Smartphones with higher RAM will be cheaper this year, thanks to the drop in memory chip pricing. While this might be a good news for consumers, for investors it spells the end of the chip boom which started in 2016. After doubling over the past year and a half, analysts expect the sales growth rate will fall this year.
The prices of high-end memory chip declined 5 percent in Q4, 2017, and it is estimated that this year, the growth rate will fall down to more than half at 30 percent. As a result of the price drop, Samsung‘s shares came down by 7.5 percent last week, while another chip-maker SK Hynix witnessed a dip of 6.2 percent.
According to Reuters report, Samsung Electronics Co’s disappointing profit estimate is also causing jitters among investors who had bet the chip boom would last at least another year. The chip industry is worth $122 billion, and it witnessed astounding growth since mid-2016, with nearly 70 percent rise in 2017, which marked the year of smartphones with RAM as high as 8GB.
This year, analysts estimate that memory chips will see a gradual price decline if demand remains strong. The decline in prices is attributed to the last year’s growth which gave chip makers cash to reinvest and boost output.
It is estimated that the supply of NAND flash memory chips will grow 43 percent this year, up from 34 percent last year, which will cause the prices to drop by about 10 percent. Companies including Western Digital, Toshiba Corp, and Micron Technology Inc will led the output, as they compete against Samsung which holds about 40 percent of the memory chip market.
While it translates to cheaper high-RAM smartphones for consumers, analysts are not completely spelling the crashing down of the memory chip market. Manufacturers are cramming more RAM into their phones and charging more for them, allowing them to weather last year’s price surge, according to analysts. Smartphone makers have also been pressing for cheaper memory chip kits, and as they hold about one-third of the global memory chip market, meeting their demands mean a significant change across the market.
According to an analysis by BNP Paribas, average DRAM memory of new models launched last quarter increased by 38 percent from the second quarter of 2016, while NAND content measured by gigabyte jumped 84 percent. This level of demand indicates the industry is growing and chipmakers’ investment in advanced technologies will help them cut down on production costs even as the prices come down, helping them keep the business profitable.