Processor demand stable in spot market

USA: According to Converge Market Insights, to this point in 2009, we have yet to see the predicted market slowdown or the expected flood of OEM excess inventory. With a number of negative forecasts occupying the headlines, the market had been bracing for a sharp fall in postholiday demand.

However, February has proven to be resilient, with typical demand in the spot market and stable pricing for most processor parts. In addition, shortages have been infrequent while excess inventory has held at a steady trickle.

Emerging trends

When or how the economic downturn will affect microprocessor demand is yet unclear, although there are some useful pointers regarding demand in the coming months:

Service and repair demand is flourishing

Demand from the service and repair sector is flourishing. This phenomenon occurs as consumers prefer to upgrade and repair old computers rather than buy new systems. Specifically, out-of-production CPU business is the area with the most growth. Old Pentium 4s, retired Xeons, or old core duo and Pentium parts are being sold more frequently in small-volume deals.

An interesting new supply channel has also emerged, as excess inventory from embedded computer builders is meeting service demand at tier-one OEMs for out-of-production laptops.

Embedded computers, such as ATMs, generally use older models of microprocessors.  For example, the T7400 has reached the end of production for laptop builders but is a currently a part utilized by telecom contract manufacturers.

Quantity of smaller orders on the rise

Current order trends reveal that customers in general are ordering their usual January/February components, although now more frequently and in smaller quantities. For example, rather than purchases of 1,000 pieces of a part once a month, we are tracking the same order four times a month in batches of 250.

Customers, watchful of stock levels, are prepared to hold less and buy on an as-needed basis. This presents some challenges, as lead times need to be shortened and pricing can be volatile.

Atom attracts interest

The miniature Intel Atom processors have begun appearing regularly in shortage requirements. Often sold along with chipsets, these CPUs maintain strong demand. These processors power the smallest of laptops and, as of now, can be purchased below current Celeron pricing.

Good value CPU-chipset bundle deals can also be found in the spot market as large price differences are occurring regionally.