Xilinx Sues Flextronics Alleging Fraudulent Chip Resale

http://www.bloomberg.com/news/2013-12-11/xilinx-sues-flextronics-alleging-fraudulent-chip-resale.html?cmpid=yhoo

Xilinx Inc. sued Flextronics International Ltd. (FLEX) over claims the electronics manufacturer fraudulently resold its products at marked-up prices.

Xilinx said Flextronics buys its semiconductor chips at a discount based on misrepresentations about end users and sells the Xilinx chips to other customers at a profit, according to a complaint filed today in state court in San Jose, California. The complaint, provided by lawyers for Xilinx, couldn’t immediately be confirmed in court records.

Flextronics, a Singapore-based supplier of cameras and battery chargers to Apple Inc. (AAPL), has also dealt in “gray market and counterfeit” Xilinx devices, according to the complaint.

“Many of these devices are incorrectly remarked in order to appear to be more expensive, higher performing devices in order to sell for a higher price,” according to the complaint. “Because some of these devices are defective, Xilinx incurs additional damages upon the warranty-mandated replacement.”

In June, Flextronics, an authorized distributor of Xilinx products, placed a large discounted order on behalf of a preferred Xilinx customer, Airvana Network Solutions, and sold the devices to Checkpoint Systems Inc., which pays as much as $4.50 more for the same device, according to the complaint.

The complaint includes allegations of fraud, misrepresentation and breach of contract.

Xilinx, based in San Jose, manufactures chips that can be reprogrammed after they’ve been installed in electronic devices.

Renee Brotherton, a spokeswoman for Flextronics, declined to immediately comment on the the complaint.

The case is Xilinx Inc. (XLNX) v. Flextronics International Ltd., 113CV257431, California Superior Court, Santa Clara County (San Jose).

Companies See Bright Spots in Bleak Market

http://www.nationaldefensemagazine.org/archive/2013/November/Pages/CompaniesSeeBrightSpotsinBleakMarket.aspx

Military contractors were recently warned by a senior official that they are about to be “punched in the face” as the defense market takes a beating over the next several years.

That statement comes as no surprise. Sequestration and gridlock will be taking a huge toll on Pentagon spending. Budgets for new weapons will be plummeting by at least 20 percent. And Pentagon buyers will be hesitant to spend what they have, as they are still scarred by a decade of procurement flops.

Remarkably, there are still companies that have the stomach to invest in defense. Some actually view these tough times as an opportunity to win new business.

Textron just unveiled a new light-attack surveillance aircraft that can carry spy sensors and is based on a commercial Cessna business jet. The aircraft, named Scorpion, is a private investment by Textron and a partnership of 22 vendors.

But in today’s bleak market, how long can a company wait for a Pentagon order before investors lose their patience?

Textron executive Edward Hackett says the company is not expecting to “drive decisions” within the Defense Department. But he hopes that products such as Scorpion will help open the debate on the “value” that industry can bring to the Defense Department.

The company decided to take the plunge in response to what it has been hearing from Deputy Defense Secretary Ashton Carter and Undersecretary for Acquisition, Technology and Logistics Frank Kendall: Industry, keep investing, please. Bring us solutions.

The business model is rather simple: Build an aircraft at a fraction of the cost of a government-developed system, mostly by using commercial components from the Cessna line.

It remains to be seen whether industry-funded hardware such as Scorpion sparks interest within the Defense Department. Some industry insiders appear impressed by the idea. Maybe the Pentagon is not ready to buy a commercial jet to replace F-16 fighters, but other countries that have less money might consider it. All Textron needs is one customer that is willing to be the first to buy one of these airplanes. Then, others probably will follow, or so some business leaders believe.

Another company that sees the downturn in a positive light is Saab North America, which spends 8 to 9 percent of its approximately $4 billion in revenues on research and development.

That’s at least two to three times what top prime contractors spend, on average, on corporate R&D.

Saab executives will admit that investors do not always like to see so much money poured into research ventures. “It takes a lot of leadership to do it,” says Vice President Brian Lawrence.

But that is the only way the company believes it can compete with the bigger primes. Saab’s story is a cautionary tale for defense companies that primarily rely on government funding to develop new products. In the 1980s, 90 percent of Saab’s revenues were from sales to the Swedish government. After the end of the Cold War, it faced a sink-or-swim moment. It decided to start funding its own product development and branched into the global market. Now 50 percent of Saab’s business is outside Sweden.

Non-U.S. defense firms understand the politics of jobs and the industrial base and have no problem pouring funds into domestic production, licensing or codevelopment, if they are reasonably sure that the U.S. government intends to buy the product.

That philosophy is guiding new investments by MBDA Inc., the U.S. subsidiary of Europe’s largest missile manufacturer. It is actively marketing its Brimstone air-to-ground missile — whose development was funded by the United Kingdom — to the U.S. Air Force, Navy and Army. This might seem overly ambitious, as the market is owned by Lockheed Martin’s Hellfire. But the company believes it can beat incumbent suppliers if given a chance to compete.

Some industry CEOs remain skeptical that the Defense Department can be trusted to commit to buy products that it did not design or develop in house. This is often known as the “not invented here” syndrome.

The government is asking industry to invest in new technology, but for some corporations, that is too big a gamble. David Melcher, CEO of Exelis Inc., a supplier of high-tech military equipment, says he expects most industry investments will be based on “requirements” set by the Defense Department.

As the downturn loomed, Defense Department leaders assumed that they would have to slash R&D spending and industry would pick up the slack. Melcher cautions about overblown expectations that industry will deliver products at high technology readiness levels not knowing whether the Pentagon will buy them. “At the end of the day, our board and our shareholders will not want us to keep investing in something that doesn’t have a return on the invested capital,” he says.

Melcher might have a point. A new study by the Center for a New American Security contends that the U.S. military “strongly resists serious investments in technologies that may threaten perceived ‘core’ weapons platforms and traditional concepts for their employment.”

Risk aversion is a “deeply rooted facet of Pentagon culture,” the CNAS study says.
Government buyers eventually will have to decide whether their desire for innovation will trump entrenched thinking. They will need to keep in mind that the modernization of the military largely will be made possible by advances in commercial technology. “The commercial sector now catalyzes far more technological innovation than the military industrial base,” says the study.

This is good news, CNAS analysts note, because a healthy commercial industry will generate innovative technologies that can be applied across the entire U.S. economy while also allowing the military to benefit from private investments.

The Pentagon, however, will always need technologies that are not available in the civilian world, and will have to make sure it invests in those areas. And if it wants defense contractors to put more skin in the game, it will also need to do a better job informing companies about its needs. The Pentagon is asking industry to invest in technology not only because it is cash strapped but also because it is in danger of losing its technological edge.

Lawrence notes that one of the biggest hurdles his company encounters in its defense business is the way the Pentagon articulates its requirements.

“The defining of requirements for new weapon systems in the U.S. needs a complete overhaul,” he says. “I think a lot of people would agree with this.” Military buyers often write requirements that are too restrictive or too difficult to achieve, he said. “That is why we have so many programs that are over budget and behind schedule.”

Compromised By Design? Securing the Defense Electronics Supply Chain

http://www.brookings.edu/research/papers/2013/11/4-securing-electronics-supply-chain-against-intentionally-compromised-hardware-villasenor

Executive Summary:

Electronic “chips” are found everywhere—not just in critical defense systems, but also in the broader infrastructure for power, finance, communications, and transportation. All of these systems function effectively only when the electronic circuits at their heart can be trusted to operate as intended.
Unfortunately, ensuring trust has become much more difficult in recent years. Concern over the growth of counterfeit electronics (parts that have been harvested from discarded systems, relabeled, and sold as new to unsuspecting buyers) has grown in recent years. These parts can fail prematurely, with potentially disastrous consequences. Thanks to recent congressional attention, improved detection methods, and heightened screening requirements for parts destined for defense systems, however, the threat of counterfeits is being actively addressed.
Yet the supply chain is almost completely unprotected against a threat that may turn out to be more significant in the long term: Chips could be intentionally compromised during the design process, before they are even manufactured. If placed into the design with sufficient skill, these built-in vulnerabilities would be extremely difficult to detect during testing. And, they could be exploited months or years later to disrupt—or exfiltrate data from—a system containing the compromised chip.
As chips have gotten more complex and design teams have grown larger and more globalized, the opportunities to insert hidden malicious functionality have increased. If the history of cybersecurity has taught us anything, it is that these opportunities will be exploited. The prudent question, therefore, is not “will intentionally compromised hardware will end up in the defense electronics supply chain?” but “how do we maintain security when it inevitably does?” This paper aims to help frame the discussion regarding how best to respond to this important and underappreciated aspect of cybersecurity.

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U.S. Manufacturing Expands At Best Pace In 2½ Years

http://www.manufacturing.net/news/2013/11/us-manufacturing-expands-at-best-pace-in-2%C2%BD-years-0?et_cid=3574502&et_rid=490548696&linkid=http%3a%2f%2fwww.manufacturing.net%2fnews%2f2013%2f11%2fus-manufacturing-expands-at-best-pace-in-2%25C2%25BD-years-0

WASHINGTON (AP) -- U.S. factory activity expanded in October at the fastest pace in 2½ years, suggesting that the 16-day partial shutdown of the government had little effect on manufacturers.
Instead, overseas demand and healthy U.S. auto sales appear to be supporting factory output. The housing recovery is also lifting the furniture and wood products industry despite a recent slowing in home sales.
"We've become accustomed to the way Washington operates in the past couple of years and assume that it will get resolved eventually, however painfully," said Bradley Holcomb, head of the survey committee of the Institute for Supply Management, a trade group of purchasing managers that on Friday reported a solid manufacturing figure for October.
The ISM's manufacturing index rose to 56.4 from 56.2 in September. A reading above 50 indicates growth.
Factories also expanded in Europe this month, though at a slightly slower pace, according to surveys in that region. Manufacturing indexes have all picked up in China, Japan, and South Korea.
The overseas strength is boosting demand for U.S. factories. A measure of export orders jumped to its highest level in nearly a year and a half in October, the ISM report said.
"The outlook for manufacturing looks far more constructive now than it did over the past several months, in light of the improving global backdrop," said Michael Dolega, an economist at TD Economics.
U.S. factory activity has now risen at an increasingly fast pace for five straight months, according to the ISM's index. In October, a measure of new orders rose slightly. And a gauge of production fell but remained at a high level. Factories added jobs, though more slowly than in September.
The shutdown did depress activity at some companies that make metal products and electrical equipment. And while the survey's findings suggest stronger output in coming months, the most recent measures of factory production remain tepid.
"The strength of this hasn't yet been reflected in actual manufacturing output," said Amna Asaf, an economist at Capital Economics.
On Monday, the Federal Reserve said factories barely increased their output in September. Automakers produced more. But that gain was offset by declines at companies that make computers, furniture and appliances.
Companies reduced demand for long-lasting factory goods in September, the government said last week. Orders for industrial machinery, electrical equipment and other core capital goods fell. And August's figures were revised down.
Economists pay particular attention to core capital goods, which exclude aircraft and defense-related goods, because they reflect business confidence.
Analysts were also encouraged by a survey of companies in the Chicago region, released Thursday. It found that the companies expanded at their fastest pace in more than two years in October. New orders jumped, and hiring also rose.
Still, economists don't expect manufacturing to boost economic growth in the coming months. Growth likely fell to a weak annual rate between 1.5 percent and 2 percent in the July-September quarter from a 2.5 percent pace in the April-June period.
Most economists expect similarly slow growth in the final three months of the year.

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Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), offered the following analysis:
“The October report on U.S. manufacturing activity from the Institute for Supply Management (ISM) contributes to growing evidence that modest improvements in global financial stability and growth are benefiting U.S. factories. The Purchasing Managers’ Index rose slightly from 56.2 in September to 56.4 in October, the highest level for this closely watched leading indicator of factory sector performance since April 2011.
“The demand components of the index were notably positive, with the new orders component remaining above the strong 60 percent level and the backlog of orders, a measure of the pressure on the factory production schedule, increasing nicely from contraction territory in September to growth territory in October,” Waldman continued. “Neither the data nor the respondent comments in October suggest any measurable impact from the government shutdown, although reports for coming months need to be interpreted carefully for any distorting influence of Washington difficulties.

“In recent months, the survey-based data from the ISM have painted a more optimistic picture of manufacturing performance than the industrial production reports from the Federal Reserve,” Waldman concluded. “Federal Reserve data show that the third quarter rebound from the modest contraction of manufacturing output in the spring was a disappointing 1.3 percent. Fed data also show that the slowdown in the U.S. housing recovery is impacting overall manufacturing performance. Taken together, the ISM data and the industrial production data suggest positive but muted near-term performance for U.S. factories, as the beneficial impacts of an improved global growth picture are at least somewhat neutralized by uncertainties about the sustainability of the rebound in key parts of the world and the potentially harmful effects of historic policy uncertainty in Washington.”

Airbus Promotes Its U.S. Links On Boeing's Turf

http://www.manufacturing.net/news/2013/10/airbus-promotes-its-us-links-on-boeings-turf?et_cid=3559583&et_rid=490548696&linkid=http%3a%2f%2fwww.manufacturing.net%2fnews%2f2013%2f10%2fairbus-promotes-its-us-links-on-boeings-turf

WASHINGTON (AP) -- Airbus, headquartered in France, is pitching its value to the U.S. economy as it takes its battle for dominance in the global airplane market onto rival Boeing's home turf.
This week for the first time Airbus is holding its annual meeting with its suppliers from around the world in Washington instead of at home in Toulouse. It's the company's way of underscoring that 42 percent of its procurement spending — about $13 billion in 2012 — goes to U.S. companies.
Earlier this year, Airbus broke ground on a $600 million assembly plant for its popular A320 airliner in Mobile, Ala., the company's first such facility in the U.S. A poster at the company's offices only a few blocks from the White House promotes the A320 as made in America.
Airbus currently claims less than 20 percent of the U.S. commercial airplane market, but is aiming for 50 percent — roughly the same as its market share worldwide, Airbus CEO Fabrice Bregier said in an interview Thursday.
"There is room to maneuver to do better in the United States," he said. "We care about this country, we have extremely good partners here, we are competitive and we want to grow with them."
Airbus is having some success with its campaign for the U.S. market, Bregier said, noting that Delta Air Lines and JetBlue have ordered A320s.
"This is first of all because of the quality of the product, but also because we are seen as a U.S. citizen and assembling our aircraft here in the United States," he said.
Boeing officials, however, scoff at Airbus' attempts to emphasize their value to the U.S. economy, noting that Boeing employees 160,000 workers across the country, about half of them involved in commercial airplanes and the rest mostly in the company's defense business.
"Their starting up of one very small plant in Mobile versus our 160,000 employees in the United States, it's a significant difference," said John Wojick, senior vice president, global sales & marketing, for Boeing Commercial Airplanes.
Both companies draw on many of the same suppliers scattered all over the world. A significant portion of Boeing's 787 parts, for example, are made in Japan. The company also has suppliers in Europe.
The U.S. is the world's largest airplane market, but it is a "mature" market and not growing nearly as fast as Asia, Wojick said.
Boeing reclaimed the title of world's largest airplane maker from Airbus last year, delivering 601 planes in 2012 to Airbus' 588 deliveries. But earlier this month, Airbus secured its first ever order from Japan Airlines, a deal that undermines Boeing's long-held dominance of the Japanese aviation market.
So far this year, Airbus has sold slightly more planes than Boeing, but both companies "are having a very good year," Wojick said. Boeing will again deliver more planes this year than Airbus, he predicted.
Bregier said he anticipates Airbus will regain the lead on deliveries around 2017 or 2018, when the company ramps up production of the A350, a family of long-range, two-engine, wide-body jet airliners due to come into service next year.
The contest between the two aircraft makers is about a lot more than bragging rights. Boeing forecasts that over the next 20 years the global demand for new airplanes will exceed 35,000 aircraft valued at $4.8 trillion.
The two companies are also challenging each other in legal arenas. They are locked in an international trade dispute at the World Trade Organization in Geneva, each claiming that the other receives illegal state subsidies.

Samsung to cut chip investment

http://www.koreatimes.co.kr/www/news/tech/2013/10/133_144910.html

By Kim Yoo-chul

Samsung Electronics, the world’s top supplier of memory chips, plans to cut its investment in components by as much as 30 percent next year.

The company doesn’t plan to build any more plants to make memory chips because the industry is undergoing rapid structural change.

Industry officials at Samsung's local primary parts suppliers say that aggressive investment does not guarantee high returns anymore due to industry consolidation as well as rising uncertainty surrounding technology and sluggish demand.

“Investment in chips will be cut by 30 percent next year, at least, because we believe Samsung doesn’t have plans to build new fabrication facilities. Total investment in components will remain under 10 trillion won throughout 2014,” said a senior executive at one of the company’s suppliers by telephone.

“It is unlikely that the industry will see cash-burning business projects in chips next year as complexity is increasing because the market is approaching scaling limits.”

Samsung planned to invest 13 trillion won this year. So far it has spent 4 trillion won to transition its Texas plant toward processors, 3 trillion won to build the first line of its NAND flash chip plant in Xian, China, and 2.3 trillion won to build its 17th processor assembly line in Hwaseong.

The remainder will be used for maintenance, technology migration and equipment, said industry sources.

“Samsung’s primary target for its semiconductor business is to churn out advanced flash memory chips including V-NANDs in a strategy to actively meet the industry’s demand for NAND-intensive digital devices such as smartphones, tablets and solid state drives. It may invest more in flash chips. However, the factory expansion, if it materializes, will cost less than 1 trillion won from next year’s tentative investment budget,” said an official from another partner of Samsung.

“Next year’s key issues are how to operate new factories and expanded lines, effectively.”

Strategy change

Samsung’s “golden pricing strategy” encouraged heavy investment in chips in an attempt to gain a larger market share, regardless of the market’s volatility.

“As a new order prevails, you don’t have to invest heavily in chips. Samsung is sourcing conventional DRAM chips from its strategic partners such as SK hynix and Micron Technologies. Rather than building new factories, Samsung can secure enough chips via cross-licensing deals with them,” said a fund manager at a U.S.-based investment bank in Seoul.

Its earlier investments in the 17th processor assembly line and the U.S. plant were aimed at supplying processors to major clients such as Apple.

“Samsung’s factory in Xian will be tasked to sell NAND chips to be used in corporate servers and to leading technology solution majors such as IBM and Apple,” said a Samsung source asking not to be identified.

The company’s in-house solid-state drives with flash chips are used in Apple’s MacBook Air, said the suppliers.

“Samsung will continue to improve semiconductor earnings as it gains more share in non-memory areas including foundries and processors. The company will enhance earnings from NAND as the market continues to grow rapidly, powered by smartphones and solid state drives. In addition, the company plans to improve DRAM margins and share as the DRAM industry moves towards a profitable oligopoly,” said Sanford C. Bernstein in a recent note to clients.

SIA reports semi sales up

http://news.techeye.net/chips/sia-reports-semi-sales-up

According to the latest statistics from the Semiconductor Industry Association (SIA), there has been a six percent quarterly boost in sales, topping the expected industry forecast.

Quarterly sales reached $74.65 billion for Q2 2013, up from the first quarter's $70.45 billion. The SIA claims this is the largest quarterly increase in three years. Global sales for June 2013 were $28.8 billion, a 2.1 percent increase compared to the same time last year and 0.8 percent higher than May. Sales in the Americas grew 8.6 percent in June 2013 compared to last year.

These were higher than predictions by industry group the World Semiconductor Trade Statistics, which expected quarterly growth of 4.6 percent globally and 3.4 percent for the Americas.

Total year to dates sales were at $145.1 billion, above the WSTS' expected $144.1 billion, and in June were 1.5 percent higher than the same time in 2012.

For the month of June, compared to May, there was sales growth in the APAC region of 0.4 percent and a dismal 0.1 percent in Europe, and a 0.9 percent decline in Japan. But this was still 5.4 percent and 0.8 percent growth for APAC and Europe, respectively.

Though together the results are strong enough, individually some SIA members may have reason to worry. Take Intel - its net profit in the quarter ending July 2013 dipped 29 percent , down 5.1 percent year on year and way below market estimates. AMD, meanwhile, posted a loss.

CEO of SIA, Brian Toohey, commented positively, saying in a statement: "There's no question the global semiconductor industry has picked up steam through the first half of 2013, led largely by the Americas.

"We have now seen consistent growth on a monthly, quarterly, and year-to-year basis, and sales totals have exceeded the latest industry projection," Toohey said, adding that memory products sold particularly well.

How money and markets are shaking up semiconductors

http://www.usatoday.com/story/tech/2013/08/05/semiconductor-industry-minyanville/2618625/

For every dollar they earned in the first half of 2013, Intel and Taiwan Semiconductor Co. spent $1.40 in capital investments. That's a lopsided number, and a sign of how competitive the semiconductor industry has become. At one time, TSMC dominated the independent foundry business, churning out everything from graphics cards to smartphone chipsets. In recent years it has become a three-horse race, with Samsung Electronics and Globalfoundries carving out large portions of the market, and Intel threatening to open things up even further with a move into mobile processors.
Both TSMC and Intel hope that, by throwing enough money at the problem, they can distance themselves from the competition. For Intel, this might be true. "Chipzilla" has a fat wallet, and a position in the PC industry that guarantees a decent return on its investment. TSMC has neither advantage, and may struggle to get ahead in the rapidly evolving mobile industry.
For both companies, costs are rising.
Gartner estimates this growth at 7%-10% annually, and predicts that by 2016, a capex budget of $8-$10 billion will be de rigueur for chipmakers like TSMC. Intel is naturally happy about this, and former CEO Paul Otellini speculated last year that new technologies -- such as 450mm wafers, which are expected to be more cost-effective than today's industry-standard 300mm, and EUV, or "extreme ultraviolet lithography," an up-and-coming technology that Intel hopes will allow it to further miniaturize its processors -- would cut the competition by half. "We've got [a] transition to 450mm [wafers] at some point; we've got a transition to EUV at some point," he said. "Both are going to be expensive, and are going to require scale."
Scale that Intel – which generated $19 billion in cash last year, and holds net working capital of $17 billion – can easily afford. Despite high capital expenditures and soft earnings in the first two quarters, the company still generated free cash flow of more than $4 billion. TSMC, on the other hand, had to tap debt markets to the tune of $3 billion as free cash flow turned negative. With working capital of less than $4 billion, and plans to maintain its current level of capital spending in 2014, the manufacturer is going to accumulate debt quickly. Samsung and Globalfoundries are spending less, but they have deep resources to draw upon, and aren't going anywhere.
TSMC's investments need to pay off soon, and in a big way – but this is a certainty that only Intel can count on. With its virtual monopoly in personal computers, and control over both chip design and production, Intel can force the adoption of new manufacturing technologies. Customers generally want these improvements, and are willing to pay for them. New processors typically account for one-third or one-fourth of the price of a new machine. Notwithstanding the dismal PC market, prices have held steady for both computers and processors, and with sales declines leveling off in the US – a leading indicator – it looks as though Intel's investments will pay off, regardless of its success in smartphones and tablets.
Taiwan Semiconductor faces a tougher road in the consumer device industry. Here, processors generally account for 2%-3% of the final product's retail price, and large improvements often go unnoticed by customers. There's small demand for a high-performance chip, and with long battery life already the norm, competition has focused on price. IDC estimates that smartphone prices have fallen 17% since the beginning of last year, and that's a potential problem for TSMC, which makes $9 on a high-end smartphone but only $4 on a low-end unit. To be practical, new factories need to lower costs – and Nvidia doesn't see this happening. Last year, the long-time TSMC customer complained that the new few generations of fabs will do little to cut costs.
That could end up being a moot point, if supply issues prevent customers from taking advantage of a new technology in the first place. Last year, shortages forced Qualcomm to second source its chips – to have some of them made by an alternative supplier, in this case Samsung. In the second quarter conference call, TSMC CEO Morris Chang was candid about his approach to customers. "We don't always put in the amount of capacity that a customer requests…. We have not and will not always follow the customer's estimates for their capacity need."
This obviates any technological advantage Taiwan Semiconductor might have, by forcing customers to design chips that can be moved between suppliers. TSMC expects to have a 20nm fab ready for mass production next year, but if Samsung and Globalfoundries are still at 28nm – in this industry, smaller is better – then Qualcomm has good reasons to stick with the older technology. TSMC might have solved this problem in the near-term by signing a deal with Apple, but without a change in philosophy, the new client probably won't end up any happier than the previous ones.
It's easy to underestimate the value of a strong balance sheet, or the security of a mature market. Intel can probably buy its way into the future, while Taiwan Semiconductor probably can't. On the other hand, neither one is likely to reinvent the industry through massive capex budgets. As smartphones and tablets continue to fall in price, it will become harder for TSMC CEO Chang's "grand alliance" – the ecosystem of chip designers and independent foundries – to push the envelope on performance, and just as difficult for Intel to compete with them on price. Change is the rule in any market; but it may be that the more the semiconductor industry changes, the more it stays the same.

U.S. Manufacturing Grows At Record Pace

http://www.manufacturing.net/news/2013/08/us-manufacturing-grows-at-record-pace?et_cid=3399825&et_rid=490548696&linkid=http%3a%2f%2fwww.manufacturing.net%2fnews%2f2013%2f08%2fus-manufacturing-grows-at-record-pace

WASHINGTON (AP) -- U.S. factory activity expanded in July at the fastest pace in two years, fueled by surges in new orders, production and hiring The gains show manufacturing is rebounding and should provide a spark to growth in the coming months.
The Institute for Supply Management said Thursday that its index of factory activity jumped to 55.4 in July, up from 50.9 in June. A reading above 50 indicates growth.
A measure of employment rose to its best level in a year, an encouraging sign ahead of Friday's July employment report. And a gauge of production soared 11.6 points to 65, the highest since May 2004.
Stronger growth at U.S. factories could aid a sluggish economy that has registered tepid growth over the past three quarters. And it could provide crucial support to a job market that has begun to accelerate but has added mostly lower-paying service jobs.
Manufacturing had struggled in first few months of the year, held back by weaker global growth and steep government spending cuts. And slower production led factories to slash jobs from March through June.
But those trends have started to reverse. Europe's economies have shown signs of life in recent months. That likely contributed to a healthy gain in U.S. exports in the second quarter.
Businesses also spent more on equipment in the April-June quarter and have boosted orders for four straight months. As those orders are filled, factory output should increase.
Auto sales are also supporting factory output and will likely remain strong this year. July sales figures will also be released Thursday. Auto sales topped 7.8 million in the first six months of 2013, the best first-half total since 2007.
The Federal Reserve will likely take note of the manufacturing gains because the ISM index is one of the earliest signs of how the economy is performing in the second half of the year. Fed policymakers slightly downgraded their assessment of the economy in a statement, but said they expected growth to improve later this year.
The economy grew at a lackluster 1.7 percent annual rate in the April-June quarter, the Commerce Department said Wednesday. That's better than the 1.1 percent rate in the first quarter, which was revised sharply lower. But it's still far too sluggish to quickly reduce unemployment.

The Fatal Shame Of Russia

http://www.strategypage.com/htmw/htlead/articles/20130706.aspx


July 6, 2013: Russian prosecutors have finally completed their investigation and prosecution of those responsible for one of the most notorious cases of military corruption in Russian history: the use of obsolete and counterfeit parts in Russian warplanes built by Russian manufacturers. The last act of this prosecution was to give a suspended sentence to one of the corrupt officials who cooperated with the prosecutors and provided information on who was involved and how the scam worked. It all began in 2007, when Algeria told Russia that it was cancelling the recent $1.3 billion purchase of 28 MiG-29 fighters and returning the ones already delivered. Algeria insisted that there were quality issues and that some of the aircraft were assembled from old parts. At first Russian officials refused to believe the Algerians a year later, and after actually looking into the situation Russia agreed to reverse the sale. The government then bought the 28 MiG-29s from the manufacturer to prevent the MiG Aircraft Corporation from going bankrupt. At the same time the government began an investigation of the aircraft industry. Within two years several aviation company executives were tried and convicted for passing off defective, or used, aircraft parts as new. Many of these parts made their way into MiG-29 jet fighters that were sold to Algeria.
The MiG-29 has been in service for three decades and stocks of Cold War era spare parts are still around, and it was first thought that some were put to use to build the Algerian aircraft. The Algerian MiG-29s were supposed to be "new," but some of their components were definitely not. Some MiG employees were very unhappy with the corrupt practices involving aircraft parts. This sort of crime often extends to parts for airliners. The MiG employees felt personally responsible for any defective aircraft leaving their plant and didn't want to be flying in an airliner containing fraudulent parts either. Russian prosecutors, already involved in an anti-corruption program underway for several years, jumped on the allegations and quickly found senior executives presiding over widespread fraud in the aircraft components industry. Some of these officials managed to avoid jail but not because they agreed to cooperate. But several others did go to prison and lost their personal wealth to pay heavy fines.
The publicity this scandal received caused the government to look more intently into the counterfeit or defective aircraft parts situation. Russian aviation officials were alarmed when, upon inspecting 60,000 aircraft parts, they found that nearly a third of them were counterfeits. While most of the substandard fake parts came from neighboring countries, many were made in Russia. China wins first place when it comes to stealing technology and producing counterfeit goods, but Russia is solidly in second place, turning out about a third as many counterfeit goods as China. Russia's neighbors, many former parts of the Soviet Union, have the same bad habits. But Russia and China together produce about 80 percent of counterfeits. Using old and now substandard parts was just one variation on the crime of selling bad (cheap) parts as good (much more expensive) stuff.
Western nations would like to get both Russia and China to crack down on the counterfeiting. That has not been easy. In both countries the counterfeiting is a multi-billion dollar a year industry, run by guys who know how to bribe the right politicians. The counterfeiters have another incentive to keep the prosecutors at bay, counterfeiting kills. Phony medicines and aircraft engine parts have both been linked to deaths in Africa and Asia, where the imitation goods are often sold. If brought to justice, Chinese and Russian counterfeiters would likely be executed.

Shortages Surface in NAND Flash

http://chipdesignmag.com/display.php?articleId=5164

By Mark LaPedus

Spot shortages - and possible price increases - for NAND flash have suddenly surfaced in the market amid recent production cuts by major memory suppliers.
The shortfall in NAND emerged this week, when solid-state drive (SSD) vendor OCZ Technology Group Inc. lowered its quarterly forecast. OCZ disclosed it could not obtain enough NAND parts for its SSDs.
Other OEMs are expected to see similar NAND shortages in the market, especially small- to mid-sized companies with no secure source of supply. On the other hand, Apple may be able to get an ample supply of parts.
The NAND shortfall is somewhat predictable. Micron, Samsung, SK Hynix and Toshiba have recently cut NAND production amid lackluster demand.
Besides supply for NAND, there are also some pricing issues for these parts. Prices for NAND hit $0.31/GB in June, but they went back up to $0.36/GB in August, according to Jim Handy, an analyst with Objective-Analysis, a research firm.
“We believe ASPs thus far in the quarter have been flattish versus the significant declines in 1H ‘12. Both 64-Gbit MLC and 32-Gbit MLC are declining flat to 5-7% thus far in the quarter,” added Vijay Rakesh, an analyst with Sterne Agee.
OCZ feels the pinch
Meanwhile, at OCZ, the shortfall of NAND impacted the company’s  Vertex and Agility line of SSDs. OCZ itself expects preliminary revenue for the second fiscal quarter of 2013 to be approximately $110 to $120 million, compared to the previously guided revenue range of $130 to $140 million. This preliminary revenue range compares to $113.6 million for the first fiscal quarter of 2013 and $78.5 million for the second fiscal quarter of 2012.
"Despite achieving bookings in excess of our expectations for our second fiscal quarter, we were not able to meet our previously stated revenue guidance due primarily to constraints in NAND flash supply," said Ryan Petersen, CEO of OCZ Technology.
“OCZ is not the only company that is affected by the supply shortages,” he said during a conference call. "While we believe that the situation will resolve itself, subject to market conditions, we plan to hasten our transition to new process nodes in order to help ease these supply constraints."
Hans Mosesmann, an analyst with Raymond James & Associates, said OCZ’s NAND shortfall involves select parts. “The shortages were primarily in 25nm MLC or consumer focused NAND, which OCZ partially resolved by using SLC or enterprise NAND at the expense of gross margins. Despite using SLC, the company depleted its inventory and expects to be 30-50% short on its NAND orders through November,” Mosesmann said.
OCZ blamed the problems on recent NAND production cuts at Micron, Samsung, SK Hynix and Toshiba. But OCZ may have also dropped the ball, as the company apparently failed to secure a steady source of NAND parts.
“The company's lack of a strategic NAND deal is clearly being negatively felt as volatility in the NAND market continues to challenge independent vendors, especially a vendor focused on a high-volume business through the channel,” said Alex Kurtz, an analyst with Sterne Agee.
“Looking forward, visibility remains challenging on the NAND front as OCZ believes the reported iPhone 5 launch is sapping supply out of the market and that transitioning to the Barefoot 3 controller, which uses a lower node flash with better availability, will also help address this issue,” Kurtz said.
The Barefoot 3 is a SSD controller, based on the SATA-2 interface. It was designed by Indilinx Co. Ltd. In 2011, OCZ acquired Indilinx, a fabless provider of flash controller semiconductors and firmware for SSDs.

ARL-Funded Research Leads to Serendipitous Discovery of Optical Scanning Method

Global IC Trading Group has this technology, DTEK, in-house.

http://www.militaryaerospace.com/news/2013/04/02/arl-funded-research-leads-to-serendipitous-discovery-of-optical-scanning-method.html

April 2, 2013

By Targeted News Service

The U.S. Army Research Laboratory issued the following news:
The U.S. Army Research Laboratory's (ARL), Army Research Office's (ARO) initial concept of exploring DNA as a tagging and tracking method has led to the discovery of an optical scanning technology that can identify counterfeit electronic components before they are integrated into Army materiel.
The technology also provides the capability to identify and track materiel in the absence of external tags or barcodes.
This timely discovery will help address a significant challenge within the Army and DoD: the presence of counterfeit electronic components in military equipment.
A 2011^'2012 investigation by the Senate Armed Services Committee (SASC) found overwhelming evidence that international counterfeiters are taking old, sub-standard electronic components and altering them to appear as new, brand-name parts that are then integrated into DoD munitions, aircrafts, sensors, and other electronic devices.

SASC chairman, Sen. Carl Levin, stated that the "flood of counterfeit parts, overwhelmingly from China, threatens national security, the safety of our troops, and American jobs."
Although the SASC uncovered the sources of many of these counterfeit parts, an ongoing challenge is to consistently and reliably identify these forgeries and prevent their integration into DoD and Army materiel.
The SASC released a report in May 2012 emphasizing this challenge by documenting "failures by defense contractors and DoD to report counterfeit parts and gaps in DoD's knowledge of the scope and impact of such parts on defense systems."
This investigation led to an amendment, signed by President Obama, to stop the integration of counterfeit electronic parts into DoD systems and to address weaknesses in the supply chain.
An ARL-ARO Small Business Innovation Research (SBIR) topic has led to a novel technology that will help address many of the challenges noted in the SASC report.
The SBIR topic, conceived by scientists from ARL-ARO and the Natick Soldier Research, Development and Engineering Center in 2007, called for a study of the properties of DNA to determine if this information-rich natural polymer could be used in a new barcoding system that would provide enhanced security relative to conventional tracking methods.
A California-based company, ChromoLogic, LLC, was contracted to explore this SBIR topic.
ChromoLogic developed a tag with a biomimetic barcode that can be aligned in the proper order and decoded by an optical reader, akin to how the sequence of a DNA molecule can be read.
This biomimetic tag and reader system has robust information-storage capabilities that are unambiguous and readily authenticated, with no reagent or material exchange between the tag and reader.
This technology will provide a capability that complements ongoing research led by the Edgewood Chemical and Biological Center, which focuses on embedding DNA in printed barcodes, which can be transferred to a reference test ticket to verify authentic military materiel.
Interestingly, as is often true for high-risk, high-payoff research, this project led to an unexpected discovery that may have an even greater impact than was initially conceived.
The research team, led by principal investigator Dr. Naresh Menon and project manager Leonard Nelson, discovered that the optical scanning technology developed to decode the biomimetic tag is capable of mapping the intrinsic surface of electronic components, providing a type of fingerprint to distinguish authentic or counterfeit circuits.
Nelson stated that when "illegitimate electronic components' surfaces are altered, the counterfeiters do it in a way that is very difficult for human observers to detect...believe it or not, the fake ones look better than the real ones."
Given that counterfeit electronic components are forged chiefly by altering their surface layers, this discovery provides a powerful method for screening integrated circuits based on their intrinsic surface patterns, which can be scanned in as little as one second.
ChromoLogic has developed this surface-scanning technology into the DTEK system, which provides quantitative optical inspection of integrated circuits.
Dr. Stephanie McElhinny, ARL-ARO program manager for the ChromoLogic project, noted that the development and use of this optical scanner for detecting surface fingerprints "is an incredible example that illustrates how research discoveries can guide a project to an outcome that would never have been predicted...and serves as a strong argument for the continued support of high-risk research to enable new Army capabilities."
The DTEK system recently began evaluation through multiple electronics manufacturers, and the technology has already been adopted by the NASA Jet Propulsion Laboratory and Boeing.
McElhinny and ARO Military Deputy Lt. Col. Timothy Warner attended a site demonstration of the DTEK system at Boeing's Huntington Beach location in 2012.
The ARL-ARO representatives were shown the quality assurance process at Boeing and the role that the DTEK system will play in authenticating circuits for use in DoD contracts.
According to Warner, the importance of this technology is evident "when one considers the implications of an illegitimate circuit making its way into Army materiel--it could cause a 10-fold reduction in service life, or worse--it could cause the failure of an aircraft or targeting system while in operation, putting lives at risk."
The DTEK system, used as part of a comprehensive counterfeit-mitigation process, may reduce the influx of forgeries into Army materiel and improve the reliability of mission-essential equipment used by the Soldier.
The DTEK optical scanning technology is also capable of identifying and tracking materiel in the absence of external tags or barcodes.
The research team is working with Picatinny Arsenal and the Aviation and Missile Research, Development and Engineering Center to develop a hand-held scanner that can be used for covert tracking and management of high-value Army commodities.

Global semiconductor inventories down 5% in Q4

http://www.totaltele.com/view.aspx?ID=480072

Intel cut its stockpiles by $585 million in the quarter, according to IHS.

Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc. The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%. "Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker. Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter. Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter. Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Intel cut its stockpiles by $585 million in the quarter, according to IHS.

Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc. The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%. "Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker. Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter. Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter. Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Intel cut its stockpiles by $585 million in the quarter, according to IHS. Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc. The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%. "Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker. Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter. Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter. Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Intel cut its stockpiles by $585 million in the quarter, according to IHS. Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc. The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%. "Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker. Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter. Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter. Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Intel cut its stockpiles by $585 million in the quarter, according to IHS. Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc. The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%. "Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker. Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter. Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter. Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Global semiconductor inventories during the fourth quarter declined more than expected from the third quarter, led by a 11% reduction by market leader Intel Corp., according to IHS Inc.

The research company said the days of inventory for semiconductor suppliers declined 5% in the fourth quarter, faster than the 1.5% decline initially forecast. Meanwhile, the inventory value fell almost 5%, more than the originally projected 3%.

"Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS.
No. 1 semiconductor supplier Intel was the most aggressive, cutting its stockpiles by $585 million, the largest decrease on a dollar basis of any chipmaker.

Advanced Micro Devices Inc. cut its inventory by $182 million, or 25% from the third quarter, while STMicroelectronics N.V.'s inventory value was reduced by $131 million, or 9% from the prior quarter.

Meanwhile, Qualcom Inc. added $247 million of inventory, a 24% rise from the third quarter.

Qualcomm has benefited from the rising popularity of smartphones. Despite a trend toward internally designed processors, smartphone makers like Apple Inc. and Samsung Electronics Co. have continued to use Qualcomm's modem chips, which employ the next-generation wireless technology LTE.

Texas Instruments Raises Lower End of Sales, Profit Forecasts

http://www.bloomberg.com/news/2013-03-07/texas-instruments-raises-low-end-of-forecasts-for-sales-profit.html

Texas Instruments Inc. (TXN), the largest maker of analog chips, raised the lower end of its forecasts for first-quarter sales and profit, as customers increase orders ahead of a projected rebound in electronics demand.

Earnings will be 28 cents to 32 cents a share on sales of $2.8 billion to $2.91 billion, the Dallas-based company said yesterday in a statement. On Jan. 22, Texas Instruments said profit would be 24 cents to 32 cents on revenue of $2.69 billion to $2.91 billion, and analysts on average predicted 29 cents and $2.81 billion, according to data compiled by Bloomberg.
Texas Instruments has thousands of customers across the electronics industry, from radar-equipment suppliers to microwave-oven makers, meaning its earnings are one of the broadest proxies for the health of the chip market. After running down inventories last year, some companies have resumed buying parts to ensure they aren’t caught short when demand returns, said Tore Svanberg, an analyst at Stifel Nicolaus & Co.
“Order rates are still improving, from obviously a low level,” said Svanberg, who recommends buying the shares. “The industrial market and especially automotive is showing some strength. We’re still very early in the process.”
Texas Instruments shares, which are up 14 percent this year, rose less than 1 percent to $35.20 at yesterday’s close in New York. Many stocks across the analog-chip industry have gained this year on optimism that orders will pick up starting in the second quarter.

Industrial Applications

“In general, the stronger demand environment has continued,” Texas Instruments Vice President Ron Slaymaker said on a conference call with analysts. “Quarter-to-date orders have been growing strongly.”
While demand remains weak for chips used in personal computers and phone-systems equipment, orders are increasing for chips used in industrial applications, Slaymaker said.
In the first quarter of 2012, profit was 22 cents a share on sales of $3.12 billion. Texas Instruments is one of the few companies that still give regular midquarter updates on their progress toward earnings targets.
The company increased its quarterly dividend by 33 percent and added $5 billion to its stock-repurchase program last month. Texas Instruments has an indicated dividend yield of 3.2 percent, according to data compiled by Bloomberg, among the highest in the semiconductor industry.
The chipmaker is in the process of exiting the market for digital chips used in smartphones and tablets, and said on Nov. 14 that it would cut 1,700 jobs as part of that shift. The staff reduction was estimated to pare expenses by about $450 million a year by the end of 2013, Texas Instruments said at the time.

RoHS 2 Creeps Up on the Industry

http://globalpurchasing.com/features/rohs-2-creeps-industry

Gary Nevison and the folks in the element14 community are doing their part to educate the electronics community about the new requirements of RoHS 2, an update to the European Restrictions on Hazardous Substances (RoHS), which took effect January 2. Element14 launched an updated e-book detailing the new requirements, and Nevison may soon be on the lecture circuit delivering that message to suppliers, customers, and others selling electronic components and finished products in Europe. Nevison is head of legislation for Premier Farnell, element14’s parent company, and he says the RoHS update is taking many in the industry by surprise.
“I think there are many areas of industry probably not prepared for this,” explains Nevison, pointing to new requirements for designating products with a CE mark, which means they conform to European standards, in particular.
The new requirements are part of a revision to the RoHS directive, known as the RoHS recast that began in 2010. The new requirements update the original 2006 directive, which banned the use of six substances—lead (Pb), mercury (Hg), hexavalent chromium (Cr (VI)), cadmium (Cd), polybrominated biphenyl flame retardants (PBB), and polybrominated biphenyl ether flame retardants—in eight categories of electrical and electronic equipment. RoHS 2, as it is known, broadens the scope of the directive to include additional products and product categories and makes RoHS compliance a CE directive, placing more data collection work on companies throughout the supply chain.
Some industry watchers say RoHS 2 has fallen off of many companies’ radar screens because it was a much bigger deal due to its newness in 2006. Quite simply, companies have been through it once, are largely familiar with the issue, and have procedures in place to address it. Further complicating the issue for American distributors is local legislation on counterfeit components and conflict minerals that is drawing more immediate attention. But Nevison and others caution against putting RoHS 2 on the back burner as environmental concerns become more acute worldwide and the regulatory climate heats up.
“Make no mistake about it, the authorities will be on this. They will come to check you for these technical files,” Nevison says, pointing to the need for documentation that products comply with European Union directives. He adds that each European state retains the responsibility for enforcing the rules under RoHS 2. “These are the facts. It’s getting more stringent rather than the other way around.”
More Products, More Documentation
Identifying products with a CE mark, which stands for Conformité Européenne (or European Conformity), ensures that they comply with EU regulations. The CE Mark directive places more data collection work on distributors and importers as they seek to verify RoHS compliance, Nevison explains.
“The main impact on industry is the inclusion of RoHS as a CE directive,” says Nevison. “[Companies] need to supply lots and lots of new documentation. The CE Mark is the biggest challenge to us at this point in time.”
In most cases, manufacturers are responsible for documentation and CE Mark designation, but in some instances the responsibility falls to the distributor or importer—especially when the distributor is selling the product under its own brand. The issue is further complicated because the CE Mark now applies to low-cost development boards, which is a sticking point for many manufacturers.
“I think some companies in all honesty didn’t think they needed to comply, but they do,” says Nevison, pointing to differing views over how development boards or kits are classified. “I think what deceives people is that these small, open PCBs don’t look like a piece of finished equipment. But as soon as they’re put in a PC to make them work, if you like, they are classed as finished equipment.”
Development boards that were already on the market before January 2, 2013, do not need to be remarked. RoHS 2 applies to any development boards or kits placed on the market after that date. Nevison says Premier Farnell has been in touch with all of its development kit suppliers to determine their compliance, to varying degrees of success.
“Some say they are in compliance, some say they’re working on it, and some haven’t done anything,” Nevison explains, adding that the issue may lead to distributors dropping certain products.
The other key issue is the broadened scope of the directive itself. RoHS 2 now includes products that depend on electric currents or electromagnetic fields for at least one of their functions. Previously, the directive applied only to products that depended on electric currents or electromagnetic fields to work properly. This widens the field of covered products. Nevison points to two examples: a gas stove with an electric clock and a gas lawnmower with an electric ignition, neither of which was covered under RoHS 1. The gas stove is in scope as of January 2, and the lawnmower will be in scope as of July 2019.
“So it will capture some different products,” Nevison explains. “And it’s worth saying there are lots and lots of exclusions this time. Those will be reviewed by July 2014, and they may even be extended.”
Nonetheless, RoHS 2 has a number of phase-in dates for new product categories. Medical devices and monitoring and control equipment must be in compliance after July 2014, with in vitro diagnostics coming into scope in 2016 and industrial monitoring and control instruments in July 2017. What’s more, RoHS 2 adds an eleventh category in July 2019 when all electrical and electronic equipment not captured in categories 1 to 10 of the directive come into scope.
Nevison emphasizes that revisions are ongoing, noting that the commission overseeing the RoHS directive plans to review more substances next year while also reviewing whether or not further exclusions should be granted.
Robin Gray, chief operating officer for the Electronic Components Industry Association, which represents manufacturers, distributors, and independent representatives in the electronics industry, says the modifications to the RoHS directive are part of a larger trend toward increased regulation worldwide. He points to pending RoHS legislation in China, new U.S. rules surrounding conflict minerals sourcing, varying state-level bans on certain chemicals in the United States, and the simmering concern over the supply of rare earth minerals commonly used in electronics equipment.
“I think the industry’s going to see more and more regulation—environmentally or otherwise,” says Gray. “The other issue is that so much of electronics uses rare earth minerals, and the supply of that is relatively limited—and some very limited. If you’re going to ban certain metals or certain chemicals, how viable are certain components for the long term? You’ve got to find new technologies, processes, or chemical formulas, or you’ve got to be willing to make a trade off. I think this is only going to become more of an issue.”

DRAM contract prices set to continue rising

http://www.digitimes.com/news/a20130128PD217.html

With some DRAM vendors reportedly quoting their 4GB DDR3 modules at more than US$20, higher than the current contract price level, contract prices for commodity memory are set to rise through February, according to industry sources.

Contract quotes for 4GB DDR3 modules came at between US$17 and US$17.50 in the first half of January, DRAMeXchange data shows. A combination of supply-side factors, such as a cutback in production of PC DRAM and more capacity allocated for mobile DRAM and server-use memory, lifted the early January quotes by almost 10%.

DRAM contract prices will continue their upward trend in February, driven mainly by the supply side, the sources indicated. Thanks to the price rally, suppliers that remain in the red will have a good chance of returning to profitability in 2013, the sources believe.

Inotera Memories, for instance, is expected to swing to profits in the second quarter of 2013, the sources said. Inotera reported net losses of NT$3.72 billion (US$128 million) for fourth-quarter 2012, which marked the 12th straight quarterly loss for the company.

Inotera has revealed plans to shift a majority of its total wafer starts to 30nm process technology by April, and the ramp-up will help improve company cost structure.

Fellow DRAM firm Nanya Technology recently remarked that the company's revised partnership with Micron Technology will help significantly reduce its R&D expenses. The firm is also looking to complete its technology transition to a 30nm process by the end of the third quarter to further lower its manufacturing cost.

Nanya is set to gradually be phased out from the commodity DRAM chip market with plans to discontinue supplying commodity chips to clients by mid-2013., the firm disclosed.

Nanya generated net losses of NT$8.88 billion in the fourth quarter of 2012 - also the 12th straight quarterly loss for the company.

Semiconductor inventory reaches record levels

Revenues to decline in Q1, rebound expected by Q3

http://news.techeye.net/chips/semiconductor-inventory-reaches-record-levels

 

Chip inventories reached record highs near the end of 2012, and according to IHS iSuppli, semiconductor revenue will decline in Q1, prompting new concerns about the state of the market.
Overall semiconductor revenue is expected to slide three percent between January and March 2013, on top of a 0.7 percent decline in Q4 2012. What's more, inventory reached record levels in Q3 2012, amounting to 49.3 percent of revenue, more than at any point since Q1 2006. IHS iSuppli believes the uncomfortably high level of inventory points to the failure of key demand drivers to materialise.
The PC market remains slow and hopes of a Windows 8 renaissance have turned into a nightmare. Bellwether Intel saw its revenue drop three percent in Q4, with profit tumbling 27 percent, and the trend is set to continue. AMD is expected to announce its earnings Tuesday afternoon and more gloom is expected across the board. The only bright spot in an otherwise weak market is TSMC, which quickly rebounded after posting the lowest revenues in two years a year ago. TSMC now expects to see huge demand for 28nm products in 2013 and many observers point to a possible deal with Apple.
In addition, TSMC plans to invest $9 billion in capital expenditure in 2013, and it will likely spend even more in 2014, as it moves to ramp up 20nm production. However, Intel's plans to increase capital spending to $13 billion, up $2 billion over 2012 levels, have not been welcomed by analysts and investors. Unlike TSMC, Intel is not investing to increase capacity in the short term, it is making a strategic bet on 450mm wafer technology, which promises to deliver significantly cheaper chips compared to existing 300mm wafers. However, 450mm plants are still years away.
TSMC's apparent success has a lot to do with high demand for smartphones and tablets, which are slowly eating into the traditional PC market. Semiconductor shipments for the wireless segment were expected to climb around four percent in 2012 and positive trends were visible in analog, logic and NAND components. However, the mobile boom can't last forever, and we are already hearing talk of "smartphone fatigue" and "peak Apple".
IHS iSuppli estimates the first quarter of 2013 will see growth in industrial and automotive electronics and other semiconductor markets will eventually overcome the seasonal decline, so a rebound is expected in the second and third quarters.
Semiconductor revenue could grow by four percent in the second, and nine percent in the third quarter. However, the assumptions are based on a wider economic recovery, which is anything but certain at this point. If demand evaporates, semiconductor suppliers could find themselves hit by an oversupply situation, leading to more inventory write-downs throughout the year.


Read more: http://news.techeye.net/chips/semiconductor-inventory-reaches-record-levels#ixzz2IkDvMFYT

Intel Girds for Third Quarterly Sales Decline on PCs Slump: Tech

http://www.bloomberg.com/news/2013-01-17/intel-fourth-quarter-profit-tops-estimates-on-slower-production.html

Intel Corp. is girding for a third straight quarter of falling sales, highlighting the chipmaker’s struggle to adapt in a world swiftly embracing mobile devices and leaving behind the personal-computer industry it dominates.

Sales in the current period may decline, Intel said yesterday, after reporting a 3 percent drop last quarter. That followed a 5 percent slide in the September quarter. The shares fell the most since May 2010.
Intel plans to spend about $13 billion on new plants and equipment in 2013, more than analysts had projected, to help it cater to growing demand for handsets and tablets. The effort won’t quickly help the Santa Clara, California-based company compensate for diminishing demand for PCs.
“They are definitely coming from behind and their market is moving away from them,” said Patrick Wang, an analyst at Evercore Partners. “They are trying to breathe some life into the PC market.”
Intel, whose microprocessors run more than 80 percent of the world’s PCs, is struggling as that market faces a second straight year of lower sales, according to analysts at JPMorgan Chase & Co. In mobile chips, Intel is playing catch-up to Qualcomm Inc.
Intel yesterday reported sales of $13.5 billion last quarter, matching the average prediction of analysts, according to data compiled by Bloomberg. Net income fell to $2.47 billion, or 48 cents a share, compared with 45 cents projected by analysts.
“I don’t think things get better in PCs,” said Cody Acree, an analyst at Williams Financial Group in Dallas. For growth in the PC market this year, “you’re talking zero to how badly are you down.”

2013 Projections

Intel fell 6.3 percent to $21.25 at the close in New York, the steepest decline since January 2009. The stock dropped 15 percent last year, compared with a 13 percent gain in the Standard & Poor’s 500 Information Technology Index. Advanced Micro Devices Inc., Intel’s main competitor in PC processors, declined 10 percent to $2.46.
Intel’s sales this year -- the last for Chief Executive Officer Paul Otellini -- will barely budge. First-quarter revenue will be $12.7 billion, plus or minus $500 million, the company said. That compares with an average analyst projection of $12.9 billion. Gross margin will be about 58 percent. A year earlier, sales were $12.9 billion, while gross margin was 64 percent.
For 2013, Intel said revenue will increase by a “low single-digit percentage.” Analysts had predicted that sales would rise about 2 percent to $54.4 billion this year.
Otellini plans to retire in May, and the company is searching for his successor.

‘Gigantic Number’

To help it meet demand for chips, Intel said it will spend $13 billion, plus or minus $500 million, on new equipment and new plants -- also known as fabs -- in 2013.
That number, which compares with an average analyst estimate of $9.99 billion, raises questions about how the chipmaker will be able to fund such an expansion while maintaining dividend and share buybacks from the cash it generates, said Daniel Berenbaum, a New York-based analyst at MKM Partners.
“It’s a gigantic number,” said Berenbaum. “It’s not like their fabs are full now.”
About $2 billion of the increase in spending this year will go to building a research facility for a forthcoming type of plant that processes 450-millimeter silicon wafers. When that goes into production, it will help increase the number of chips the company can get from each production run.

Data Center

Under Otellini, Intel has been able to compensate for part of the PC malaise by catering to buyers of servers, which outfit data centers. Revenue in Intel’s data center group rose 4 percent to $2.8 billion in the recent period, compared with a 6 percent decline in its main PC-chip business.
Intel expects demand from companies to drive a return to low-double-digit percentage growth for the data-center business, Chief Financial Officer Stacy Smith said.
Intel has “modest” expectations for growth in the PC industry, and is betting new chips going into tablets and slimline laptops it calls Ultrabooks will catch the attention of consumers.
That will translate into reinvigorated demand in the second half of the year, Smith said in an interview.
“We expect some unit growth in the back half of the year and into 2014,” he said. “We’re putting in the factory capacity to support that.”

Margin Compression

While Intel has won some orders from phone makers for its chips, that business won’t “move the needle” for the whole company until next year, when its customers bring handsets featuring so-called long-term evolution high-speed data links to market, Smith said.
PC shipments fell 4 percent in 2012 and will slide a further 1.5 percent this year, JPMorgan analysts estimate. Tablet unit sales, by contrast, rose 72 percent last year and will surge 54 percent this year, they project.
Fourth-quarter gross margin, the percentage of sales left after subtracting production costs, was 58 percent, compared with an average analyst estimate of 57 percent. A year earlier, gross margin was 65 percent.
Intel’s results kick off two weeks of earnings reports from the largest U.S. technology companies. Because its chips power the majority of the world’s PCs, investors watch Intel’s earnings for a broad indication of demand for desktop, server and laptop computers.
The company’s biggest customers are PC makers Hewlett- Packard Co. and Dell Inc., which together contribute more than 30 percent of revenue, according to a Bloomberg supply-chain analysis.

DRAM contract prices soar in 1H January

http://www.digitimes.com/news/a20130117PD218.html

Contract prices for DRAM have risen about 10% in the first half of January, with 4GB modules quoted at as high as NT$17.50, according to DRAMeXchange.

Early January contract quotes for 2GB and 4GB DDR3 modules averaged US$9.75 and US$17.25, respectively, up 8.3% and 9.5%, DRAMeXchange disclosed. Average prices for 2Gb chips came to US$0.92 during the period, rising 10.8%.

Japan- and Taiwan-based DRAM makers continue to cut back their production of PC DRAM, while Korea-based vendors shift more PC DRAM capacity to non-PC memory chips, industry sources revealed. With the overall output slowing down, prices for commodity memory have gone up recently, the sources said.

Supply-side factors will continue to boost prices for PC DRAM until early February, the sources predicted. And if demand picks up, prices are expected to stage a solid rally, the sources indicated.

At the spot market, prices for 2Gb DDR3 chips have rebounded to US$1.20-1.30 recently, the sources observed.