Market decline

An expected drop in the DRAM market of 19%

Lower shipments of desktops and laptops, the biggest users of DRAM, as well as lower shipments of tablet PCs and slower growth of smartphone units created excess inventory and suppliers were forced to Dramatically reduce average selling prices in order to move parts, writes market analyst firm IC Insights. 16% drop in ASP DRAM coupled with an expected 3% drop in DRAM unit shipments is expected to result in a 19% decline in the DRAM market in 2016, the lowest among 33 IC product categories than IC Insights follows in detail. This sharp decline will be a brake on the growth of the total memory market (minus 11%) and the total integrated circuit market (minus 2%) in 2016.

Large fluctuations in the average selling price are nothing new in the DRAM market. The annual average DRAM selling price increases of 48% and 26% in 2013 and 2014 have propelled the DRAM market to more than 30% growth each year. In fact, the DRAM market was the fastest growing IC product segment in each of these years. Then, market share gains and excess stocks triggered the cycle of sharp price declines in the second half of 2015 and that continued throughout the first half of 2016. More like the profile of a mountain range alpine, the growth of DRAM ASP has seen several dramatic and downward increases since 2007, confirming the volatility of this integrated circuit market segment. When coupled with the strength or weakness of DRAM unit shipments, the demand for bit volume, and the amount of capacity and capital expenditure spent on DRAM production each year, this market can quickly increase or decrease. On a positive note, ASP DRAMs strengthened at the end of 2Q / 16 and are expected to continue to grow through the remainder of 2016 and into 2017. The drive for ASP DRAM is expected to come from demand for enterprise systems ( servers), which are selling well due to the need to process “big data” (eg, Cloud and Internet of Things). Additionally, low voltage DRAM continues to enjoy high demand for use in mobile platforms, especially smartphones. The demand for new smartphone models is expected to help increase ASP DRAM through the end of this year and into 2017. The upward trend in ASP DRAM may be short-lived, however, as two China-based companies, Sino King Technology in Hefei, China, and Fujian Jin Hua IC Company, plan to enter the DRAM market in late 2017 or early 2018. It remains to be seen what devices and technology the two new entrants will offer, but their presence in the market could signal that another round of price cuts are around the corner. —– More can be found at © IC Insights.