EU Chip Makers Weigh Production Risks Amid Covid-19
by 
Following significant capacity investment through 2018, DRAM manufacturers plan to scale back their capex for at least this calendar year.
One of the significant questions facing the IC industry in the second half of 2019 is if and when the DRAM market will rebound, according to IC Insights. Any rebound in the market will be driven in part by available manufacturing capacity. After huge capex outlays for DRAM in 2017 and 2018, the question becomes how much new capacity will come online and how far DRAM prices (price per bit) will fall as a result of this buildup.
The three main DRAM suppliers—Samsung, SK Hynix, and Micron—generally agree that DRAM bit volume will grow roughly 20 percent per year over the next few years. Micron’s and IC Insights' perspective on the capex required to increase DRAM bit volume shipments 20 percent per year is illustrated below:
Data is from Micron’s 2018 Analyst and Investor Event versus IC Insights’ DRAM capex history and forecast data.
With new and very complex DRAM technologies requiring much more fab equipment and more fab space needed to house this equipment, Micron estimates that the industry capex required to grow DRAM bit volume by 20 percent more than doubled from $8 billion in 2015 to $18 billion in 2018. Actual DRAM expenditures in 2016 were slightly below what was needed to increase bit volume 20 percent and about equal to what was needed in 2017, said IC Insights. However, in 2018, capex targeting the DRAM market reached $23.7 billion, 32 percent more than the $18.0 billion that was deemed necessary to grow DRAM bit volume by 20 percent. It is worth noting that in 2018, DRAM bit volume increased only 13 percent and is forecast to increase 17 percent in 2019, the research firm said.
Too much capex spending typically leads to overcapacity and subsequent pricing weakness — a condition that is amplified by economic weakness and softer demand from end-users. With Samsung, SK Hynix, and Micron aggressively spending to upgrade/add DRAM capacity last year, and with economic and trade uncertainties continuing to permeate global markets, IC Insights believes that the risk of too much DRAM capacity and the subsequent pricing weakness that results will continue for the remainder of 2019. On a brighter note, actual DRAM capex spending in 2019 is forecast to be less than what is required to maintain 20 percent bit volume growth. That could offset the overspending in 2018 and help start a return to supply-demand balance within the DRAM market in 2020.
Additional details on semiconductor industry capital spending and IC market trends will be provided in the Mid-Year Update to The McClean Report — A Complete Analysis and Forecast of the Integrated Circuit Industry. A subscription to The McClean Report includes free monthly updates from March through November (including a 200+ page Mid-Year Update), and free access to subscriber-only webinars throughout the year.
To review additional information about IC Insights’ new and existing market research reports and services please visit our website: www.icinsights.com.
Related posts
