Chip boom on its final stretch? Investors concerned as memory chip price fell

Gold ETF

After an outstanding year and a half span of price surges, an unexpected plunge in some memory price, followed by Samsung Electronic Co’s upsetting profit estimate, is causing unease among the investors who had bet on the chip boom expecting it to last at least another twelve months.

In between news that the market has begun losing grip, high end flash memory chips, which are used predominantly in smartphones, began to drop in price, about 5 percent in the fourth quarter. According to some analysts, the industry’s growth rate will drop by half or more this year to 30 percent.

This has caused Samsung shares to fall 7.5 percent in the previous week, while its home competitor SK Hynix dipped 6.2 percent. However, analysts state that the possibility of a sudden crash is unlikely, and that 2018 should be a significantly stable year for chipmakers.

The memory chip industry, which is valued at $122 billion, has enjoyed a groundbreaking boom since middle of the year 2016, growing at least 70 percent in 2017 alone thanks to the strong growth of smartphones and cloud services that needs more versatile chips than can handle more data.

According to Yuanta Securities Korea analyst Lee- Jae-yun, memory chips will likely experience a progressive price decline in the year 2018 in the case of a sustained strong demand.

However, a growth of 30 percent is considered as a robust gain in an industry popular of its volatility, and the market is still on track for its longest boom after dropping 6 percent in the year 2016.


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