Leading smartphone makers may have to increase prices because they have been too successful. By creating a demand for premium features like AMOLED screens, more RAM, faster UFS storage, and stronger materials, they have created shortages of these products.
China-based market intelligence provider Trendforce has seen the old supply and demand paradigm raise its head with RAM increases of 10%, UFS rises by 20% and AMOLED screen demand skyrocketing to 27.7% – all because leading smartphone makers designed their devices some 18 months ago to use these premium components on the assumption that they would get cheaper, not dearer, over the development period.
Trendforce says that consumer expectations are driving the premium features, but they are unwilling to pay more for smartphones unless price increases happen across the board.
It adds that the soaring prices of key components are starting to affect smartphone makers’ ability to control the costs of their products and maintain scant profit margins. For some Chinese brands, the strategy of enticing consumers with low-priced, high-spec devices will be less effective this year and, while it may lead to market share gains, profits will be eroded by high component prices.
{loadposition ray}A summary of the report is below.
Average selling price of mobile DRAM to increase by more than 10%
RAM size will continue to increase in 2017 as device makers introduce the latest upgrades such as dual-lens camera, video streaming, and services that are based on artificial intelligence technologies. Flagship smartphones with 6GB/8GB of memory are going to be the standard during the first half of 2017.
While LPDDR4 is now the market mainstream, mobile DRAM suppliers have introduced LPDDR4X – a variant that requires less voltage than the standard solution. As suppliers have yet to make clear price differentiation between LPDDR4 and its more efficient variant, numerous smartphone brands have taken the opportunity to adopt the latter solution pushing its price up.
Prices of eMMC and UFS products will keep climbing on the back of growing demand
Similarly, the trend of increasing memory content per box is going to lift eMMC and UFS markets. Chinese smartphones have ratcheted up the competition by matching their storage specifications with those of the mainstream iPhone devices – most flagship devices on the market have advanced from the 32GB/64GB options to 64GB/128GB options. This competitive trend has also spread beyond the high-end segment, requiring smartphone makers to expand the storage capacity for their mid-range and low-end models as well.
TrendForce expects a 20% accelerated adoption of UFS, first adopted by Samsung in 2015 because high-end processors demand this higher performance interface.
eMMC and UFS products are nearing their peaks and are expected to see a more moderate sequential hike of 5-10% on average in the second quarter. Still, further price increases are expected in the second half of 2017 due to the tight NAND flash supply.
Global shipment share of smartphones with AMOLED display to reach 27.7% this year despite high AMOLED panel prices
AMOLED is gaining more prominence as Apple and major brands fuel its demand and the overall production capacity for the display technology continues to expand. Trendforce WitsView projects that the share of AMOLED models in the annual global smartphone shipments will grow from 23.8% in 2016 to 27.7% in 2017.
The production capacity of good quality LTPS LCD panels is also increasing, and the global shipment shares of smartphones with LTPS LCD display is projected to advance from 31.5% in 2016 to 34.8% in 2017.
The established standard a-Si display technology is gradually losing its position in the market due to the competition from AMOLED and LTPS LCD. WitsView estimates that the global shipment share of smartphones featuring a-Si display will contract to 37.4% in 2017.
Samsung Display this year will divide most its AMOLED panel capacity between its group company Samsung and Apple. The panel maker has very limited ability to satisfy the rising demand from other brands.
TrendForce believes that prices of AMOLED panels will most likely stay on an uptrend in the second half of 2017 because of persisting undersupply. On the other hand, prices of LTPS LCD panels for smartphones will begin to drop gradually starting in the second quarter because of the overall production capacity expansion.
There are also price pressures on aircraft grade aluminium for the chassis, protective glass, batteries, and shortages of next-generation processors. While manufactures will hold off as long as they can, particularly to see what Samsung, Sony, and Apple do, it is inevitable that prices will increase this year.