Memory chip revenue climbs further

After years of consolidation, chipmakers are riding high on rising demand, thanks to billions of connected devices.

May 10, 2017

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After years of consolidation, chipmakers are riding high on rising demand, thanks to billions of connected devices.

Samsung's position in the memory market makes it a main beneficiary of recent increases in demand.
Source: Samsung

Though the advancement of microprocessors is slowing in some respects as companies approach the physical limitations of Moore's Law, the semiconductor industry is still thriving. A decline in revenue back in 2015 caused some concern for the sector. In 2016, though, the industry saw growth return amid numerous mergers and acquisitions. Now, the proliferation of all kinds of smart or connected devices is driving up demand and chip prices.

Quotes for memory chips are surging. Data from DRAMeXchange shows NAND rates rose 27 percent and that of DRAM 80 percent in the period from July 2016 to March 2017. The Wall Street Journal notes that Samsung is the primary benefactor of these trends, since the company is a major chip supplier. Memory chips were 64 percent of the company's operating profit in the first quarter and share prices have gone up 30 percent in six months.

Higher chip quotes are benefiting the entire industry. Companies such as SK Hynix, Applied Materials and Lam Research have seen revenue and share prices climb.

One of the big reasons for the rise in chip demand is connected devices, which are growing at a rapid rate. In 2014, there were already 3.8 billion connected devices, which includes everything from smartphones to TVs. As smart homes become more popular and people start connecting everyday devices to the internet in greater numbers, memory chips will start to be embedded in seemingly everything. Gartner projects there will be 20.4 billion connected devices by 2020.

A decade of consolidation seems to have paid off for the industry. China semiconductor companies are looking to shake up the market again, though. They are not close to competing with foreign companies yet, but China is investing heavily in the sector. For now, chip prices are likely to increase for the foreseeable future as more devices come online.

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