With supplies tight, memory chipmakers head into ultra-super-cycle

The global #memorychip industry is heading into what's been dubbed an ultra-super-cycle, as the challenge of making chips smaller yet more efficient has created supply bottlenecks, while there is soaring demand for data storage - from smartphones and artificial intelligence to autonomous driving and the Internet of Things. Chipmakers and analysts predict the price rally - the average price of benchmark memory chips rose 26-31 percent last year - will continue this year as supplies remain tight. "We expect an ultra-super-cycle instead of just a super-cycle in the 2017 DRAM industry," said CW Chung, an analyst at Nomura, referring to memory chips used in smartphones and computers for short-term data processing and storage. That's left gadget makers scurrying to secure stable supplies, and distributors reporting shipment delays, while chipmakers enjoy bumper earnings. For example, Samsung Electronics, the world's biggest memory chipmaker, this week reported record quarterly operating profit of 4.95 trillion won ($4.26 billion) at its chip business, and its stock price has risen 77 percent over 12 months, a period that includes one of the consumer electronics industry's most damaging product faults. "As of the end of the fourth quarter, our DRAM inventory in particular has gotten tight compared to the previous period after we actively responded to demand," Chun Se-won, Samsung Electronics senior vice president, said after the earnings. Samsung did not detail its inventory levels, but some analysts reckon its DRAM inventory level fell to less than a week at end-December, from nearer a month a year ago. BNP estimates the industry-wide inventory of NAND flash memory chips, used for longer-term data storage, is also less than one week. Toshiba, which may sell part of its core chip business for unrelated financial reasons, said it is receiving orders beyond its capacity for NAND chips, and SK Hynix, while meeting orders for now, warned that an industry-wide shortage of NAND chips will likely persist this year. Leading Chinese smartphone makers such as Huawei [HWT.UL] and ZTE declined to comment on chip supplies. Alibaba-backed Meizu said it has no problems in its smartphone launch or shipment plans. "We have a long-term agreement with our suppliers that ... guarantees more than 3 months of supply at any given moment," global branding manager Ard Boudeling told Reuters.

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