The last year has been turbulent in the Semiconductor industry. It is not the first time that the semiconductor market is in memory bubble mode. It is however probably the first time that the memory bubble is not created by consumers. In the good old days (last year) consumers would buy a lot of stuff with memory making the price of memory increase. This in return would increase the price of the stuff with memory and consumers would buy less stuff with memory making pricing fall again. The industry has been used to these boom and bust memory markets and knows how and when to invest.
However, this market situation is different. The semiconductor industry is entering uncharted territory. It is the rise of the data center that is creating the new situation. Not the enterprise data center where storage capacity is treated as a cost and should be minimised but the cloud data center, where storage capacity is an asset. The memory market is not controlled by the consumer anymore even though the consumers buy most of the memory. The memory market is controlled by the Cloud companies that treat storage capacity as a capital investment needed to win the cloud wars. Pricing is not an issue as long as the other cloud companies pay the same. Memory manufacturing capacity will not increase significantly over the next period at the same time as the cloud will need more memory. Other applications have already started to suffer from the price increases. Smartphones and PC’s are in a decline that will continue. This will affect the business of semiconductor companies selling into these markets. Will we talk about this situation in the future like we talked about the oil crisis? The memory crisis of 2017?
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