Predictions of 2017 semiconductor market growth continue to get more optimistic as the year rolls on, with favorable conditions in the commodity memory market continuing to be seen as the main driver.

On Thursday (April 13), market research firm Gartner Inc. said it expects semiconductor industry sales to grow 12.3 percent this year, reaching $386 billion. Gartner (Stamford, Conn.) said favorable market conditions that gained momentum in the second half of 2016 have raised the outlook for the chip market in both 2017 and 2018.

But Gartner also cautioned that the rush to add DRAM and NAND flash capacity to capitalize on the market conditions and the rise in manufacturing in China would likely result in a market correction in 2019.

"While price increases for both DRAM and NAND flash memory are raising the outlook for the overall semiconductor market, it will also put pressure on margins for system vendors of smartphones, PCs and servers," said Jon Erensen, research director at Gartner, in a press statement. Erensen added that component shortages and rising costs would create a volatile market in 2017 and 2018.

Gartner's forecast, which represents a revision to its January forecast of 7.2 percent growth for the chip market, is the most aggressive yet from chip industry watchers. In recent weeks, other market research firms have revised their forecasts for the market upward, including IC Insights Inc., which last month more than doubled its semiconductor market forecast to 11 percent growth for the year.

Gartner said pricing for PC DRAM pricing has doubled since the middle of 2016, with a 4GB module that cost $12.50 in the middle of last year now commanding just under $25 today. NAND flash average selling prices (ASPs) also increased sequentially in the second half of 2016 and the first quarter of 2017, Gartner said.

The market research firm predicted that pricing for both DRAM and NAND would peak in the second quarter of 2017, but added that relief is not expected until later in the year as content increases in key applications like smartphones have vendors scrambling for supply.

"With memory vendors expanding their margins through 2017, the temptation will be to add new capacity," Erensen said. "We also expect to see China make a concerted effort to join the memory industry, setting the market up for a downturn in 2019."

Gartner said unit production estimates for premium smartphones, graphics cards, video game consoles and automotive applications have improved and also contributed to the stronger outlook in 2017. Electronic equipment with heavy exposure to DRAM and NAND saw semiconductor revenue estimates increase, including PCs, ultramobiles, servers and solid-state drives, Gartner said.

By: DocMemory
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