IC Insights has revised its IC market revenue forecast for 2016 from negative two percent to one percent growth. Unit volume shipments were also raised from four percent to six percent. The forecast was increased primarily due to stronger growth in the DRAM market.
IC Insights’ analysis of the market shows that results in the third quarter of 2016 were slightly higher than the past 15-year average, posting a nine percent increase. With an expected increase of one percent this quarter, the total IC market in the fourth quarter of 2016 is forecast to reach $76.9 billion. This is “a new quarterly record high, surpassing the previous high of $76.7 billion posted in 4Q14,” according to IC Insights.
The average second half versus the first half of the year growth rate since 1990, including the forecast for 2016, is 8.9 percent, according to IC Insights. However, the market research firm expects the second half of 2016 to be up 12.3 percent compared to the first half of 2016. This is “a strong turnaround from the extremely poor second half result of -1.2 percent posted last year and the highest second half growth rate since 2009,” according to IC Insights.
The latest update to IC Insight’s 2016 McLean Report also forecasts the global semiconductor market to grow by four percent in 2017. This is primarily due to expectations for slightly better worldwide GDP growth in 2017 compared to 2016, and continued firming of DRAM and NAND memory prices. Pricing for DRAM and NAND memory have been steadily increasing in the double-digit range over the past quarter.
This is a turnaround since July when several market research firms, including IC Insights and Gartner, lowered their semiconductor forecast for 2016 due in part to the Brexit vote, GDP growth, weak DRAM and NAND memory markets, and lower consumer PC demand.
However, the upward swing may have started in July. The Semiconductor Industry Association (SIA) recently reported that DRAM sales led growth in the semiconductor industry in July. “Most major semiconductor product categories saw increased sales in July compared to the previous month, with DRAM leading the way with 7.1 percent growth,” according to John Neuffer, SIA’s president and CEO.
But not all prognosticators agree. Gartner still forecasts negative growth for the semiconductor industry in 2016. Global semiconductor revenue is pegged at $332 billion, a decrease of 0.9 percent from 2015, according to Gartner. Jon Erensen, research director at Gartner, believes “the worst appears to be over, with a stronger outlook for the remainder of 2016 driven by inventory replenishment and increasing average selling prices (ASPs) in select markets.”
"Improving conditions in the commodity memory market contributed the most to the improved outlook based on stronger supply-and-demand dynamics,” he further stated.
DRAM ASPs started to strengthen in the late second quarter of 2016, and industry analysts expect pricing to continue increasing through the end of the year and into 2017.
“The boost to DRAM ASP is expected to come from demand for enterprise (server) systems, which have been selling well due to the need to process “big data” (e.g., the Cloud and the Internet of Things),” according to IC Insights. “Also, low-voltage DRAM continues to enjoy solid demand for use in mobile platforms, particularly smartphones. Demand from new smartphone models is expected to help contribute to increasing DRAM ASPs through the end of this year and into 2017.”
DRAMeXchange recently reported that the average contract price of PC DRAM reached its highest point in two years in the fourth quarter of 2016 – up nearly 30 percent - due to “stronger-than-expected notebook demand worldwide.”
“In September, the average spot prices of 4Gb DDR3 and DDR4 chips rose 19 percent and 15 percent respectively compared with the prior month to $2.10 and $2, indicating that the market demand continues to outpace supply,” said Avril Wu, research director of DRAMeXchange, in a statement.
“In the fourth quarter, the PC DRAM market will witness an even larger price hike. The undersupply problem will worsen as well due to DRAM makers underestimating the increase in demand,” she further stated.