The semiconductor industry’s forecast is brighter than originally thought. That was the conclusion of market research firm IC Insights on Wednesday, when it almost doubled the growth forecast for the semiconductor industry from eight to 15 percent in 2018.
IC Insights said that it had underestimated the expected prices for DRAM and NAND memory chips. The prices of these chips typically change based on supply and demand, not unlike steel or solar panels. Last year, the chip industry erupted with more than $400 million in worldwide revenue as DRAM prices swelled and NAND sales surged.
Though it projected the growth to die down slightly, the company adjusted its growth forecast for the DRAM market to 37 percent, up from 13 percent, and raised its growth forecast for the NAND flash market from 10 percent to 17 percent.
IC Insights now expects DRAM prices to increase 36 percent – significant given that the memory technology’s price jumped 81 percent last year. The price for NAND is forecast to increase 10 percent after jumping by 45 percent in 2017. The actual number of DRAM and NAND chips sold will grow only 1% and 6% respectively.
Technology research firm Gartner also recently revised its estimate of worldwide semiconductor revenues to $451 billion, up from $419 billion in 2017. In January, the company pointed to price increases for both NAND and DRAM to explain why it changed its forecast from 4 percent to 7.5 percent growth.
The price increases could put pressure on profit margins for manufacturers of servers, personal computers, smartphones and other products with growing amounts of memory. Ben Lee, principal research analyst at Gartner, said in January that higher bills of materials would collide with component shortages to create market volatility.
The semiconductor industry tends to bust after booms and boom after busts, as component shortages lead to increased production, which generates a surplus in the global supply chain. For last five years, the industry has typically hinged on the success of the market for DRAM chips sold by companies like Samsung and Micron.
At $99.6 billion, the DRAM market is forecast to be the largest single product category in the semiconductor industry over the next year, according to IC Insights. That far exceeds the $62.1 market estimated for NAND, which is increasingly used as storage technology in tablets and memory sticks – as a replacement for hard disk drives.