Soaring Prices of Key Components Are Starting to Squeeze the Margins of Smartphone Makers
March 6, 2017 | TrendForceEstimated reading time: 3 minutes
The markets for key components used in smartphones have experienced rising prices since the second half of 2016 because of tightening supply. TrendForce’s latest analyses indicate 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.
ASP of Mobile DRAM to increase by more than 10% annually due to undersupply
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.
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.
Looking at the price trend, the tight supply situation in the entire DRAM market will keep pushing up mobile DRAM prices through 2017, with the annual increase in ASP surpassing 10%.
Prices of eMMC and 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.
Global shipment share of smartphones with AMOLED display to reach 27.7% this year despite high AMOLED panel prices
In the market for smartphone displays, AMOLED is gaining more prominence as Apple and major brands fuel its demand and the overall production capacity for the display technology continues to expand. Under this context, WitsView projects that the share of AMOLED models in the annual global smartphone shipments will grow from 23.8% in 2016 to 27.7% in 2017. The production capacity of LTPS LCD panels is also increasing, and the global shipment shares of smartphones with LTPS LCD display is projected to advance from 31.5% in 2016 to 34.8% in 2017. As for the established a-Si display, the technology is gradually losing its position in market due to the competition from AMOLED and LTPS LCD. WitsView estimates that the global shipment share of smartphones featuring a-Si display will contract to 37.4% in 2017.
Samsung Display (SDC) this year will divide most its AMOLED panel capacity between its group company Samsung and Apple. The panel maker has very limited ability to satisfy the rising demand from other brands. Therefore, TrendForce believes that prices of AMOLED panels will most likely stay on an uptrend in the second half of 2017 because of persisting undersupply. On the other hand, prices of LTPS LCD panels for smartphones will begin to drop gradually starting in the second quarter on account of the overall production capacity expansion.
Smartphone brands are under pressure to control costs as rising component prices are affecting their bottom lines
TrendForce further points out that the soaring prices of key components are starting to impact smartphone makers’ ability to control the costs of their products and maintain healthy profit margins. For some Chinese brands, their strategy of enticing consumers with low-priced, high-specs devices will be less effective this year. Even if selling “affordable premium” products will lead to market share gains, profits will be eroded by high component prices.
Suggested Items
Nanotechnology Market to Surpass $53.51 Billion by 2031
04/25/2024 | PRNewswireSkyQuest projects that the nanotechnology market will attain a value of USD 53.51 billion by 2031, with a CAGR of 36.4% over the forecast period (2024-2031).
Technica USA Presents Inaugural Supplier Alliance Award at IPC APEX EXPO 2024
04/24/2024 | Technica USADuring IPC APEX EXPO 2024, Technica USA took the opportunity to thank all of their supply partners that made the effort to join them for the exhibition in their booth, as well to all of our SMT partners that had their own booths, with the latest in automation and process technology.
IDTechEx Report Unveils 3D Electronics Status and Opportunities
04/22/2024 | PRNewswire3D electronics is an emerging manufacturing approach that enables electronics to be integrated within or onto the surface of objects. 3D electronic manufacturing techniques empower new features, including mass customizability, greater integration, and improved sustainability in the electronics industry.
IDTechEx Examines the Opportunities for Wearables in Digital Health
04/19/2024 | IDTechExIDTechEx’s report, “Digital Health and Artificial Intelligence 2024-2034: Trends, Opportunities, and Outlook”, covers this ongoing trend in the consumer health wearables market and includes analysis of the opportunities and roadmap for biometric monitoring.
Real Time with... IPC APEX EXPO 2024: Pluritec's Expansion and Growth in the North American Market
04/19/2024 | Real Time with...IPC APEX EXPONicola Doria, president of Pluritec, discusses the company's strategic focus on the North American market, their investment in a new sales organization, service expansion, and a new process integration line. The conversation also covers market response and future installations, as well as Pluritec's new partnership with IEC.