Components undersupply to squeeze smartphones' margins: reports TrendForce

March 02, 2017 // By Julien Happich
The markets for key components used in smartphones have experienced rising prices since the second half of 2016 because of tightening supply, according to market analysis firm TrendForce.

TrendForce reports that prices of mobile DRAM, mobile NAND Flash products and AMOLED panels will continue to climb through 2017. As smartphone brands will be raising hardware specifications of their products, they are also revealing their intentions to build up their inventories in advance. High prices of AMOLED panels and memory components during this entire year will constrain smartphone makers’ ability to attain greater profits.

TrendForce notes that the memory content in smartphones will continue to increase in 2017 as device makers introduce the latest upgrades such as dual-lens camera, video streaming and services that are based on artificial intelligence technologies. Flagship smartphones with 6GB or even 8GB memory are going to arrive on the market during the first half of this year. This undersupply will drive the ASP of Mobile DRAM to increase by more than 10% annually.

While LPDDR4 is now the market mainstream, mobile DRAM suppliers have introduced LPDDR4X – a variant that requires less voltage than the standard solution. As suppliers have yet to make clear price differentiation between LPDDR4 and its more efficient variant, numerous smartphone brands have taken the opportunity to adopt the latter solution. Prices of eMMC (embedded Multi-Media Controller) and Universal Flash Storage (UFS) products will keep climbing on the back of growing demand to the end of 2017. Similarly, the trend of increasing memory content per box is going to lift eMMC and UFS markets.

Chinese smartphones have ratcheted up the competition by matching storage specifications of their products with those of the mainstream iPhone devices. As a result, most flagship devices on the market have advanced from the 32GB/64GB options to 64GB/128GB options. This competitive trend has also spread beyond the high-end segment, requiring smartphone makers to expand the storage capacity for their mid-range and low-end models as well.

TrendForce also expects the accelerated adoption of UFS in 2017. UFS, which is an interface standard that offers better performance than eMMC, was first adopted by Samsung in 2015 and later by other brands. TrendForce’s recent analysis puts the adoption rate of UFS in the smartphone market around 20% this year on account of more high-end application processors supporting the interface standard.

In terms of prices, eMMC and UFS products are nearing their peaks and are expected to see a more moderate sequential hike of 5~10% on average in the second quarter. Still, further price increases are expected in second half of 2017 due to the tight NAND Flash supply.