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IC Insights
IC Insights, Inc. is a leading semiconductor market research company headquartered in Scottsdale, Arizona, USA. Founded in 1997, IC Insights offers complete analysis of the integrated circuit (IC), optoelectronic, sensor/actuator, and discrete semiconductor markets with coverage including current … More »

DRAM Capex to Plunge 28% in 2019 After Huge Outlays in 2017-18

 
July 11th, 2019 by IC Insights

Economic and trade uncertainties, softer demand to keep pressure on DRAM ASPs in 2019.

IC Insights will release its 200+ page Mid-Year Update to The McClean Report 2019 later this month.  The Mid-Year Update revises IC Insights’ worldwide economic and IC industry forecasts through 2023 that were published in The McClean Report 2019, released in January.  Included in the update is a review of capital spending and DRAM market trends for the balance of this year and through the forecast period.

One of the significant questions facing the IC industry in the second half of 2019 is if and when the DRAM market will rebound. Any rebound in the market will be driven in part by available manufacturing capacity. After huge capex outlays for DRAM in 2017 and 2018, the question becomes how much new capacity will come online and how far DRAM prices (price per bit) will fall as a result of this buildup.

The three main DRAM suppliers—Samsung, SK Hynix, and Micron—generally agree that DRAM bit volume will grow roughly 20% per year over the next few years. Figure 1 shows Micron’s perspective on the capex required to increase DRAM bit volume shipments 20% per year (data from Micron’s 2018 Analyst and Investor Event) versus IC Insights’ DRAM capex history and forecast data.

With new and very complex DRAM technologies requiring much more fab equipment and more fab space needed to house this equipment, Micron estimates that the industry capex required to grow DRAM bit volume by 20% more than doubled from $8 billion in 2015 to $18 billion in 2018!  Actual DRAM expenditures in 2016 were slightly below what was needed to increase bit volume 20% and about equal to what was needed in 2017.  However, in 2018, capex targeting the DRAM market reached $23.7 billion, 32% more than the $18.0 billion that was deemed necessary to grow DRAM bit volume by 20%.  It is worth noting that in 2018, DRAM bit volume increased only 13% and is forecast to increase 17% in 2019.

Too much capex spending typically leads to overcapacity and subsequent pricing weakness—a condition that is amplified by economic weakness and softer demand from end-users.  With Samsung, SK Hynix, and Micron aggressively spending to upgrade/add DRAM capacity last year, and with economic and trade uncertainties continuing to permeate global markets, IC Insights believes that the risk of too much DRAM capacity and the subsequent pricing weakness that results will continue for the remainder of 2019.  On a brighter note, actual DRAM capex spending in 2019 is forecast to be less than what is required to maintain 20% bit volume growth.  That could offset the overspending in 2018 and help start a return to supply-demand balance within the DRAM market in 2020.

Figure 1
Report Details:  The 2019 McClean Report
Additional details on semiconductor industry capital spending and IC market trends will be provided in the Mid-Year Update to The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry.  A subscription to The McClean Report includes free monthly updates from March through November (including a 200+ page Mid-Year Update), and free access to subscriber-only webinars throughout the year.  An individual-user license to the 2019 edition of The McClean Report is priced at $4,990 and includes an Internet access password.  A multi-user worldwide corporate license is available for $7,990.To review additional information about IC Insights’ new and existing market research reports and services please visit our website: www.icinsights.com.

Category: Fabless Semiconductors

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