Strong demand and rising prices for memory ICs and other semiconductors will result in stronger-than-expected sales for the global semiconductor industry in 2017, according to World Semiconductor Trade Statistics’ (WSTS) updated semiconductor forecast.
WSTS revised its forecast for 2017 and now says the global semiconductor market will increase 11.5% to $378 billion. The growth rate for 2017 will be the highest that it’s been since 2010 when sales increased more than 30%.
In its original forecast for 2017, WSTS had said the market would grow about 3% in 2017 and then revised the forecast to 6.5% in February. For 2018, chip sales growth will slow to 2.7%. But for now, many chipmakers are seeing double-digit sales growth.
For instance, in the first quarter year-over-year sales for STMicroelectronics increased 12.9%, said Carlo Bozotti, ST’s president and CEO. “In the second quarter, we continue to see healthy demand, with strong booking trends across all our product groups,” said Bozotti. He said ST expects second-quarter sales to increase 5% over the first quarter and 12.5% over the second quarter of 2016.
Texas Instruments is also posting strong sales as its first-quarter revenue increased 13%, compared to the first quarter of 2016, said Rich Templeton, TI’s chairman, CEO and president. He said TI has seen strong demand for its products in the automotive and industrial markets. “Our analog revenue grew 20% and embedded processing revenue grew 10% from the same quarter a year ago,” he said.
Because of rising prices for DRAM and NAND flash, Samsung Semiconductor’s overall chip sales increased 40%, while its memory IC revenue grew 53% in the first quarter compared to the first quarter of 2016.
Distributors are also seeing an increase in semiconductor sales. For instance, Arrow Electronics posted 10% growth in its first-quarter component sales, which includes semiconductors.
“We had a good first quarter and we believe the market is continuing to grow,” said Alan Bird, president, Americas, for Arrow Electronics. “We are seeing growth the court across the board” in all customer segments, he said.
“In the first quarter, we did not have a segment that showed a decline year-over-year although some segments were stronger than others. It’s a broad growth market,” said Bird.
Chipmakers, distributors, and industry analysts say growth is due to overall stronger semiconductor demand and increasing prices, especially for DRAM and NAND flash.
“Memory prices are driving a lot of growth,” said Kathy Ta, Americas vice chair at WSTS. Ta is also managing director, investor relations for semiconductor supplier Maxim Integrated. She noted that when memory IC demand increases, DRAM manufacturers will sometimes “flood the market with DRAM, and ASPs (average selling prices) are not maintained. But this time they have not done this. They have been very disciplined,” said Ta.
As a result, memory prices and revenue have increased. DRAM tags increased 15% since the first quarter and NAND prices have increased nearly 7%, according to Jim Feldhan, president of Semico Research. He added that prices for other semiconductors have also increased. For instance, microcontroller prices were up 8%; discrete semiconductors, 9% and NOR flash, 10%, which is surprising because NOR has been a declining market for about five years, said Feldhan.
Prices for other semiconductors have been flat to up slightly. For instance, microprocessor prices increased by about 0.4%, while wireless communications ICs increased 1.9%, according to Semico. However, prices for semiconductors used in cellular phones are down 10% and MOS logic communication chips fell 3% since the first quarter.
Semiconductor price hikes may ease in the second half of the year because chip demand may weaken. “When you look at end applications, whether it is a server, cell phone or tablet, the manufacturer has a budget for its semiconductor bill of materials,” he said. “When there is a shortage of DRAM and prices increase, OEMs may try to reduce the amount of memory that they put in the product.” Weaker demand usually results in price firming or erosion.
In addition, more semiconductor capacity is expected later in the year, which could impact prices in the fourth quarter, said Feldhan.
As a result, “we have tempered the forecast a little bit particularly in the fourth quarter. Our forecast is 9.5% but if memory prices remain strong through December there’s certainly an upside to the forecast,” Feldhan said.