The Greensheet: August 2020

CPUs

Back-to-School leads to increased CPU demand

With students returning to school in September, we are anticipating an increase in demand for desktops, laptops and Chromebooks. This could enhance the desktop landscape, which has been off the radar in the open market for a while.

As for the mobile CPU landscape, it’s possible that there may be heightened demand compared to previous years due to the pandemic. COVID-19 has sped up the pace of Project Connect (a GIGA initiative aimed at connecting every school to the internet), causing an overwhelming amount of demand on Intel and AMD small core mobile CPUs.

All eyes on Intel’s upcoming 11^th Gen mobile CPU, Tiger Lake

The market is excited for the upcoming release of Intel 10NM mobile CPUs and successor for Ice Lake (10NM), Tiger Lake, which is expected to be announced in September. The Tiger Lake lineup will come in three different flavors: Tiger Lake-Y (entry level), Tiger Lake-U (mid-tier level) and Tiger Lake-H (top-tier level).

Traditionally, if the successor receives an overwhelming amount of demand from the market in the transition period, a supply gap occurs and the market often revisits the predecessor, e.g. Ice Lake or other series like Comet Lake and Whiskey Lake, to fill in the gap.

Customers should plan ahead of time in order to minimize the impact caused by this supply constraint.

Pricing for desktop and server CPUs likely to rebound

For the past few months, desktop CPUs have been moving slowly in the open market. Though we have come across some open market offerings and decreased pricing, prices have been increasing with each transaction.

Likewise, for server CPUs, once vendors feel that their inventory pressure has been alleviated, they will increase their offering price in hopes of recouping some of their losses. We encourage customers to take advantage of these cost saving opportunities now as it will not last forever.

AMD sustains its market growth

AMD has been creating waves in the server processor space since Q1 2020. With its enhanced EPYC processor performance, AMD has set its eyes to capture and double its data center business this year.

There is a bullish sentiment for AMD server market share, and prices continue to be on an upward trend. However, this massive growth in demand may inevitably create a strain on its limited supply.

ICs

Lockdowns are once again affecting IC supply

In early August, the Philippines experienced a second lockdown after another surge of COVID-19 cases. With Metro Manila and neighboring provinces having been under modified enhanced community quarantine for two weeks, component supply has been and continues to be affected.

Despite ROHM announcing its plan to reduce worker capacity at its Philippines factory earlier this month, multiple employees contracted COVID-19. The factory, which mainly produces ICs, sensors/MEMS, transistors, diodes, and resistors, was shut down for 3 weeks, causing lead times to be heavily affected. The company currently has numerous backlogs with no updated schedule published. For all new orders, customers can expect lead times to stretch to at least 16 weeks.

Littelfuse’s lead times have not been seriously affected because of the preparations it made in advance of the lockdown. With all 045xxxx (Fuse) products being made in the Philippines, Littelfuse claims that lead times will remain at 14-16 weeks for now.

ST Micro’s 48-LQFP package is mainly produced in its Philippines factory. Currently, STM32F03xxx products are experiencing lead time stretches with minimum lead times of 24 weeks.

OnSemi’s FAN series is experiencing an increase in demand; however, it is mainly produced in the Philippines and Thailand. The latest shutdown will most likely cause lead times to increase. In addition, OnSemi’s MOSFET and IGBT components are also reportedly facing major lead time stretches due to the shutdown, with certain series seeing lead times of 20+ weeks and some as long as 40+ weeks.

Fire in Kemet Finland factory affects production

Kemet’s factory in Suomussalmi, Finland, recently experienced a fire that damaged and destroyed certain inventory and equipment. The full extent of the damage is under investigation, and it is unknown when deliveries will be expected to run smoothly again.

Kemet, however, has advised customers that their orders of electronic capacitors produced within this plant will be delayed for the rest of August, with the potential to remain delayed throughout September.

Samsung is discontinuing a range of MLCC models

Two months ago, Samsung announced the discontinuation of hundreds of MLCC models.

Since the announcement, decreasing demand on these models has made it difficult for Samsung to maintain steady production. The last-time-buy for the discontinued lines will be Nov. 30, 2020 while the last production date is set for May 31, 2021.

It was announced that last-time-buys are subject to MOQs and that items will only be available for customers who have purchased within the past year.

MEMORY

Memory oversupply leads to falling prices

Stable supply, combined with weakened demand, is leaving customers and distributors with high inventory pressure. The result is an average of about 6-8 weeks of excess and some companies with as much as 14-16 weeks’ worth.

Overall prices are still expected to fall through Q4 2020 with a low chance of respite going into 2021. However, there has been an increase in activity for high capacity server DIMMs, mainly for 64GB and 128GB due to the popularity of the Filecoin.

Pessimistic outlook on DRAM market due to weakened demand

Due to economic uncertainty caused by COVID-19, Q3 contract pricing for server DRAM products has started to fall. Pricing originally began to rise at the end of 2019 and steadily increased until its peak at the end of Q1 2020.

The delayed launch of flagship mobile phones has caused manufacturers to reduce the production output of mobile DRAM and increase production of server DRAM instead.

Current hyperscale and cloud service providers increased their purchases of DRAM in Q2, which has created significantly high levels of inventory. Intel’s announcement delaying the release of its new CPU, combined with current economic downturn, may lead to softer demand in Q3 and Q4.

In the NAND flash sector, most suppliers’ businesses are expected to worsen in Q3 and Q4 of 2020, caused by the slowdown of the global economy.

STORAGE

A spike in demand for high capacity Enterprise HDDs, but not the case with SSDs

While COVID-19 is slowing down server market growth, Filecoin mining activities in China are creating more demand for large capacity HDDs, especially 10TB and above. Because of this, we are expecting manufacturers to put more production resources toward large capacity HDDs, which could result in a decrease in price for smaller capacities.

Demand for SSDs has not picked up and manufacturers are cutting production to avoid inventory issues. Suppliers are predicting that overall, SSD prices will remain flat in Q4 of 2020.

Demand for GPU spikes due to Filecoin mining

The launch date for the upcoming transition of the new generation GeForce series, Nvidia GeForce RTX 30, is expected in early- to mid-September. Tentatively, RTX 3080 Ti and RTX 3080 are expected to be launched first, followed by the RTX 3070 release in October.

Because the official launch date has yet to be confirmed, there has been an rise in inquiries for the RTX 20 series. Despite the shortage caused by the RTX 2080 series being announced as EOL, demand for GPUs has increased from the hype around cryptocurrency mining activities.

Price increases of around 5-10% have been seen for the RTX2060, as well as for the GTX 16 series. Because Filecoin mining requires more powerful GPUs and is mostly driven by Chinese miners, it has caused a continued price surge on RTX 2080ti in China. The heightened price level for high-end GeForce cards is expected to last until Q4 at least.

FINISHED PRODUCTS

The lack of raw materials is creating havoc on peripheral supply

There have been multiple disruptions in production for optical transceivers, webcams and Wi-Fi cards due to the lack of raw materials. As we move toward mid-Q3, vendors are not seeing an ease on the supply constraint. Though Chinese factories are resuming full operations as the country’s COVID-19 situation stabilizes, the disruption to the raw material supply will have a long-lasting impact.

Lockdowns in South East Asia continue to constrain chipset supply. With increased investment in the telecommunications industry and the development of 5G, supply cannot meet demand. On the upside, suppliers are expecting the shortage to slightly improve in Q4 of this year.

Wi-Fi module card supply drops as manufacturers relocate

Manufacturers are slowly relocating production plants for WLAN cards from China to Taiwan, mainly due to U.S.-China Trade War. Affected series are AX200, AX201, AC 9461, and AC 9462. We are also hearing that certain series are experiencing higher than usual failure rates, resulting in supply being negatively affected.

Customers have been looking for alternative series’, however, due to the PCB shortage from raw materials, including crystal oscillators, they have been unsuccessful. On the flip side, we are hearing supply may start to recover in early October.

Demand for webcams is still on the rise

Webcam supplies have been constrained since April and manufacturers are still trying to catch up on supply. The wafer shortage for CMOS sensors, used in webcams, are also facing shortages. This could result in further diminishes to supply in the market.

Recently, customers from the Middle East have been asking for large quantities of lower-end webcam models to be used in their webcam reliant projects.

Asian suppliers are also reporting that there is less stock allocation available compared to the previous quarter due to manufacturers prioritizing shipments to the EMEA region rather than to the Asia region. This will further deteriorate supply and encourage further price surges.

LCD shortage causes pricing increases

In Q2, LCD demand was hit badly due to the lockdowns occurring globally. In response, panel production was reduced by 30%, which has led to an increase in price.

However, at the beginning of Q3, Chromebook demand increased because of people working from home and students partaking in e-learning activities. As a result, all factories diverted their production lines to Chromebook size panels. This caused a huge supply gap for the mainstream 14.0” and 15.6” panels.

Most notebook makers have barely received allocation for the mainstream size panels. The current supply could only cover around 30% of the overall demand but is expected to recover in late Q4.

Meanwhile, prices have increased by more than 20% with almost no availability from authorized distributors.