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Prices in DRAM Market Will Keep Rising Through 2017 as Annual Bit Supply Is Projected to Expand by Less Than 20%, Says TrendForce

14 December 2016 Semiconductors Avril Wu

Prices in DRAM Market Will Keep Rising Through 2017 as Annual Bit Supply Is Projected to Expand by Less Than 20%, Says TrendForce

The global DRAM market has been on a roller coaster ride during 2016. Prices were on a steep slide in the year’s first half due to weak demand. However, the pickup in notebook shipments and the strong sales of Chinese branded smartphones since the start of the third quarter have not only reversed the price downtrend but also caused average selling prices of DRAM to make big jumps. Looking ahead to 2017, DRAMeXchange, a division of TrendForce, forecasts that DRAM bit supply will expand by less than 20% annually. This growth rate will also be a new historical low for the industry. Assuming that there will be no significant weakening of demand, DRAM supply will generally remain tight next year. Thus, suppliers should continue to reap profits during the entire 2017 on account of rising prices.

Bit supply growth will be driven by the industry’s migration to 1Y nm technology while the overall wafer capacity will remain relatively constant

“The top three suppliers that have made the DRAM into an oligopoly will keep the overall supply from expanding significantly in 2017,” said Avril Wu, research director of DRAMeXchange. In terms of wafer capacity, next year’s overall level will be about the same as this year’s. As for bit supply, the main growth driver during 2017 will be the industry’s migration from 20nm-class processes to the more advanced 1Y (10nm-class) processes.

“Though the share of 1Y chips in the industry’s total output will increase next year, suppliers will also encounter higher difficulties in developing their die-shrink solutions,” Wu added. DRAMeXchange expects that the annual bit supply growth rate for the global DRAM market in 2017 will be under 20%, a historical low for the industry.

DDR4 and LPDDR4 will become the market mainstream at the start of 2017

Suppliers gradually adopted 20nm-class processes as their primary production technology during the second half of 2016. Therefore, DDR4 and LPDDR4 is expected to account for the majority of suppliers’ shipments in 2017. DDR4 is now the main solution for servers and is going to become the standard for PCs later at the end of this year. The adoption of DDR4 in the PC market is slower than in the server market because there have been delays in developing the support for the next-generation memory technology on the Intel’s PC processor platform.

LPDDR4 on the other hand is being supported on most application processors and will supplant LPDDR3 as the memory used in the majority of smartphones at the start of 2017. Furthermore, the minimum capacity of LPDDR4 modules are expected be 4GB by next year since making mono-die chips of higher density on the 1Y or under-20nm technology makes better cost sense. This in turn will contribute to the general increase in memory content per box for smartphones in the future.

Share of custom and specialized products will expand in suppliers’ portfolios

As the smartphone market has reached a growth plateau during these two years, device makers and component suppliers are looking for the next mainstream products. Currently, emerging products and applications include drones, robots, IoT products and gaming graphic cards (that are VR and AR ready). For DRAM suppliers, these markets are hard to assess in terms of potential demand as they still at early stages of their development. Therefore, DRAM suppliers have to work with various device vendors to create specialized memory components for diverse applications.

For instance, DRAM suppliers and NVIDIA developed the unique specification standards for GDDR5X, the latest generation of graphic DRAM that offers faster speed and overclocking. Application-specific products such as GDDR5X, which targets the high-end graphic card market, can help DRAM suppliers to differentiate themselves and improve their market positioning. The DRAM market therefore can expect an increase in the share of custom and specialized products next year. Since major suppliers are relatively equal in terms of manufacturing technology (i.e. using 20nm-class processes), they are also likely to generate higher profits in selling these dedicated memory solutions.

China still signals strong intent to develop a domestic DRAM chain but the current oligopoly is less willing to help out

As the DRAM oligopoly of Samsung, SK Hynix and Micron is well established, Wu believes that these three dominant players will not allow additional competitors to enter the market and let supply outpace demand. “Due to profit considerations, the three major suppliers are reluctant to help Chinese semiconductor makers to pursue DRAM manufacturing,” said Wu.

From the Chinese perspective, the DRAM market currently has the highest entry barrier compared with markets for other semiconductor products. From the long-term perspective, China will have a lot of difficulties in its DRAM venture due to the oligopoly and other related obstacles.

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