After an 18 month boom, there has been a sudden drop in some memory prices, which is causing jitters among investors who had thought the chip boom would last at least another year.
Prices of high-end flash memory chips,dropped nearly five percent in the fourth quarter and some analysts now expect the industry?s growth rate will fall by more than half this year to 30 percent.
That led shares in Samsung to dip 7.5 percent last week, while its home rival SK Hynix fell 6.2 percent. But analysts say that there is unlikely to be a sudden crash, and that 2018 should be a relatively stable year for chipmakers.
Yuanta Securities Korea analyst Lee Jae-yun told investors that memory chips will likely see a gradual price decline in 2018 if demand remains strong and appetite from servers holds.
However 30 percent growth is still a strong gain in an industry known for volatility, and the market is still on course for its longest ever boom after shrinking six percent in 2016.
The supply of NAND flash memory chips, in particular, will grow 43 percent this year, up from last year?s 34 percent, causing prices to drop by about 10 percent, brokerage Nomura estimates.
Nomura expects growth in output will be largely led by the likes of Western Digital, Toshiba and Micron as they seek to catch up with top-ranked Samsung, which controls about 40 percent of the flash memory chip market.
Smartphone vendors have been including more memory in their phones and charging more for them, allowing them to weather last year?s price surge, analysts say.
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