The gap between DDR3 spot and direct pricing is narrowing, Converge reports

Demand continues to be robust for Micron memory, especially SDRAM and DDR1. Micron lead times appear to be getting longer for most SDRAM PC1333 product, and while the spot market has been an avenue of supply, pricing has been at a premium. For those users who have Samsung approved as well as Micron, product is available and pricing has been much more favorable for comparable configurations. 

CPU Update

As reported in last month’s Market Insights update, the long-awaited Intel Arrandale mobile CPU shortage arrived and it gathered momentum in March.

In particular, the off-road i5-430M, i3-330M and i3-350M were affected. These processors are currently not available to all OEMs, with Intel supplying first to Tier 1 OEMs along with some smaller “early adopter” gaming machine producers. This meant that the shortage was not market wide, with only the very large or niche players affected.

Throughout March we were tracking sporadic large demand on these parts while supply was severely restricted. It is unusual to find a device shortage that cannot be solved in the open market, but in March the off-road-map Arrandale was in short supply and demanding a 20 percent premium above its contract price. This shortage looks to continue through April. However, many manufacturers remain unaffected as they continue to utilize the Intel Montevina processor family, where supply remains healthy.

While the mobile market buzzed with activity, the desktop market was quiet by contrast. The retail box market offered cost savings on a range of “I” series in Europe, and this lessened the demand for its tray equivalents. The E8400 enjoyed an extended lease on life as the processor remained a high runner, but demand is expected to tail off in favor of newer models.

The repair and embedded markets continue to show steady growth and we see signs of a more healthy market in April and May. We also believe the Arrandale shortage must ease soon or it will have a prolonged effect as the entire manufacturer base may “swap-out” to the newer models.

Semiconductors and Integrated Circuits Update

It has been more of the same in the semiconductor and integrated circuit market. Lead times in the 16- to 24-week range are the norm and there is little change in sight. Demand continues to be strong and suppliers continue to be conservative in bringing on or increasing their capacity. The same manufacturers continue to be short, with Texas Instruments, Freescale, Cypress, On-Semi, IR, Maxim and Xilinx at the forefront. Again, certain parts within these manufacturers might start improving their lead times, but then another series of parts within the same manufacturer start to get worse. We anticipate these conditions should continue at least through the second quarter and into the third quarter of 2010.

We are also seeing a significant amount of shortages and long lead times in the capacitor market. AVX, Sprague and Kemet in the SMT tantalums, especially the low ESR series, and Murata in the ceramics are the most common shortages we are tracking. Tantalum capacitor lead times are anywhere from 16 to 26 weeks and the ceramics are as long as 22 to 30 weeks. Shortage activity seems to be increasing in the market, and we anticipate it will continue to get worse before it gets better.

Storage Update

Status quo is how we would characterize the HDD market in assessing the first quarter of 2010. Historically demand in the first quarter is the slowest of the year, but remains as expected and in line with previous years. When comparing the results of Q110 to Q409, it is evident that the shortages and demand that were prominent last quarter have diminished. However, this is not an overall indication of market direction but more of a seasonal trend. Most analysts are sticking to earlier predictions of double-digit increases in sales revenues year over year in the HDD space. Meanwhile, product development focused on more capacity and greater speed continues. Western Digital introduced a 600 GB VelociRaptor HDD, the highest-capacity 10K RPM enterprise 2.5" SATA drive designed to compete with the emerging SSD drives. Additionally, Toshiba is now offering a 1 TB and a 750 GB internal option in the 2.5" form factor more suited for the mobile, the SFF and the all-in-one desktop lines.

Specifically, there was no change in the 3.5" SATA pricing month over month with the exception of the 1.5 TB and 2 TB capacities. In these higher-capacity drives, there has been an approximate 5 percent decline in open market pricing to the mid-$90 and mid-to-low-$120 range, respectively. Pricing for the 2.5" SATA HDDs have remained stable since the last Market Insights report. We have not seen inventory issues in either form factor for this interface. As a result, most customers are seeking price point variance purchasing opportunities. 

Last, low inventory levels in the IDE interface continue. While this is impacting pricing in both form factors, the effect is much more significant in the 2.5" drives. Here we have seen $5 to $7 increases starting at the 40 GB capacity and continuing through the full range. While this is in contrast to our general assessment of the market status, it is not a result of the typical factors that drive it but rather the phasing out of the interface. Industry segments such as off-lease mobile computing sales, where the IDE interface is still prominent on a 3- to 4-year refresh and original HDD destruction is a requirement, are experiencing difficulty finding replacement HDDs and thus driving price.

LCD Update

Despite sustained material shortages, the LCD market is catching its breath in April after a rally in recent quarters. While the overall lead time on TV panels remains between 4 and 8 weeks, 40" and larger sizes are actually delivering closer to 4 weeks than to 8 weeks. Factory pricing for these sizes has also only dropped by single-digit amounts. Pricing remains unchanged from the previous month for panels between 26" and 37", with lead times closer to 8 weeks than to 4 weeks. One factor for the pricing correction is seasonal, as demand declines from the peak of the holiday seasons around the globe. Panel makers are approaching the market situations with cautious confidence as the overall demand for TV panels is expected to remain healthy after this temporary correction.

Desktop panels are holding ground with factory pricing remaining largely unchanged and supplies tight for sizes between 21" and 24". Pricing fluctuates slightly on these sizes, in the $2 to $3 range, depending on the models. Average lead time is also unchanged in the 4- to 6-week range. Demand persists for certain 17" through 19" models, particularly those with 4:3 aspect ratios. Market pricing also remains high, at the low $100 range for these models.

Shortage is modest for notebook panels. Selected sizes with new LED technology, such as 10.1", 15.6" and 17.3" panels, are in higher demand. Pricing fluctuation is largely fueled by the weaker dollar in recent weeks. With CCFL backlights being obsolete, the demand for inverters also dropped. Not surprisingly, certain models featuring CCFL backlights with attached inverters are showing clear signs of shortage. Pricing will likely continue to rise in the foreseeable future as these panels become scarce.

Recent market activities seem to confirm Toshiba’s decision to exit the TFT business (see Converge’s February Market Insights). AU Optronics announced on March 31 the acquisition of AFPD, Toshiba’s subsidiary in Singapore. AFPD is one of the largest manufacturers of low-temperature polysilicon, or LTPS, TFT LCDs. LTPS is the base for the new active-matrix organic light-emitting diode, also known as AMOLED, technology. The AMOLED display technology is expected to replace conventional TFT in future mobile phones. This $110 million acquisition will allow AUO to better position itself to compete with Chimei Innolux Corporation in the mobile display market. This move is also interpreted by market observers as part of AUO’s strategy to regain its leadership position in the TFT manufacturing industry. This acquisition is scheduled to be official in July. Converge will continue to monitor the market impact of this marriage as well as Toshiba’s future plan for its TFT business.

Note: Prices listed for products in Converge’s Market Insights are based upon market conditions at the time the articles are written. Prices quoted in these articles should be used only as a guide, as market conditions vary daily and can affect overall spot market pricing.