MBX recommends reserving supply allocations ahead of forecasts to secure components into Q2 2020.
Justin Formella, Chief Strategy Officer
There have been multiple changes to the status of the novel coronavirus (COVID-19) outbreak over the past two weeks, and we want to update you on what we know today about its impact on technology manufacturing and the overall electronics supply chain.
As the number of COVID-19 coronavirus cases continues to rise within and outside China, factory closures across Asia are escalating. However, on Monday, at least six Chinese provinces lowered their emergency response levels from the highest rating. While more factories are allowed to open this week, worker quarantine orders are limiting manpower and production in China.
By planning ahead and increasing our stock substantially on the most commonly used SKUs, MBX will stay in a strong inventory position going into Q2 2020. But we want to remain transparent about what we’re learning and filter the official and unofficial information we’re hearing from our partners around the world to stay on top of potential market constraints.
Although manufacturers are not publicly confirming any impact on their production, we’re staying on top of the current status with our network.
The latest COVID-19 coronavirus supply chain updates
- Solid State Drives – Constraints that began in October 2019 are being exacerbated by COVID-19. Industry-wide shortages are affecting lead times and we expect this will continue through Q2 2020. The virus has caused Micron to pull U.S. citizens from their China factories, which is reducing production there. On most Micron SKUs we’re seeing lead times of 6-8 weeks for new inventory. For Samsung, leads times are as long as 18-20 weeks. In anticipation of the annual Lunar New Year production slowdowns, MBX increased our position on commonly used SSD SKUs which will carry us into Q2 2020. We recommend reserving allocations through your Account Management team as well as exploring product substitutions if you use heavily constrained SKUs.
- DRAM / NAND – Existing constraints originating before the Lunar New Year continue. To date, there has been no specific COVID-19-related impact.
- Intel – Intel has imposed worker restrictions at its facilities for two weeks after returning to their home countries from mainland China, Hong Kong, and Macau. Analysts say Intel’s focus on the high-end of the market makes it more immune to the virus-induced slowdown. We are not seeing an impact on the processor market, but the SSD impact mirrors the rest of the industry. We recommend reserving allocations through your Account Management team or evaluating Micron SSDs as an alternative.
- Supermicro – Supermicro is not forecasting a significant impact on production currently because it runs operations in the U.S., Europe, and Taiwan, which limits supply chain risks. We recommend taking a cautious position with Supermicro as our experience tells us the situation may change quickly on a SKU-by-SKU basis.
- Dell – Dell has released limited information on the impact on its business operations and is assessing all options and mitigation plans to keep its supply chain operational. We do see Dell vulnerable to the same SSD and DRAM shortages as stated above, albeit with more procurement flexibility. To date, we have not seen any impact on Dell lead times but recommend taking a proactive approach to securing allocations.
- Samsung – Samsung says it is making its best effort to minimize the impact on operations, however, it has temporarily shut down a factory in South Korea after an employee contracted the illness. Market constraints on Samsung SSDs are causing a significant impact on lead times; we’re seeing as long as 18-20 weeks on new inventory.
- Nvidia – Nvidia is experiencing supply chain disruption and reduced production in China. We are not seeing an impact on the supply side yet, but we expect this to change within the next 4-6 weeks. We recommend building up inventory allocations in advance of the predicted constraints.
Coronavirus logistics obstacles
Also keep in mind that global logistics obstacles are growing, and this has a direct correlation to shipping costs. Although we are still receiving regular shipments, the controls placed on flights and ports in affected areas mean it’s just a matter of time before orders get pushed out or stop shipping from manufacturers.