Market Intelligence
August 1, 2023

The Greensheet: August 2023

Sign up for The Greensheet to unlock this post.
Subscribe to receive Fusion Worldwide's monthly market trends report.

The Greensheet is Fusion Worldwide’s monthly report on trends that impact the open market supply chain. Our latest report details the changes in supply and demand influencing the integrated circuit, CPU, memory, GPU, and networking product industries.  

  • China’s recently announced export restrictions threaten substrates necessary for manufacturing power semiconductors and high-frequency components.  
  • Mobile CPU prices increase by 40% following Intel’s EOL notices.  
  • HDD demand is outpacing supply and customers have reported order processing delays.  
  • Networking product supply is constrained, especially for optical fiber cables, network switches, optical transceivers, and networking adapter cards. 
  • The cost of enterprise GPUs is rising rapidly as NVIDIA expands production to meet customer’s needs.  

Following a period of slow demand where inventories often swung into states of excess, lead times and pricing are once again on the rise for industrial PCs, certain memory products, enterprise GPUs, MCUs, and networking products.  


Learn more about the market happenings in the full report below.  



Integrated Circuits

Export Restrictions May Cause Repercussions for Semiconductor Manufacturing  

In early July, China announced its export restrictions on two metals necessary for chipmaking: gallium and germanium. These two metals are essential for manufacturing power semiconductors and high-frequency components. In the initial assessment of these export restrictions, the supply chain won’t face immediate setbacks. However, a negative impact is anticipated in the long term since products can’t be manufactured without these metals. Entering August, manufacturers like Broadcom, Skyworks, Qorvo, Infineon, STMicroelectronics, and WIN Semiconductors will likely assess the disruption further.    

Gallium and germanium are essential for several industries, including the defense industry which relies on these materials for radar systems. Plus, the green energy industry utilizes the metals for solar panels and power-saving LED lighting. However, gallium and germanium are especially essential for semiconductor manufacturing since they are used to create substrates. Substrates are crucial materials used in manufacturing specific semiconductor chips, with applications for transistors, solar cells, and infrared detectors.   

If the export restriction affects the availability or cost of these substrates, it could disrupt the supply chain for chip manufacturers on a global scale. Customers have already reported that some manufacturers have begun to bring up these restrictions as part of the explanation for why lead times are being pushed out in certain instances.  


Extensive Lead Times Impact STM Automotive Channel Drivers and MCUs 

A quality issue with the lead frame packaging in STM's Morocco factory has caused delays for the company's VN series of channel drivers. As STM assesses how to allocate orders under the current circumstances, lead times continue to stretch and have reached over 100 weeks for certain MPNs.  

Furthermore, there is a shortage of the SPC5xxx series MCUs, and available allocation is limited. The estimated lead times from distributors for this series range from 42 to 50 weeks, which could expand further if supply remains constrained. In addition, pricing could also increase as distributors have already noted a significant disparity in costs and availability between OEMs and distributors for automotive MCU series, including the SPC5xxx.  


Micron Prices Forecasted to Increase Following Reduced Wafer Input   

Following a period of low demand, Micron reduced wafer input by 30% in the first quarter of 2023.  This reduced production strategy continued into Q2, as the company focused on inventory management and supply control. By Q3, inventory began to stabilize, but operating expenses continue to exceed gross profits.    

The reduction in wafer input, combined with the operating losses, points to a tighter level of supply, which typically leads to an uptick in prices. Based on these trends, forecasts indicate that the cost of DRAM will increase from August into the beginning of 2024.  

Other factors may influence DRAM pricing, and market conditions are always subject to change. Procurement teams proactively monitor the market to gauge the dynamics to inform cost-saving opportunities before prices escalate.  




Desktop CPU Market Remains Soft While Industrial PCs Lead Demand  

It has been a slow couple of months for desktop CPUs, and demand remained soft going into August. The few products experiencing demand are the 12th Gen Alder Lake and 13th Gen Raptor Lake, with the newer 13th Gen beginning to marginally outpace the 12th Gen. In particular, the mainstream enterprise series of i5/i7 CPUs are the most popular.  

With market activity remaining flat, Intel and AMD are vying to provide the best cost savings opportunities to capture demand. Unfortunately for both companies, forecasts do not indicate that demand will improve for desktop CPUs within the next one to two quarters.  

In contrast, the industrial PC segment has more optimistic projections. Based on recent transactions, industrial PC demand will likely perform better than the personal and enterprise computing segments, due to their versatility. Even with the generally higher expense, industrial PCs are the favorite among consumers compared to other PCs because of their dependability and accuracy. Thanks to the broad scope of applications in industries like green energy, aerospace, and automated manufacturing, market research indicates that the global industrial PC market will grow in the coming years, and embedded CPUs will likely be the next focus area for market demand.  


Server CPU Activity Stagnant but New Products May Revitalize the Industry 

Similar to desktop CPU market conditions, server CPU activity for Intel and AMD remained minimal over the last month. AMD saw improved demand for the Genoa series, but customers' buying behavior remained conservative because of inventory concerns. For Intel, most orders are still for Ice Lake, and there has been a slight drop in demand for the Sapphire Rapids series.  

In addition, Intel reported a bug issue for the 4th Gen Sapphire Rapids server CPU Medium Core Count series. Intel paused shipments in early July to fix the problem, which was resolved quickly. This minimized the impact of the production gap, and customers have not reported any shipment or supply issues thus far.  

Even though it has been a challenging year, the market may receive the boost it needs before the end of the year, with Intel’s upcoming Emerald Rapids 5th Gen Server CPU likely launching at the end of Q4.  


Major Price Increases and Product Upgrades Hit the Mobile Market   

Following the EOL announcement issued by Intel in July, demand for the Mobile CPU 11th Gen Tiger Lake has increased alongside pricing. Prices have already risen 40% compared to just a few weeks prior. Customers, including larger OEMs, are simultaneously moving towards the 12th Gen Alder Lake because of sky-high pricing.  

While it's the end of the line for some Intel components, there are new products to look forward to later this year. Intel has confirmed the Raptor Lake-S and Raptor Lake-HX, the latest editions for the 14th Gen CPU family, and the mobile segment's Raptor Lake-U and Meteor Lake-P chips will be hitting the market in the near future. The Raptor Lake refresh, and Meteor Lake, products will likely launch by the end of 2023. Reviews consider the 14th Gen Raptor Lake refresh a minor upgrade to its predecessor, while the Meteor Lake update is said to have significant improvements. Based on that, pricing for Raptor Lake refresh should be more affordable than Meteor Lake.  

Based on this speculation, the Raptor Lake Refresh will be more affordable than Meteor Lake. However, demand will depend on consumer-specific needs and budgets, and Intel may adjust pricing for previous generations to boost sales of both new series. Additionally, it may take some time to identify and differentiate the generations in Intel's new naming scheme for both product families.  




Constraints Impact Availability as HDD Demand Rises  

Sluggish demand and inflated inventories have dominated the landscape for the HDD market since the onset of 2023. Even with higher capacity 16TB to 18TB HDDs experiencing spot demand, pricing has steadily decreased.  

To strategically alleviate inventory pressure, Seagate, Western Digital, and Toshiba reduced production across all HDD lines. By July, these strategies showed signs of helping to digest excess, as competition for the limited availability increased demand.  

Constraints have now begun to impact availability, especially for the higher capacity series that had more consistent interest among consumers. Quotes have started to reflect this rise in demand as pricing and lead times have gradually expanded. To prevent the backlog of orders from growing, manufacturers will have to ramp up production. However, building stores of raw materials and other resources necessary for manufacturing will take time and capital.   

Now that there is an imbalance between supply and demand, with demand outpacing supply, Seagate customers have reported order processing delays. If demand holds strong, it is likely that manufacturers will increase pricing, especially after the steady pricing decline that HDDs have been subject to since the beginning of the year.   


SSD Distributors Focus On Creating Stable Supply in a Slow Market  

While the same strategies were applied to both SSD and HDD production, the SSD market is still struggling to produce to meet demand. Even EOL notices, which have historically stimulated demand, have not pushed customers to increase their order sizes. Instead, buying is mainly driven by cost savings opportunities in the open market as it is well known that supply is healthy, or in excess, across most brands.  

In order to keep supply from swinging too far into excess territory, distributors began to apply stricter supply controls in order to keep inventories stable. Distributors have also started to move away from any attempts to build buffer stock and are only loading back-to-back orders with manufacturers.  

Furthermore, those who still have stock of EOL components are selling them at a loss. Until distributors can clear out these older models, distributors are not providing forecasts for newer SSD series. This has had a trickle-down effect on the open market as customers turn to alternative sources to secure supply, and the availability of the latest series is decreasing.  


DDR4 and DDR5 Pricing Competition Heats Up     

Despite forecasts that memory market activity would improve by Q2, the timeline shifted to show that Q3 would be a more accurate turning point. Throughout the beginning of the year, prices were on a steady decline. Manufacturers worked to keep supply low to match weak demand but were not always successful. Even with constraints hitting higher-density modules, excess inventory of other smaller capacity modules filtered into the open market, which further eroded pricing as customers sought cost savings opportunities.   

Inventory levels in the open market are generally still elevated, and costs remain below the official manufacturer's pricing. However, this is subject to change. Knowledge of the supply and demand cycle indicates that the reduced output strategies employed from Q1 through Q2 would take about six months to impact the market. The effects of these cuts may start to emerge now that the AI industry has rejuvenated demand.  

Open market pricing for DDR4 RDIMM is still competitive, especially for 64GB, but the supply of DDR5 128GB and 256GB is constrained. DDR5 128GB has been popular since May, and demand for these modules far exceeds availability. The DDR5 256GB constraints began in June after Samsung consistently reduced production throughout the year and was hit with a quality issue. Additionally, the DDR5 constraints were exacerbated by a lack of global forecasting and the unforeseen strength of the AI industry.  

As a result, manufacturers are strategically dispersing what supply is available by prioritizing fulfilling tier-one customers' orders. The limited supply has caused market pricing for high-density DDR5 modules to rise 15% to 30% higher than official pricing. Despite the current imbalance, customers believe supply will stabilize from mid to the end of Q3. Furthermore, forecasts are optimistic that demand will continue to rise thanks to the AI industry generating revenue for the memory market.  


Enterprise GPUs in Short Supply As Prices for Consumer GPUs Drop  

Demand for enterprise GPUs has spiked since the beginning of the year, with most of the demand focusing on NVIDIA's A100, H100, A800, and H800 products. Pricing is increasing rapidly, with costs expanding by 20% in just two weeks during July.  

Lead times for new orders are also extended. The uptick in lead times is the result of the unexpected demand from the AI industry, combined with the US restrictions on selling high-end enterprise GPUs to China. The lengthy lead times have pushed customers to the open market to receive orders sooner, but this has caused costs to increase by at least 10%.  

To better support customers, NVIDIA is focusing on enterprise GPU production. However, while customers are optimistic that supply could improve, costs continue to rise. The limited supply of GPU chipsets has caused manufacturers to halt special price approvals across all regions. NVIDIA's Quadro and Tesla series will likely see prices increase within Q3.   

Alternatively, demand for consumer GPUs is still soft, and supply is healthy. The only product experiencing an uptick in demand is the RTX 4090 series, especially the blower and turbo editions. The RTX 4090 is popular in the gaming industry because of its performance power, but it is also favored by the AI industry for deep learning and supporting general AI applications. Supply for this series is consequently limited, and lead times are long.   

Sales of the RTX 40XX series, including the RTX 4060 and RTX 4080, have been slow due to their expensive price tags. Customers have preferred the RTX 30XX series over the RTX 40XX, as it has been on the market longer, and its cost has dropped. In particular, NVIDIA has been issuing sporadic price drops in the European and US markets to stimulate overall sales.  


Networking Product Availability Unlikely to Improve in the Foreseeable Future   

The AI, machine learning, and data center networking industries continue to accelerate a rebound in demand for networking products. Since April, demand began helping distributors digest excess inventories, and by June, lead times were starting to extend to at least 30 to 40 weeks. Forecasts are now optimistic that the market will grow throughout the year as demand has surged across most networking products.  

Optical fiber cables, network switches, optical transceivers, and networking adapter cards are the most sought-after products. As a result of this situation, supply is constrained, and lead times have extended indefinitely, especially for high-performance and specification components like the 100G and 200G products.  

Manufacturers are still in the midst of increasing production to catch up with demand, so supply will not improve for the foreseeable future. Manufacturers are also refreshing their pricing because of the rising cost of raw materials and shortages of components necessary for production.


From In Jeopardy to In Stock, Raspberry Pi's Backlog Starts to Stabilize  

Raspberry Pi is seeing a rebound that may be here to stay as production continues to ramp up. The company anticipated limited recovery in July but judging by the way it has worked through its backlog of orders this positive trend may prove sustainable. The combination of a healthier supply of raw materials, and additional buffer stock, has created a more stable manufacturing cycle that is steadily matching demand. Thanks to additional support from long-term partner, Sony, more customers are reporting that orders have started to arrive.  

Pi4 production is still Raspberry Pi's main focus, and recent announcements declared that the total number of shipped products would reach a million units by the beginning of Q3. Furthermore, expedited production will help maintain that level of delivery until the company's backlog is exhausted.  


DC-DC Market Continues to Expand As Shortages Worsen  

DC-DC converter demand has continued to outpace product availability, worsening the shortage that has materialized over the last several months. With lead times from 60 to 100 weeks customers are turning to the open market to secure supply.  

The leading cause of this shortage is a poor supply of IC components during a prolonged period of high demand. In order to create available supply, some customers have been partnering with distributors to supply DC-DC converter manufacturers with the IC components they need to manufacture their products. While this is alleviating some of the pressure on manufacturers, overall demand shows no signs of dissipating, due to numerous industries rely on these parts. As the automotive and telecommunications industries propel expansion, forecasts indicate that the converter market will grow by 20.75% over the next four years. This is primarily due to the demand for EVs, cell phones, and the extension of 5G networks, which all rely on DC-DC converters for various applications.  




Sign Up for Market Intelligence Today
By providing your contact information, you’re giving Fusion Worldwide permission to contact you about our products and services. You may unsubscribe from these communications at any time. For more information on our privacy practices and commitment to protecting your personal information, please review our Privacy Policy.
Contact Us

General Inquiry

Lead Gen Graphic
Complete this form to contact Fusion Worldwide about our products and services.
Geographic Region
By providing your contact information, you’re giving Fusion Worldwide permission to contact you about our products and services. You may unsubscribe from these communications at any time. For more information on our privacy practices and commitment to protecting your personal information, please review our Privacy Policy.