This year will be strong for chips, says BOK

The global chip industry is anticipated to enjoy another year of strong demand, the central bank said Sunday, claiming local chipmakers should still focus on building capabilities for non-memory products to prepare for future developments.

“The industry-wide boom, which started in the second half of 2016 for DRAM products, will continue throughout the first half of 2019 and gradually fade out afterwards,” the Bank of Korea said in a report. The bank, however, said rising demand from self-driving cars and artificial intelligence may prolong the boom further.

The global chip industry was estimated at $412.2 billion in 2017, up 22 percent from a year earlier. Memory chips, such as DRAM and NAND flash products, accounted for 30.1 percent of the global chip market, with DRAM accounting for 58.7 percent.

Robust earnings for chipmakers came as the supply failed to catch up to soaring demand, especially for smartphones and big-data solutions. The central bank, however, said slowed growth of advanced economies may hinder the growth in demand for DRAM soon.

Rising competition by Chinese rivals, along with increased supply from traditional brands, such as Samsung and SK Hynix, also stand as potential hurdles, the bank said.

Considering the nature of the chip industry, however, the bank said it is unlikely that the market will face an oversupply of chips.

The central bank said local chipmakers should expand investment of non-memory chip products, as the recent boom cannot continue for years.

Korean currently depends heavily on chips, with the sector accounting for 17 percent of the nation’s exports. Samsung Electronics is presumed to have raked in one-third of its first-quarter operating profit from chips alone.

The BOK said chipmakers should improve their capabilities in the non-memory segment, which is less affected by economic volatilities, by diverting earnings raked in from the latest boom into research and development and facilities upgrades. Yonhap