Looking ahead to next year’s DRAM market, the annual demand and supply bit growth rates are projected around 23% and 25% respectively, according to Avril Wu, research director of DRAMeXchange. Supply will still outpace demand by bit , and average sales prices will continue to drop. Whether suppliers can turn a profit will mainly depend on their progression in technology migration and product-mix strategies.

SK Hynix and Micron’s migration to the 20/21nm technology will be the main driver of bit output growth in the DRAM industry during 2016. As for wafer capacity, Samsung may embark on a limited expansion of Line17 fab next year, and SK Hynix’s new fab, M14 will also gradually increase to a certain level of capacity. Nonetheless, the total wafer capacity for the entire 2016 will be the same as that for 2015.

The share of DDR4 in the overall DRAM production continues to rise due to the shifting market demand and the maturation of the 20nm technology. The server DRAM market is where the adoption momentum of DDR4 is at its strongest this year. By the fourth quarter, the server DRAM market has become the first application segment where DDR4 replaced DDR3 as the mainstream.

Moreover, new PCs and notebooks equipped with Intel’s Skylake processors will also be carrying the next-generation DRAM. DRAMeXchange therefore expects that mass shipments of Skylake-based PCs and notebooks in the second quarter of 2016 will make DDR4 the dominant memory solution in the PC/notebook market.

Smartphones’ memory specs have advanced further on account of rising penetration of LPDDR4 manufactured on the 20nm process. The standard memory specs for flagship smartphones are 3GB/4GB , excluding Apple’s iPhones. By the second quarter of 2016, smartphones with memory density of 6GB will be available on the market and mobile DRAM demand will surge correspondingly.

Likewise, the server market has benefitted from the rising penetration of DDR4 built on the 20nm technology. Falling production costs of high-density 32GB/64GB modules allow DRAM suppliers to stimulate demand by offering more flexible pricing strategies.

China will stay on course with its agenda to build a domestic semiconductor sector. Manufacturing of memory products will also remain as an important part of the plan. However, the top three DRAM suppliers have a very strong oligopolistic grip over the market.

Furthermore, they are unlikely to work closely with the Chinese because they do not want new competitors to emerge and aggravate the oversupply problem. Hence, Chinese companies entering the DRAM market next year will face hurdles that are more difficult to overcome compared with markets of other semiconductor products.