The pay TV set-top sector is among a number of device business being negatively impacted by spiking global demand for dynamic random access memory (DRAM) chips.
With Google, Facebook, Amazon and other U.S. internet giants aggressively building out data centers in the second half of 2017, the global supply of memory chips is tight. The leading set-top box maker in the world, Arris, said during its fourth-quarter earnings call last month that it’s making adjustments to respond to the DRAM shortage, including renegotiating prices with operator clients.
”I mean, hell, we're down $100 million on EBIDTA from that revenue, and indeed into this year, we anticipate that we'll have some more [effects from high DRAM pricing],” said Arris CFO David Potts yesterday, speaking at a Raymond James investor event.
According to Digitimes, the global production value of the DRAM industry is estimated to surge over 30% to $96 billion in 2018, with DRAM prices set to rise 5-10% in the first half of 2018.
According to Gartner, the price of DRAM for personal computers has doubled since the middle of 2016. A 4GB module is now $25, increasing from $12.50.
DRAM isn’t the only hardware spiking in price, with costs for flash memory, batteries and displays also increasing globally, and driving up the consumer prices of PCs, smartphones and tablets.
However, relief is expected in 2019. According to Jon Erensen, research director for semiconductors at Gartner, prices for memory chips will plummet next year, with manufacturers already working to increase global production.
For its part, Arris isn’t stepping away from the global pay TV set-top business, which generates 45% of its sales. But it is emphasizing new growth areas, such as the wireless business being built around its recent Ruckus purchase.