Higher memory prices to drive 2017 chip market growth

January 24, 2017 // By Peter Clarke
The global chip market will total $364.1 billion in 2017, an increase of 7.2 percent from 2016, according to market research firm Gartner Inc. which has increased its outlook for 2017 by $14 billion or an additional 4.1 percent.

Gartner has increased its outlook for largely on the strength of memory pricing – about $10 billion out of that $14 billion increase. "Memory market supply and demand have turned positive for memory vendors who are pushing ASPs [average selling prices] higher to recover margins," said Ganesh Ramamoorthy, research vice president at Gartner, in a statement.

Coming after a growth-year in 2016 – by 1.5 percent according to Gartner – this would represent a remarkable turnaround. Only a few months ago almost all the market forecasters were telling the industry that the market would shrink in 2016 (see Gartner agrees 2016 chip market will fall )

Some even predicted an unprecedented three-year decline extending to 2017 (see Global chip market to shrink for three years, says IHS ).

A poor start to 2016 drove the market researchers to reach for pessimism. However, the second half of 2016 was fuelled by inventory replenishment and improving demand and rising prices, Gartner said.

"The worst is now over with a positive outlook emerging for 2017 driven by inventory replenishment and increasing average selling prices (ASPs) in select markets, particularly commodity memory and application-specific standard products," said Ramamoorthy. "The turnaround that started at the end of the second quarter of 2016 will continue to gain momentum and we expect the improved conditions to carry through 2017."

Gartner expects ASP increases for application-specific standard products (ASSP), discrete and analog chips. And this together with higher semiconductor content in key applications including the Internet of Things is producing a benign environment for chip vendors.

Top ten semiconductor vendors ranked by worldwide revenue in dollar millions. Source: Gartner Inc.

The slow-growth due to market saturation in traditional consumer applications such as PC, tablet and smartphones, may well continue but the strength in multiple other sectors, including industrial, automotive, storage and IoT is compensating, according to Gartner.

This is driving suppliers that have depended on traditional consumer markets