The demand for Yageo MLCCs has dropped about 10% as compared with 2019, but customers and distributors are still reporting price increases. Yageo has reported lean inventory of 40+ days and there are rumors of capacity cuts in order to support the price increases.

CPU

Mobile supply stable amidst strong demand, impending Tiger Lake launch

End customer demand for Whiskey Lake, Comet Lake and Ice Lake has been strong. On the other hand, supply has been in line by and large, with only Whiskey Lake showing some signs of tightness in recent weeks, which is expected to continue through the end of June. It appears that certain end customers would prefer to skip Ice Lake altogether and jump from Comet Lake direct to Tiger Lake, expected to launch in Q3.

Skylake Xeon activity on the rise

The removal of rebated pricing schemes has driven a spike in demand for Skylake server CPU. The Gold 6130 is one of the more sought-after processors of late. Supply is expected to remain tight for the remainder of 2020 for Skylake. Cascade Lake, meanwhile, has leveled off in terms of demand in recent weeks though it is expected that supply will constrict again in June and remain so throughout Q3.

Price decreases coming for Intel 9^th Gen Desktop SKUs

Since Intel is catching up on 9th Gen Desktop SKUs, the market has softened as a result. This may present some opportunities for savings soon. The changes in pricing could very well be dramatic.  Demand forecasts are far below what was originally forecasted for some customers in the desktop space. The remainder of 2020 will be a challenge for this segment.

Denverton Atom CPU extremely short

Low cost system-on-a-chip server grade Atom CPU, formerly known as Denverton, have been constrained in recent weeks and will be throughout Q3. Production of these low-cost processors have reportedly been set at a lower priority in the face of other supply constraints. Denverton series processors are typically used in enterprise networking devices.