This article originally appeared on Real Money on Jan. 23, 2017.

Markets can be slow at times to recognize the full impact massive consolidation can have on how an industry operates. That was the case for the DRAM industry a few years ago, and to a lesser extent for the hard-drive industry.

The same now holds for a chip industry that has seen a giant M&A wave over the past three years -- one that's far from over. This, along with a few other factors, lays the groundwork for 2017 to be much stronger for the industry than 2016 was.

Research firm Gartner just forecast global semiconductor industry revenue will rise 7.2% in 2017 to $364.1 billion. That's far better than the estimated 1.5% growth recorded in 2016 and 1.9% decline seen in 2015, not to mention the IMF's forecast for 3.4% 2017 global GDP growth.

What's particularly interesting here is the extent to which Gartner sees higher average selling prices (ASPs) boosting chip sales. Much of this has to do with memory prices, as both DRAM and NAND flash memory prices are on a cyclical upswing. But Gartner also forecasts ASP gains for markets such as application-specific standard products (ASSPs), discrete semiconductors (e.g., basic semiconductor devices such as diodes and transistors) and analog chips.

It's hardly a coincidence that there has been a slew of M&A deals involving prominent names servicing one or more of the aforementioned markets. Examples include Microchip's(MCHP) - Get Report acquisition of Atmel, ON Semiconductor's (ON) - Get Reportacquisition of Fairchild Semiconductor, Infineon's purchase of International Rectifier and Cypress Semiconductor's (CY) - Get Reportmerger with Spansion.

And the M&A wave clearly isn't letting up. Analog Devices(ADI) - Get Report is set to buy analog/mixed-signal chip peer Linear Technologies for $14.8 billion, and Qualcomm (QCOM) - Get Report is due to acquire top microcontroller and automotive chip supplier NXP Semiconductor (NXPI) - Get Report for $47 billion.

In addition to higher prices, the growth seen in the amount of chip content found in the average car is also a tailwind. Autonomous driving technologies, the adoption of hybrid and fully electric cars and the spread of advanced infotainment/connectivity systems are each serving to grow an automotive chip market now worth over $30 billion, and expected to be worth a lot more in a few years. Chip content is also growing in many other embedded devices, as everything from home appliances to industrial equipment to medical devices become more intelligent and/or connected.

Meanwhile, Skyworks' (SWKS) - Get Report recently-announced upbeat earnings and guidance, together with expectations for a high-profile iPhone 8 launch this fall, give reasons to think the giant mobile chip industry will see a moderate growth pickup this year. And while PC chip sales are unlikely to see much growth, simply having flat sales growth (or close to it) would be a welcome change relative to 2016. And given recent data, that might just be in play.

Macro trends could also benefit the industry. BlueFin Research just reported Asian chip sales are tracking above expectations thanks to strong Chinese demand believed to be the result of Beijing's growth-oriented monetary policies. In the U.S., the Trump Administration's planned attempt to boost GDP growth with the help of tax cuts and heavy spending could also provide a lift, though that's more of a wait-and-see story for now.

To a degree, good industry conditions have already been priced into chip stocks: The Philadelphia Semiconductor Index isn't far from the highs it set in late December, and is up 36% over the past two years. But given there are still plenty of names trading for less than 15 times forward earnings, there could still be room to run for the group as M&A and favorable business conditions continue boosting the industry's profitability.

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