Memory Chip Shortage Driving Up Smartphone and Electronic Device Prices Due to AI Demand

Not only smartphones but laptops and other electronic devices are expected to experience price increases in the coming year.

Japan:

Consumers may face higher prices for mobile phones, laptops, and other electronic gadgets next year, according to warnings from manufacturers and analysts, as artificial intelligence data centers consume increasing amounts of memory chips that would otherwise be used in consumer electronics.

The world's largest technology companies are investing enormous sums into building hardware infrastructure that powers artificial intelligence tools such as ChatGPT.

Their unrelenting demand is creating bottlenecks in a supply chain intentionally kept tight by chipmakers who aim to avoid profit-reducing price decreases, according to industry experts.

Lu Weibing, president of Chinese electronics giant Xiaomi, stated this week that in 2026, supply chain pressure for memory chips "will be far greater than this year."

"Everyone will likely observe that retail prices for products will see a significant increase," he mentioned during an earnings call.

William Keating, who leads semiconductor and technology consulting firm Ingenuity, shares this perspective.

"All companies that manufacture PCs, smartphones, servers etc will be impacted by the shortage," Keating told AFP.

"End result: consumers will pay more."

There is high demand for essential chips known as DRAM and storage components called NAND, which are components of everyday gadgets but are also required to process the vast amounts of data utilized by generative AI.

This is causing memory chip prices to rise, which in turn is substantially increasing revenue for manufacturers such as South Korea's Samsung and SK hynix, and American companies Micron and SanDisk.

"AI-related server demand keeps growing, and this demand significantly exceeds industry supply," stated Kim Jae-june of Samsung Electronics last month.

Samsung announced on Sunday plans to construct a new semiconductor facility in South Korea to meet the escalating demand, while SK hynix recently reported its most successful quarterly performance ever, "driven by the full-scale rise in prices of DRAM and NAND".

Industry analysts TrendForce have reduced their 2026 global production forecasts for smartphones and notebook laptops.

"The memory industry has begun a robust upward pricing cycle," which "forces downstream brands to hike retail prices," according to TrendForce.

Automobiles may also be affected, although Keating noted that a smaller portion of their technology relies on memory chips.

Last week, China's largest contract chipmaker SMIC indicated that customers were reluctant to place orders due to uncertainty regarding how many phones, cars, or other products the memory chip industry can supply.

The shortage has two main causes.

AI-driven demand has exceeded expectations, but memory chip manufacturers have also been "drastically cutting" investments in capacity expansion in recent years, as Keating explained.

"Keep capacity tight, keep prices high is basically their mantra," he said.

"They've done this deliberately to ensure that there's no repeat of the most recent memory price collapse, which cost the memory makers tens of billions in losses."

Price increases for memory chips "are huge and the trend is continuing," said Stephen Wu, founder of the Carthage Capital investment fund.

"Consumers and enterprises should expect higher memory prices, longer lead times, and more take-or-pay contracts through at least early 2026," Wu stated.