Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Mark Moskowitz with J.P. Morgan.
Mark Moskowitz - J.P. Morgan
Thank you. Good afternoon. A few questions; could you maybe help clarify again the impact on the margins for the September quarter? Can you maybe prioritize or rank order the impacts in terms of how much of it is related to fully available supply by all of your competitors and thereby the associated pricing detriment versus maybe increasing fuzziness in terms of the murky demand environment because of the macro, or other?
David A. Wickersham
Mark, let me try to answer that question. If we sat and looked at what we have modeled into our pricing, we’ve modeled approximately 7% price erosion for the September quarter with the historic range having been 3.5% to 5%. Now, embodied in all of that is the economic environment we’re in, the commonality of products, the ample supply throughout the industry, all of those types of things are embodied in that price erosion figure.
There is uncertainly relative to demand and visibility to that, at least in the early part of this quarter. That is historically the case where July and August are a little slower demand and then tend to pick up in the latter half of August and September.
So we have a significant pricing pressure this quarter and as we indicated, for the bulk of the September quarter we are still going to be shipping the products that were in process during the June quarter which, to a very large extent, represent some of the older, less cost effective products. And then as we start migrating through the September quarter and into December, we expect to see a meaningful improvement in that area. But it’s that cost structure along with the pricing pressure that is giving the margin compression for the September quarter.
Mark Moskowitz - J.P. Morgan
And then if I could follow-up on the 7% price erosion bogey, how much of that is static in terms of dependent on the OEM versus maybe some swing factors that could go in your favor on the distribution side, or increasing market penetration in notebooks or higher cap desktop? Can you help us out there?
David A. Wickersham
Well, a little more than half of it is OEM based, leaving the rest for whatever the distribution environment represents during the course of this quarter.
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