According to well-known analyst firm ICinsights, an important issue facing the IC industry in the second half of 2019 is when the DRAM market will rebound. Any rebound in the market will be driven in part by the available manufacturing capabilities. ICinsights further pointed out that after the huge DRAM capital expenditures in 2017 and 2018, how many new capacity will actually go online, and how much DRAM price (per bit price) will fall due to the emergence of these capacity?
According to ICinsights, three major DRAM suppliers – Samsung, SK Hynix and Micron – generally believe that DRAM production will grow at a rate of about 20% per year in the next few years. Figure 1 shows Micron's view of the capital expenditures required to increase DRAM bit shipments each year (Micron's 2018 analyst and investor events data) compared to IC Insights' DRAM capital expenditure history and forecast data.
As new and very complex DRAM technologies require more fab equipment and more fab space to accommodate these devices, Micron estimates that the industry capital needed to increase DRAM capacity by 20% will be from 2015. The $8 billion is increased to $18 billion in 2018! Actual DRAM spending in 2016 was slightly lower than the investment required to increase the bit rate by 20%, which is comparable to the demand in 2017.
However, in 2018, capital expenditures in the DRAM market reached $23.7 billion, which is 32% higher than the $18 billion required to increase 20% of DRAM capacity. It is worth noting that in 2018, the number of DRAMs increased by only 13%, and is expected to increase by 17% in 2019.
Too much capital expenditures often lead to overcapacity and subsequent price weakness, which is magnified by weak economic conditions and weak end-user demand. With Samsung, SK hynix and Micron actively invested in upgrading/increasing DRAM capacity last year, and economic and trade uncertainty continues to penetrate the global market, IC Insights believes that the risk of excessive DRAM capacity and subsequent price weakness will be in 2019 The second half of the year continues to be reflected.
IC Insights expects actual DRAM capital expenditures in 2019 to be lower than the maintenance required to maintain sales growth of 20%. This can offset the overspending in 2018 and help to return to the DRAM market's supply and demand balance by 2020.