Industrial Sector Spurs Semiconductor Growth
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Spot prices of DDR4 DRAM memory devices fell by nearly two percent since April 20, indicating a correction to close the price gap between spot and contract pricing for PC DRAM, according to DRAMeXchange, a division of TrendForce. However, the market research firm expects DRAM prices to remain on an upward trend in 2017 primarily due to tight supply.
Tight supply is attributed to a “lack of major fab expansion plans and yield issues with leading-edge processes,” which will continue throughout 2017. In addition, PC OEMs are expected to expand their memory inventories to prepare for the second half, which means contract prices of PC DRAM modules will continue to rise, according to DRAMeXchange.
“Most contract negotiations for the second quarter have been completed during the latter half of this April,” said Avril Wu, research director of DRAMeXchange, in a statement. “The average contract price of mainstream modules for the second quarter is expected to go up 10 to 15 percent from the first quarter. The average contract price of 4GB DDR4 modules is also projected to reach $27, which translates to around $3.06 for each 4-Gb chip used in these modules. This price is still lower than the average spot price as it has been for a long time.”
Wu expects spot pricing of DDR4 chips will be down in the short term. The 1.92 percent drop in the average spot price of DDR4 chips from $3.38 to $3.32 indicates an attempt to narrow the price difference between the contract and the spot market, she said.
Prices for mobile DRAM chips also are expected to remain on an upward swing. However, Wu believes this will result in lower average per device memory content for smartphones in 2017. Trendforce lowered its estimate from 3.7 GB to 3.2 GB per smartphone in 2017. However, this is still up from 2.4 GB in 2016.
Memory content growth was expected to be much larger due to LPDDR4 becoming mainstream in the market, but the continued rise in prices of mobile DRAM constrained smartphone manufacturers from raising memory specs due to cost pressure, according to Wu.
DRAMeXchange estimates that LPDDR4 and its variant (LPDDR4X) will account for more than 50 percent of the total shipments of mobile DRAM products in 2017.
Rising memory prices are having an impact on virtually all smartphone makers including Apple. Wu expects a memory cap of 3 GB for the next iPhone, which means consumers will have to wait until 2018 for a 4-GB iPhone.
“Rising memory prices is expected to have an impact on Apple’s cost structure for iPhone, even though the company normally has been able to maintain annual iPhone shipments of over 200 million units,” according to DRAMeXchange.
“The tight supply situation in the mobile DRAM market will last through this entire year, so Apple is going to make difficult decisions to control costs while managing its supply chain,” Wu stated. “Of the three new iPhone devices that will be released this year, the model with 5.8-inch AMOLED display and the model with 5.5-inch LCD will have 3 GB of memory. The 4.7-inch LCD model by contrast will carry 2 GB. The average memory content of iPhone devices will increase this year, though the growth is driven by the increased shipments of 3GB models. Apple will probably not raise iPhone’s memory to 4GB until next year.”
“Since mobile devices became a major application segment for DRAM market, shipments and average memory content of smartphones have been closely connected with the relationship between the overall supply and demand,” Wu added. “Hence, the current wave of price surge will test smartphone makers’ ability to effectively manage their supply chains. At the same time, the smaller brands will bear heavier cost pressure.”
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