NEW TAIPEI CITY, Taiwan -- The president of Nanya Technology, a big Taiwanese memory chip maker, on Tuesday said the price of dynamic random access memory chips will continue to rise until the first quarter of 2018, thanks to robust demand from strong sales of data center servers, mobile gadgets and consumer electronics.
"DRAM prices still have room to go up in the first quarter of 2018, a traditional low season for memory chips, thanks to healthy demand and tight supplies," Lee Pei-Ing said, adding that the price would at hold steady through 2018, and that the entire industry looks to be in good shape for next year.
The average price of DRAM chips, which are found in nearly all electronic devices, has climbed 50% since the third quarter of 2016, and may rise another 20% in the second half of 2017, according to Avril Wu, an analyst at Taipei-based DRAMeXchange.
Wu also echoed Lee's view that DRAM prices will stay robust. Her organization expects prices may rise another 5% in the first three months of 2018 and move 10% higher for all of next year.
Keep chipping away
Although Nanya, unlike many Taiwanese tech companies, is not a supplier to Apple, it sells to Chinese midrange smartphone makers and networking equipment providers such as Huawei Technologies and ZTE, and to a wide range of PC and consumer electronics companies.
The most important growth driver of DRAM demand in the coming years will be from data center servers, mainly driven by artificial intelligence applications such as smart vehicles, according to Nanya's Lee.
"It's a new trend, starting from this year, that DRAM chips used in data center servers have replaced smartphones to become the strongest growth driver. ... New data centers in future AI computing really need greater DRAM capabilities to run more smoothly and efficiently," said Lee.
Nanya's smaller Taiwanese peer Winbond announced at the end of September that it will spend 330 billion New Taiwan dollars ($10.92 billion) to build a memory chip plant in Kaohsiung, in southwest Taiwan, to meet strong expected demand. Winbond's new factory is scheduled to go into production in 2020.
For July to September, Nanya saw its revenue rise 30% on the year to NT$13.29 billion. The company's gross margin and operating margin, at 44.2% and 31.9%, respectively, were big improvements from 31.1% and 16.7% a year earlier. Its net profit for the quarter was NT$8.57 billion.
Nanya's Lee said his company's margin may continue to improve in the current quarter, and see more upside in the first quarter of 2018.
"Next year, most key global DRAM suppliers will not increase output too much, and the overall output will grow only 20%. ... That makes the whole market balanced, and there is no oversupply issue in sight at least to the end of 2018," said Sean Yang, an analyst at Shanghai-based CINNO Research.
Nanya shares have surged 78% so far this year, closing at NT$86 on Tuesday ahead of the earnings report.