Worldwide semiconductor revenues are forecast to total US$386 billion in 2017, an increase of 12.3% from 2016, according to Gartner. The prediction is up from the research firm's previous estimate of a 7.2% increase.

Favorable market conditions that gained momentum in the second half of 2016, particularly for commodity memory, have accelerated and raised the outlook for the market in 2017 and 2018, Gartner indicated. However, the memory market is fickle, and additional capacity in both DRAM and NAND flash is expected to result in a correction in 2019.

"While price increases for both DRAM and NAND flash memory are raising the outlook for the overall semiconductor market, it will also put pressure on margins for system vendors of smartphones, PCs and servers," said Jon Erensen, research director at Gartner. "Component shortages, a rising bill of materials, and the prospect of having to counter raising ASPs will create a volatile market in 2017 and 2018."

PC DRAM pricing has doubled since the middle of 2016, Gartner identified. A 4GB module that cost US$12.50 has jumped to just under US$25. NAND flash ASPs increased sequentially in the second half of 2016 and the first quarter of 2017. Pricing for both DRAM and NAND is expected to peak in the second quarter of 2017, but relief is not expected until later in the year as content increases in key applications, such as smartphones, have vendors scrambling for supply.

"With memory vendors expanding their margins though 2017, the temptation will be to add new capacity," said Erensen. "We also expect to see China make a concerted effort to join the memory industry, setting the market up for a downturn in 2019."

Unit production estimates for premium smartphones, graphics cards, video game consoles and automotive applications have improved and contributed to the stronger outlook in 2017, Gartner noted. In addition, electronic equipment with heavy exposure to DRAM and NAND flash saw semiconductor revenue estimates increase. This includes PCs, ultramobiles, servers and SSDs.

"The outlook for emerging opportunities for semiconductors in IoT and wearable electronics remains choppy with these markets still in the early stages of development and too small to have a significant impact on overall semiconductor revenue growth in 2017," said Erensen.