2017 IC Growth Doubled; DRAM and NAND Prices Surge

Optimism continues to prevail for 2017: IC Insights has doubled its global semiconductor growth forecast for the year from 5 percent to 11 percent. The revision was due to higher expectations – and higher prices -- for the DRAM and NAND flash memory markets.

IC Insights now expects DRAM sales to grow 39 percent and NAND flash sales to increase 25 percent this year, with upside potential from those forecasts. DRAM market growth is expected to be driven almost entirely by a huge 37 percent increase in the DRAM average selling price (ASP), as compared to 2016, when the DRAM ASP dropped by 12 percent. Moreover, NAND flash ASPs are forecast to rebound and jump 22 percent this year after falling by 1 percent last year.

In April 2016, IC Insights reported the DRAM ASP was $2.41 but rapidly increased to $3.60 in January 2017, a 49 percent jump. A pickup in DRAM demand from PC suppliers during the second half of 2016 caused a significant spike in the ASP of PC DRAM. Currently, strengthening ASPs are also evident in the mobile DRAM market segment. With total DRAM bit volume demand expected to increase by 30 percent this year and DRAM bit volume production capacity forecast to increase by 20 percent, IC Insights believes that quarterly DRAM ASPs could still surprise on the upside in 2017.

Furthermore, DRAM output is also being slowed, at least temporarily, by the ongoing transition of DRAM production to ≤20nm feature sizes by the major DRAM producers this year. At $57.3 billion, the DRAM market is forecast to be by far the largest IC product category in 2017, exceeding the expected MPU market for standard PCs and servers ($47.1 billion) by $10.2 billion this year.

Research firms are casting 2016 as a year of recovery for the chip market, setting the stage for a robust 2017. Spurred by a 12 percent decline in the DRAM ASP in 2016, the DRAM market slumped 8 last year, said IC Insights. The DRAM segment became a headwind to worldwide IC market growth in 2016 instead of the tailwind it had been in 2013 and 2014. Now, the DRAM segment is forecast to have a positive impact of four percentage points on total IC market growth this year. IC Insights notes that the total IC market growth rate forecast for 2017, when excluding the DRAM and NAND flash markets, would be only 4 percent, about one-third of the current worldwide IC market growth rate forecast including these memory devices.

IHS Markit expects IC trends experienced in the second half of 2016 -- DRAM and NAND supply constraints and strong demand, coupled with an ASP increase-- will drive memory revenue into record territory throughout 2017. Additionally, chip content in cars continues to climb, with micro components and memory integrated circuits leading the pack. Both experienced more than 10 percent growth in automotive applications. IHS reported the auto IC market increased by 9.7 percent in 2016.

Overall, the IC market posted a year-end growth rate of 2 percent in 2016 with chip growth seen across multiple market segments. Global revenue came in at $352.4 billion, up from $345.6 billion in 2015, according to IHS.

Consolidation that began in 2016 is also expected to impact the chip market in 2017. The year began with the close of the biggest-ever acquisition in the semiconductor industry; Avago Technologies finalized its $37 billion acquisition of Broadcom Corp. to form Broadcom Limited. The acquisition resulted in the newly formed company increasing its market share in several market segments, including taking a large lead in the wired application market.

“After some selective divestiture, Broadcom Limited has focused on market segments where its customer base holds dominant market share positions. These also tend to be markets which have fairly stable and visible TAM growth,” said IHS senior analyst Brad Shaffer. “These characteristics may help entrench the company’s market share positions in areas where it chooses to compete,” added Shaffer.

Among the top 20 semiconductor suppliers, ON Semiconductor and nVidia enjoyed the largest revenue growth last year, followed closely by MediaTek. ON and MediaTek achieved growth through multiple acquisitions, while nVidia saw an enormous demand for its GPU technology as it moves into new markets and applications.

Qualcomm remained the top fabless company in 2016 while MediaTek and nVidia moved into the number two and three spots, respectively. The fabless company with the largest market share gain was Cirrus Logic, a major supplier for Apple and Samsung mobile phones. They moved up five spots in 2016, to number 10.

Intel remains in the number one spot for semiconductor suppliers, followed by Samsung. Qualcomm comes in at number three, with plans to increase its market share in 2017 with its pending acquisition of NXP.

Although price increases are welcomed by semiconductor suppliers, customers may not be as thrilled. However, companies across the manufacturing spectrum have been experiencing higher supply costs. Raw materials prices have been increasing for U.S.-based manufacturers, according to the Institute for Supply Management. Midsized U.S. manufacturers cite prices as one of their top concerns for 2017. Component makers have been complaining for years that they are unable to pass price increases on to customers. 2017 might be their chance.