Smartphone component prices set to soar, analysts predict

Many manufacturers are expecting to experience a potentially nervy couple of months as a rise in the cost of crucial components, coupled with tightening supply chains, could lead to a reduction in operating margins.

Analysis by Trendforce, the global market intelligence firm, has indicated that the price of mobile DRAM, NAND flash products and AMOLED screens will gradually increase throughout this calendar year. To compound this problem, most of the industry’s major players are expected to be releasing new state-of-the-art models in the coming months.

As is always the case with technology, these new flagship devices will feature enhanced capabilities over previous models and will make use of in-demand, cutting-edge components. Apple and Samsung – two of the biggest smartphone manufacturers – have already built up their inventories in order to prepare themselves for big production runs. This, in turn, has led to lead times being extended and supply chains around the world are now being squeezed as the availability of parts diminishes.

Memory is one market area that is expected to be especially volatile this year. As newer flagship devices require 6GB – or even 8GB in some cases – to handle dual-lens cameras, artificial technologies and video streaming services, the demand for DRAM is likely to be sky high.

Of course, as demand increases, so too does its price: Trendforce’s analysts believe that the cost of DRAM will go up by around 10% this year.

But this rise is not just fuelled by the traditional big players in the sector. Chinese smartphone manufacturers are now increasingly competing with the likes of Apple and Samsung. As well as putting pressure on the memory market, the addition of new players and models to the smartphone arena is also having an impact of UFS (Universal Flash Storage) products.

UFS is an interface that offers better performance over its predecessor, eMMC (embedded Multi-Media Controller). First adopted by Samsung in 2015, UFS is becoming widely used and its use within the smartphone sector is set to increase by 20% in 2017, driving prices upwards in the process.

Although not necessarily something that you’d consider to be an electronic component, demand for AMOLED screens will go up by nearly 30% as the technology becomes widely adopted. WitsView, a market research firm that specialises in the LCD screen sector, believes that the market share of AMOLED screens will grow from 23.8% to 27.7% this year as both Apple and Samsung release new models.

This will cause problems for OEMs, many of them who operate outside of the smartphone sector, because there is a dominant manufacturer of AMOLED screens, Samsung Display (SDC)

SDC has already divided its production category between its sister company Samsung and Apple, leaving very little availability for the general market.

For manufacturers and buyers who make use of electronic components and parts utilised in mobile devices, it looks to be a potentially tricky year ahead.

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