DRAM market weakness drags down the Worldwide Semiconductor market

22 August, 2016

The DRAM market is forecasted to shrink by 19% in 2016, causing worldwide semiconductor market to shrink by 2%. In 2017, prices might recover

The DRAM market is forecasted to shrink by 19% in 2016, causing worldwide semiconductor market to shrink by 2%. In 2017, prices might recoverunnamed

The plunge of the DRAM market continues to weigh heavy on the worldwide semiconductor market profitability in 2016. According to a current research by specialized semiconductor markets research company IC Insights, the DRAM market is forecasted to shirk by a staggering 19%. This extreme downward trend is caused by the drop in the price of DRAM as well as a shrinkage in global shipping’s.

The current downward trend is not new – it is actually going on for several months now. Declining shipments of desktop and notebook computers, the biggest users of DRAM, as well as declining tablet PC shipments and slowing growth of smartphone units have created excess inventory and suppliers have been forced to greatly reduce average selling prices in order to move parts. A DRAM ASP decline of 16% coupled with a forecast 3% decline in DRAM unit shipments is expected to result in the DRAM market declining 19% in 2016 (Figure 1), lowest among the 33 IC product categories IC Insights tracks in detail.  This steep decline will be a drag on growth for the total memory market (-11%) and for the total IC market (-2%) in 2016.

Volatility in average selling price are not new to the DRAM market.  Annual DRAM average selling price increases of 48% and 26% in 2013 and 2014 propelled the DRAM market to more than 30% growth each year.  In fact, the DRAM market was the strongest growing IC product segment in each of those years. Then, marketshare grabs and excess inventory started the cycle of steep price cuts in the second half of 2015 and that continued through the first half of 2016.

IC Insights forecasts an improvement in the DRAM market by 2017. Nevertheless, this foretasted recovery may very well prove to be a short term trend – while demand for DRAM is expected to grow due to the rapid development of Big Data applications, as well as IoT and the mobile market, supply is about to explode as well. Only recently, several Chinese producers such as Sino King Technology and Fujian Jin Hua have announced they will be mass producing DRAM memories by 2017-18.

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