The memory chip industry is set for an upturn in the third quarter of 2016 as inventories in the market have almost been cleared in the last two quarters and price hikes have become more apparent, according to industry sources.

Production cuts initiated by the top-three vendors Samsung Electronis, SK Hynix and Micron Technology in the first and second quarters have resulted in tight supply of commodity DRAM chips recently, boosting contract prices, said the sources.

Increasing built-in memory capacity at next-generation smartphones, including new iPhone devices, will further ramp up demand for memory products in the third quarter, said sources, noting that the mobile DRAM capacity of the next-generation iPhone is expected to increase to 3GB from 2GB previously, while those for new Android phones are expected to raise to 6GB from 4GB.

Increasing demand for DRAM products, mostly high margin models, from the server sector is also contributing to the recent uptick of the DRAM industry, added the sources.

Meanwhile, the strong demand for standard DRAM has also weighed on the supply of niche-type memory products, which are widely being used in the LCD TV, STB and GPS sectors, said the sources, adding that significant sales of niche DRAM chips will continue to September.

Prices of NAND flash chips are also bound to increase, buoyed by rising demand, particularly from the next-generation iPhone devices.

Macronix International, a manufacturer of flash and mask ROM memory chips, expects sales of its NAND flash products to reach NT$300 million (US$9.475 million) a month in the third quarter and to NT$400 million in the fourth, according to company president Chih-yuan Lu.

Macronix, which currently accounts for 22% of the global NOR flash market, will aim to further ramp up its share by pushing sales of its NOR flash products in the automobile sector, Lu added.

Backend-service company Powertech Technology (PTI) also expects to see another double-digit growth for its revenues in the third quarter after seeing its sales expand 11.5% on year to NT$21.94 billion in the first half of 2016.

The supply of commodity DRAM has fallen short of demand, while memory density in high-end smartphones and servers continues to rise, commented PTI president Hung Jia-yu recently.

Rising flash memory content per smartphone and greater SSD penetration will encourage PTI to improve technology and boost production capacity for the memory, Hung said.

By: DocMemory
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