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Memory Shortages Mark the Start of 2017

Only two months in, 2017 has already been marked by shortages that experts expect to last into mid-year. Memory has been a special challenge all over the supply chain as evolutions in chip technology collide with demand to leave major manufacturers running short.

A shift to 3D NAND, which requires smaller chip architectures that deliver higher performance, has caused production challenges due to the complexity of the work. At the same time that NAND technology has started to evolve, demand has risen for the NAND memory chips that go into computers and PCs, resulting in supply bottlenecks and causing a worldwide shortage of the commodity.

Samsung has seen delays due to this shortage, with its 850 Pro 4TB SSD held up as the company has been compelled to budget its NAND supply for its more in-demand, affordable products. SK Hynix is also feeling the effects of the shortage as a result of its recent success, with 4Q2016 reported as its best quarterly profit in nearly two years. The momentum the company is carrying with it into 2017 is double-edged, though, as both servers and mobile devices are demanding more processing power and SK Hynix now faces the pinch of that demand. The company is readying for potential shortages of both NAND and DRAM through the first half of the year by maintaining tight inventory levels.

In the current market conditions, we can expect to see elevated prices for the next 3-4 months as supplies stay tight and demand holds steady (or even ramps up, as with planned NPIs), especially for the servers that power cloud computing and other growing sectors.

Many manufacturing lines and purchasing departments are strained right now. But distributors can offer significant support in navigating an uncertain market to track vital parts at manageable prices.

“The way to support our customers during situations like a grueling shortage is to be as proactive as possible,” said Senior Procurement Specialist Natalie Barela, a key member of our purchasing team here at Smith. “Upping the hours we spend working with them boosts the chances we can hunt down the parts they need.”

Working across time zones is a key part of this strategy, to make sure we have nets cast in all global regions and to be ready – at a moment’s notice – to prep parts to go out the door. Swiftness as soon as an order is approved by a customer means that target pricing – and scarce components themselves – are less likely to disappear.

“It matters that we deliver for our customers, especially at times when shortage is threatening their lines with shutdown,” said Natalie. “So even at home, in the middle of the night, we set our alarms and stay ready. It’s a tough market right now, and we’re all in this together.”

Additionally, maintaining strong relationships with a broad network of trusted suppliers supports the swiftest sourcing, with vendors offering information and opportunities based on a close bond and years of doing business together.

From distributors and their supplier networks to the manufacturers feeling the worst of the strain, relationships make a key difference in navigating shortages – and Smith’s sales and purchasing reps are ready to help 24 hours a day, worldwide. Don’t hesitate to reach out to us if you could use help managing shortage situations.

Keep up with Smith’s Market Blog and our Twitter (@smithweb) for more industry news and analysis.

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