A double-digit percentage growth rate is forecast for the global semiconductor industry in 2017 thanks to market condition improvements, starting in the second half of 2016. Memory devices including DRAMs and NAND flash are the big drivers behind the raised forecasts, which have experienced significant price hikes and short supply over the past six to nine months.
Two semiconductor market research firms – IC Insights and Gartner – both forecast double-digit percentage increases for the semiconductor industry. IC Insights recently revised its chip forecast up from five percent to 11 percent growth in 2017. The market researcher expects DRAM sales to grow by 39 percent and NAND flash memory to increase by 25 percent this year.
Gartner forecasts semiconductor revenue to increase by 12.3 percent in 2017, reaching $386 billion. Gartner attributes the stronger outlook to improved unit production for several application areas including premium smartphones, graphics cards, video game consoles and automotive. Another factor was heavy users of DRAM and NAND flash, including PCs, ultramobiles, servers and solid-state drives.
"While price increases for both DRAM and NAND flash memory are raising the outlook for the overall semiconductor market, it will also put pressure on margins for system vendors of smartphones, PCs and servers," said Jon Erensen, research director at Gartner, in a statement. "Component shortages, a rising bill of materials, and the prospect of having to counter by raising average selling prices (ASPs) will create a volatile market in 2017 and 2018."
PC DRAM prices have more than doubled since the second half of 2016, agreed forecasters.
“Pricing for a 4GB module has increased from $12.50 in the middle of last year to a little less than $25 today,” said Gartner. “Pricing for both DRAM and NAND is expected to peak in the second quarter of 2017, but relief is not expected until later in the year as content increases in key applications, such as smartphones, have vendors scrambling for supply.”
Due to tight supply coupled with some quality issues with leading-edge processes, DRAMeXchange, a division of TrendForce, expects the average contract price of 4GB DDR4 DRAM modules to rise by 12.5 percent in the second quarter of 2017. DRAMeXchange expects the contract price for 4GB DDR4 modules to reach about $27 in the second quarter.
“PC-OEMs that have been negotiating their second-quarter memory contracts initially expected the market supply to expand because Samsung and Micron have begun to produce on the 18nm and the 17nm processes, respectively,” said Avril Wu, research director of DRAMeXchange, in a statement. “However, both Samsung and Micron have encountered setbacks related to sampling and yield, so the supply situation remains tight going into the second quarter and PC DRAM prices will continue to rise through this three-month period.”
Similarly, server DRAM ASPs are expected to rise by 10 percent in the second quarter of 2017, and potentially higher in the third quarter, according to DRAMeXchange.
“The product mix changes made by suppliers in the second half of 2016 as the main factor behind the tightening of server DRAM supply,” said Mark Liu, DRAMeXchange analyst, in a statement. “At the same time, the demand from the downstream has taken off and surpassed DRAM suppliers’ expectations. As server makers expand their purchasing of memory products, server DRAM prices will keep climbing.”
While the entire DRAM market will see price increases, Wu noted that “mobile memory products will have the smallest price increase during this three-month period, estimated at under five percent from the preceding quarter. The moderate price uptick for mobile memory products is mainly attributed to slowing shipments from China-based smartphone makers. On the other hand, prices of eMCP products are expected to go up by around five percent versus the first quarter due to the additional factor of NAND Flash shortage.”
But suppliers should be wary of a downturn in 2019. Gartner expects a correction in 2019 due to additional production capacity for both DRAM and NAND flash in 2017.
"With memory vendors expanding their margins though 2017, the temptation will be to add new capacity," said Erensen. "We also expect to see China make a concerted effort to join the memory industry, setting the market up for a downturn in 2019."