Let’s have a look at what the current market conditions and what a lot of chip history can tell us about how the year is likely to turn out.
Don’t get me wrong. Although chip makers are suffering, the market’s not bad for everyone. Those OEMs who suffered from sky-high DRAM prices in 2018 were thrilled to get some price relief in 2019. These OEMs also need to know the 2020 outlook: Will today’s respite from high prices last, or are chip prices about to return to unbearable heights?
The chart (Fig. 1) illustrates spot market prices for DRAM and NAND flash for the past couple of years. These prices are important to anyone in the semiconductor community, even those who neither make nor use DRAM or NAND flash, because they are the drivers of the market’s notorious revenue swings. (More on this later.)
NAND flash prices, shown with the red line and measured on the left vertical axis, began to tumble in early 2018, and by the middle of this year they had dropped 79% from their 2017 peak to flatten out at cost. DRAM prices, illustrated with the black line, and measured on the right vertical axis, climbed in 2018 but began to collapse late in the year. By December they had fallen 60%.
The net result of these price falls is that 2019 DRAM revenues are likely to be down by 41% once 2019 has been tallied up, and NAND flash revenues will be found to have fallen by 18%. These two are big contributors to the 12% total semiconductor revenue decline that 2019 is likely to be remembered for once the year’s books have been closed.