WSTS has just released their semiconductor forecast for 2017 and 2018 suggesting that the memory market has peaked and will turn south from here. Our research on the demand and the supply side of the memory market points in a different direction.
The memory market has not yet reached an equilibrium and will continue to favour the producers of semiconductor memories. Although there has been invested significantly in increased supply, it will take time before the new capacity has a meaningful impact on the market. Hynix and Samsung started the investment cycle carefully followed by massive investments the last few quarters. Micron was out of the start block early but have now returned to a more conservative approach potentially expecting a turn in the market. Micron did add meaningful capacity by taking control of the Inotera, the manufacturing joint venture operated with Nanya but this does not add capacity to the market.
On the demand side, there have been two major surprises. Opposite to what should be expected of consumer products, the Smartphone and Tablet demand has remained solid irrespective of material price increases. The other has been the massive hunger of memory in the data Center, ignoring the price increases completely.
The move towards Big Data and Artificial Intelligence in the Cloud Data centre can be seen by Nvidia’s growing revenue. Nvidia cannot yet match Intel in the Data Center but seems to win most of the processor sockets for AI. Intel themselves believe 7% of the current processing capacity in the Data Center is associated with AI. Nvidia’s current share of processing revenue in the Data Center is slightly above that number. In other words, the current memory shortage could be a result of the 7% shift towards AI in the Data Center. It is safe to assume that this number will grow and have a significant impact on memory pricing.
The memory market could be entering uncharted territory.
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