Rising DRAM Prices Impact Smartphone Makers: TrendForce
The sharp upswing in prices of mobile DRAM products is expected to hold back the growth of average per device memory content for smartphones this year, says the market intelligence firm TrendForce. Furthermore, TrendForce has lowered the estimated average memory content of smartphones for 2017, from 3.7GB to 3.2GB. The revised average memory content figure represents an increase of 33.4% compared with the 2016 figure.
TrendForce smartphone analyst Avril Wu stated that smartphones’ average memory content was around 2.4GB in 2016, and its growth for this year was initially expected to be significantly larger due to LPDDR4 becoming the market mainstream. However, the continuing rise in prices of mobile DRAM products is increasing the cost pressure on smartphone makers and constraining their efforts to raise memory specifications for their products.
Wu noted that smartphone brands, especially vendors of Android phones, have increased the memory content of their products in the recent period because of performance necessity and consumer preference. “Android phones tend to become sluggish after a period of usage because of performance issues associated with the open source nature of the operating system,” said Wu. “The problems are dealt with during the product design as smartphone makers expand the built-in memory to improve computing speed and ensure satisfactory user experience.”
“Hardware specifications also have a strong influence over purchase decisions, particularly for the Chinese consumers,” Wu added. “Besides the power of the application processor, the amount of built-in memory is an important indicator of value for buyers as well. Thus, we have seen that the growth of the average memory content for smartphones has been much higher than tablets and other computing devices. Several high-end smartphones are now featuring 4GB or even 6GB of mobile DRAM, which are comparable to the specifications of some mainstream notebooks.”
However, intensifying competition and spiking prices of mobile DRAM products is going to slow down the pace of the memory content growth for smartphones this year. There are currently more than 30 brands in the global smartphone market. Very few among them such as Samsung and Apple have the economies of scale and the ability to record huge profits. For smaller brands, they have to post annual shipments above the 40-million or 50-million unit marks in order to turn a profit. The recent price increases in the mobile DRAM market have further added to the cost burdens of smartphone makers, thereby slowing the growth of the average memory content per device.
Rising memory prices is expected to have an impact on Apple’s cost structure for iPhone, even though the company normally has been able to maintain annual iPhone shipments of over 200 million units. Wu pointed that the tight supply situation in the mobile DRAM market will last through this entire year, so Apple is going to make difficult decisions to control costs while managing its supply chain. Of the three new iPhone devices that will be released this year, the model with 5.8-inch AMOLED display and the model with 5.5-inch LCD will have 3GB of memory. The 4.7-inch LCD model by contrast will carry 2GB. The average memory content of iPhone devices will increase this year, though the growth is driven by the increased shipments of 3GB models. Apple will probably not raise iPhone’s memory to 4GB until next year.
Wu added: “Since mobile devices became a major application segment for DRAM market, shipments and average memory content of smartphones have been closely connected with the relationship between the overall supply and demand. Hence, the current wave of price surge will test smartphone makers’ ability to effectively manage their supply chains. At the same time, the smaller brands will bear heavier cost pressure.”
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