By 2020, the memory market is predicted to reach approximately US$170 billion. NAND and DRAM is set to account for 97% of this market, driving the growth of the semiconductor industry, and representing 30-35% of the revenue of the top semiconductor companies globally.
With such a promising outlook, here are five key factors to consider:
1. The flash market is no longer cyclical
The memory market has historically been considered cyclical, with the global economy and revenue growth of the industry being positively correlated, following the classical principles of supply and demand. Memory is thought of as a raw material, with demand higher in periods of economic expansion and growth, and lower in periods of crisis.
Consumer electronics represent a big share of the overall memory market. However, rising demand from less seasonal markets, like automotive and enterprise, are changing this behavior. There are no Black Fridays for a data center, and how likely are you really to buy a car as a Christmas present instead of a tablet or a smartphone? This diversification in the memory industry also has technological implications, as flash memory in these markets usually have different requirements. They must, for example, support extreme temperatures or meet different performance expectations. This memory is less of a commodity, going into devices that are expected to last a minimum of ten years.
Additionally, OEMs have learned to be more rational and disciplined in their purchases. As the investment firm Zynath points out, they have started to cut back and control costs when memory prices peak, but they buy as soon as the prices start to come down a little. This does not represent a risk in the current times, due to an existing oversupply of memory.
All these factors are turning a highly cyclical market into a more stable one, with less severe troughs and peaks.
2. CAGR OF 4%
The revenues for NAND flash are expected to grow at a compound annual growth rate of 4% during the next five years. This growth is driven by the data explosion we are experiencing – IDC estimates the global datasphere will grow to 175 zettabytes by 2025 – but because of the changes in the industry’s cyclicality, fewer ebbs and flows are expected during those five years.
3. Comparing flash memory vendors
Price per gigabyte is not a good indicator of the memory market or vendors’ performance. Sites like DRAM eXchange and China Flash Market are very popular sources for checking spot prices, but contract prices are often overlooked. Contract prices are agreed upon, usually for memory types that have special characteristics, like automotive grade memory.
It’s also important to remember that flash memory vendors are not selling bits, they are selling chipsets and memory modules. Economies of scale affect production costs; manufacturing a 4 GB module costs practically the same as manufacturing one that is 128 GB, yet the latter are sold at a far higher price. Instead of dollars-per-gigabyte, better indicators for assessing a flash memory vendor include application workloads, ability to deliver, business model (fabless or not), quality processes, and supply chain members.
4. The role of China in the memory landscape
China will play a more major role in the supply ecosystem. China’s market potential, combined with the Made in China 2025 program, is bringing substantial sources of funding and investment into the country. China wants to grow their domestic capabilities and level of competitiveness, in order to shrink the gap between their local production and consumption, and to reduce their semiconductor and memory imports from other countries.
The goal is not yet to export, but to support their domestic demand long-term. The country has been adding more capacity to their semiconductor and memory factories, while opening new facilities and manufacturing companies. Yangtze Memory, for example, is a state-backed chipmaker, and beneficiary of the National Semiconductor Investment Fund, which has just started its production of 3D NAND flash memory chips. Additionally, tariffs and new trade policies are a source of concern, with several multinational chipmakers owning labs and foundries in the country – some large companies may eventually consider shifting their production away from China.
5. Automotive, eSports, AI, and 5G are major drivers
At Tuxera we’ve talked a lot in the past about data needs for the automotive market, especially concerning autonomous driving. According to IHS, Autonomous vehicles are expected to reach approximately 600,000 units by 2025. The rise of eSports – with 4.5B USD of investment in 2018 – is driving up sales of the most expensive lines of desktop and gaming computers.
At the same time, artificial intelligence requires an enormous amount of memory to store all those models and datasets, and 5G will enable increased data generation and data sharing, affecting all industries in one way or another. In consumer electronics, for example, users are increasingly sharing video content over pictures, requiring more storage space. In retail, meanwhile, PoS are getting smarter, and the proliferation of third-party apps on connected devices are driving up data storage needs.
It’s undeniable that flash memory storage needs are growing. In the next five years, the memory market is set up to see significant shifts, driven by structural changes in the industry, the development of rising technologies, and China’s growing memory investments. In order to stay ahead of the curve, players at every level of the flash memory market need to be aware of these factors.
Eva Rio is our Head of User and Market Research at Tuxera, the leading provider of quality-assured embedded storage management software and networking technologies. She conducts research and analysis in topics such as flash memory and storage markets, automotive technology, consumer electronics, and industrial verticals, as well as identifying potential areas of expansion for the company. Eva holds a M.Sc. in Information Systems from Åbo Akademi, and a M.Sc. in Service Design and Engineering from Aalto University, both in Finland.
 Gartner Says Four Chinese OEMs Were Among the Top 10 Global Semiconductor Customers in 2018. Gartner. (February 2019).
 Semiconductors – the Next Wave: Opportunities and winning strategies for semiconductor companies. Deloitte. (April 2019).
 Status of the Memory Industry 2019. Yole Développement. (2019)