PURCHASING HOTLINE

Late-breaking news and analysis for purchasing/supply chain management professionals

By -- Purchasing, 6/15/2000

Good news for microprocessor and flash memory buyers.

Good news for microprocessor and flash memory buyers. Intel is investing $2 billion in new processor capacity at its Rio Rancho, N.M., fab. The investment will be in lines that use 300 mm wafers and 0.13 micron process technology. The investment will add 1 million s.f. to the existing facility. The fab manufactures flash memory and Celeron, Pentium III Xeon processors. The new capacity will go on line in 2002.

If you're having trouble sourcing flash memory, one reason is the growth of digital cameras.

If you're having trouble sourcing flash memory, one reason is the growth of digital cameras. The small cameras use flash chips to store pictures. Demand for digital cameras is growing as prices drop. In 1999, worldwide digital camera shipments exceeded 6.5 million units. That number will increase dramatically to 41.6 million by 2004. For more on consumer electronics, see p. 51.

IBM will make Compaq Computer's line of Alpha copper microprocessors.

IBM will make Compaq Computer's line of Alpha copper microprocessors. The high-performance chips are used in servers. IBM has developed advanced copper chip technology that boosts the chip's semiconductors' performance. IBM may eventually make Alpha chips silicon-on-insulator (SOI) technology, which requires less power and results in better performance.

Chip makers are adding new capacity.

Chip makers are adding new capacity. Evidence: The semiconductor equipment book-to-bill ratio increased to 1.42 in April, according to Semiconductor Equipment and Materials International. That means for every $100 of new semiconductor equipment that was shipped, equipment companies received $142 in new orders. The three-month average of orders received in April 2000 was $2.7 billion, 94% above the $1.4 billion posted the year before.

Demand for synchronous transfer mode (ATM)-based wide area network (WAN) is growing.

Demand for synchronous transfer mode (ATM)-based wide area network (WAN) is growing. Sales increased to $873.4 million in the first quarter representing 51% growth over Q1 1999, according to Cahners In-Stat. For the year the ATM WAN switch market will grow 45% to $4.1 billion. The rapid growth of broadband services and voice over Internet will drive ATM WAN switches.

Watch for a surge of high-tech manufacturing in China

Watch for a surge of high-tech manufacturing in China as a result of pending trade liberalization. Passage of the trade pact was called "priority one-bar none" by a high-tech coalition. Tariffs would be eliminated entirely over a five-year period on many technology products, including computers. Much manufacturing, in areas such as molds and dies, has already migrated to China-from Taiwan-not the USA.

Check out new servers from IBM that fill a midrange niche.

Check out new servers from IBM that fill a midrange niche. Pricing is in the $19,000 to $68,000 range. The servers include some high-end technology, such as a processor that monitors vital functions.

What's the most important lesson from the viruses that attacked computer systems last month?

What's the most important lesson from the viruses that attacked computer systems last month? Back up hard drives. That's the same admonition given to computer users since day one, but it's amazing how few follow the advice, particularly telecommuters. The "I Love You" virus devoured jpeg and various multimedia files. The second most important lesson may be the requirement for insurance to cover damage caused by powerful viruses.

Recall alert:

Recall alert: Intel will replace motherboards that have a defective memory translator hub (MTH) component that translates signals from sdram memory to the 820 Chipset. Products shipped before November 1999 are not affected.

How wired is your factory?

How wired is your factory? CIMs, or computer-integrated manufacturing systems, are not new, of course. But key players are preparing high-capability systems that guarantee widespread impact. Example: Brown & Sharpe will roll out sophisticated software that electronically links quality-measuring equipment, such as coordinate measuring machines, to computer-aided design drawings.

Purchasing pros will need to bone up even more on networking equipment options as a result.

Purchasing pros will need to bone up even more on networking equipment options as a result. Air Products, for example, picked Extreme Networks (Santa Clara, Calif.) to link electron microscopes with PC networks.

Keep an eye on a widespread Teamsters strike as a bellwether

Keep an eye on a widespread Teamsters strike as a bellwether of freight labor trends. Both sides-drivers and Overnite Transportation Co.-are getting hammered in the seven-month representation battle, and both refuse to retreat. It's James P. Hoffa's biggest test in his first year as president of the Teamsters. Overnite is the largest non-union less-than-truckload carrier in the US. Hoffa runs for re-election next year and is determined to show gains in membership in the core freight business.

Tips on electronics' buying strategies.

Tips on electronics' buying strategies. Purchasing has a new book filled with insights. Electronic Buying Strategies examines such important areas as how to use supplier strengths to improve quality and cost competitiveness; the significance of outsourcing, contract manufacturing and build to order; the role of high-tech buyers in bringing new technology into their firms; the part that distribution plays in cost effectiveness; and the significance of supply-base consolidation. For your copy, send $26.50 plus $2.50 for postage and handling (check or money order) to Purchasing Magazine, P.O. Box 497, New Town Branch, Boston, Mass. 02456. For credit card orders call (617) 558-4348 (Amex, Visa and MasterCard accepted). You can also visit our Bookstore on Purchasing's Web site, www.purchasing.com.

Semiconductor sales increased to nearly $15 billion in March,

Semiconductor sales increased to nearly $15 billion in March, a record amount for a month. Chip sales were up nearly 34 % from March 1999, according to the Semiconductor Industry Association. Flash memory had the highest growth rate at 198% from Q1 1999. Programmable logic increased 78%; DSPs, 53%; application specific MOS logic, 50% and DRAM 33%.

Intel has begun shipping its 933 MHz Pentium III processor.

Intel has begun shipping its 933 MHz Pentium III processor. The chip is designed for mainstream desktops as well as entry-level workstations. The processor has an integrated, high-performance Level 2 cache subsystem that runs at the full speed of the processor core. The chip is in SECC2 and FC-PGA packaging. Price: $744 in 1,000-unit quantities. Intel also has unveiled its upgraded Xeon processor, which runs at 700 MHz. The fastest Xeon chip had been 550 MHz. The new chip, which is targeted for high-end servers, has integrated cache memory so separate cache memory chips are not needed. Cost: $1,177.

Surging demand and higher prices mean the semiconductor market will grow 31% to $222 billion in 2000,

Surging demand and higher prices mean the semiconductor market will grow 31% to $222 billion in 2000, according to a new report by market researcher Dataquest. Strong demand for computers, communications equipment and consumer appliances will continue for the next four years driving chip demand. By 2004, the semiconductor market will reach $320 billion.

Expect domestic energy supplies to slowly increase

Expect domestic energy supplies to slowly increase as higher prices and new technology encourage more production. Newly developed extraction technologies allow deeper drilling in more remote areas.

Keep an eye on rail freight this summer.

Keep an eye on rail freight this summer. Asian imports are still flooding the West Coast, putting pressure on eastbound freight. One port official is telling rail carriers to be prepared for a 15%+ increase in rail demand between now and Labor Day. Smart shippers are booking all-water routes through the Panama Canal.

Researching market price trends?

Researching market price trends? Why not tap into our extensive price database. Purchasing maintains commodity price histories dating back as far as 1980 on five commodity groupings-metals, chemicals, plastics, pulp and paperboard, lumber. Annual subscription price is $125 per commodity group. Subscription provides complete monthly price history and four quarterly updates. Prepay by sending check or money order to Purchasing Magazine, P.O. Box 497, New Town Branch, Boston, Mass. 02456. Samples available: (617) 558-4348. For credit card orders call (617) 558-4348 (Amex, Visa and MasterCard accepted).

Hot new specialty in purchasing is global supply.

Hot new specialty in purchasing is global supply. Bayer just named Hans-Joachim Kogelnik global supply manager for its huge polyurethane business. The Walt Disney Co. named Lawrence Aldridge VP-Global Sourcing, working out of LA. Send new management appointments in your purchasing departments for Purchasing's Who's Who report. Send announcements to rvemmer@cahners.com.

Inflation worries are real.

Inflation worries are real. The push this year on raw materials pricing is one thing. Those will drop when demand sags. More worrisome is the run-up in wages. First-quarter pay and benefits rose at the fastest pace in 10 years. "Labor is going to put even more upward pressure on prices than energy," comments Diane Swonk, chief economist at BancOne, Chicago.

Huge swings in plastics prices are a major burden-and nothing new.

Huge swings in plastics prices are a major burden-and nothing new. Tyco says its bill for polyethylene resins has soared 60% this year. PVC prices have doubled this year, our survey shows. Resin prices have been on a high-stakes roller coaster for 20 years. Sellers and buyers both push hard when they get the upper hand even though both would gain from smoother cycles.

Beware of hype in the tooling buy.

Beware of hype in the tooling buy. Some engineering departments are wasting time and money on so-called "rapid" tooling for pre-production output. Most of these new processes are poorly controlled, leading to inconsistent part quality. Some OEMs, Kodak for one, are moving fast to mushrooming high-speed machining techniques that produce better tools, faster.

Auto producers are pushing e-procurement downstream.

Auto producers are pushing e-procurement downstream. The new automotive trade exchange, dubbed Cosivint, wants tier ones and twos to buy from their suppliers on its system. Cosivint is offering an undisclosed financial incentive for participation. There will be no developments, however, until U.S. and European officials approve the overall concept.