AI Demand Triggers Memory Chip Shortage, Threatening Higher Prices for Smartphones and Electronics

AI is contributing to a memory chip shortage that could hit phones and cars

A SK Hynix Inc. 12-layer HBM3E memory chip displayed at the Semiconductor Exhibition in Seoul, South Korea. Chipmakers and analysts are warning of a memory chip shortage that could hit the consumer electronics and automotive industries next year, as companies prioritize massive demand from the artificial intelligence boom. In an earnings call on Friday, the CEO of Semiconductor Manufacturing International Corp, China's largest contract chipmaker, reportedly said that fears of a memory chip shortage were prompting its customers to hold back orders for other types of chips used in their products. "People don't dare place too many orders for the first quarter next year," said Zhao Haijun, SMIC's co-CEO, during an earnings call. "Because no one knows how many memory (chips) will actually be available -- how many phones, cars, or other products it can support." Analysts say these supply constraint concerns come as chip manufacturers focus on advanced memory chips used in artificial intelligence computing, with less focus on production needed for consumer products. "The AI build-out is absolutely eating up a lot of the available chip supply, and 2026 looks to be far bigger than this year in terms of overall demand," Dan Nystedt, research analyst at TriOrient, told CNBC. AI servers primarily run on processors from chip designers like Nvidia. These AI processors heavily rely on a type of memory known as High-Bandwidth Memory or HBM, which has proven extremely lucrative for memory companies like SK Hynix and Micron to pursue. Memory suppliers have been chasing as much of this AI demand as possible thanks to typically high margins, Nysdedt said, noting that AI server companies are willing to pay top dollar for premium chips. "It could be very bad for PCs, laptops, consumer electronics and automotive, which depend on cheap memory chips," he said. Perhaps a bigger issue, however, is that the memory industry suffered some severe down turns in 2023 and part of 2024, leading to under-investment in the industry. "They're building new capacity now, but it will take time to get running."

Memory chip crunch set to drive up smartphone prices

Tokyo (AFP) - Shoppers could face higher prices for phones, laptops and other gadgets next year, manufacturers and analysts warn, as AI data centres hoover up memory chips used in consumer electronics. The world's biggest tech companies are ploughing head-spinningly huge sums into building the hardware that powers artificial intelligence tools like ChatGPT. Their insatiable demand is snarling up a supply chain kept tight on purpose by chipmakers who are keen to avoid price drops that dent profits, experts say. In 2026, supply chain pressure for memory chips "will be far greater than this year", Lu Weibing, president of Chinese electronics giant Xiaomi, said this week. "Everyone will likely observe that retail prices for products will see a significant increase," he told an earnings call. William Keating, head of semiconductor and tech consulting firm Ingenuity, expects the same. "All companies that manufacture PCs, smartphones, servers etc will be impacted by the shortage," Keating told AFP. "End result: consumers will pay more." In high demand are key chips known as DRAM and storage components called NAND, which are found in everyday gadgets but are also needed to help process the vast amounts of data crunched by generative AI. That's driving up memory chip prices, which in turn is turbocharging revenue for the firms that produce them such as South Korea's Samsung and SK hynix, and Micron and SanDisk in the United States. "AI-related server demand keeps growing, and this demand significantly exceeds industry supply," Kim Jae-june of Samsung Electronics said last month. 'Keep prices high' Samsung said Sunday that it plans to build a new semiconductor plant in South Korea to meet the soaring demand, while SK hynix recently reported its best-ever quarterly performance, "driven by the full-scale rise in prices of DRAM and NAND". Industry analysts TrendForce have lowered 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," TrendForce said. Cars may also be affected, although Keating noted that a smaller portion of their tech relies on memory chips. Last week China's largest contract chipmaker SMIC said customers were hesitant to place orders owing to uncertainty over how many phones, cars, or other products the memory chip industry can supply. The cause of the shortage is two-fold. AI-driven demand is greater than anticipated, but memory chip makers have also been "drastically cutting" spending on expanding capacity in recent years, 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 jumps 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 said.

Smartphones Could Get Even More Expensive Next Year, Official Warns

* Chip shortages are driving memory costs sharply upward * Samsung has hiked memory chip prices by up to 60 percent * Xiaomi says price hikes won't fully offset soaring costs Key smartphone components, such as memory chips, have recently been reported to be experiencing a drastic shortage as companies compete globally to build artificial intelligence (AI) data centres. Consequently, several flagship smartphones that offer AI-centric features have been heavily impacted, with their prices witnessing an uptick due to the rising chip costs. A Xiaomi official has now warned that its product retail prices could rise even further next year, although the price hike may not be enough to absorb the soaring manufacturing costs. Xiaomi Phones to Get More Expensive Soaring chip costs are driving up the smartphone prices, Xiaomi President Lu Weibing reportedly said during the Q3 2025 earnings call. This is attributed to chipmakers, such as Samsung, deprioritising the fabrication of smartphone memory chips in favour of DDR chips that are used to build AI data centres, temporarily storing data and facilitating rapid data transfer and retrieval. As supply worsens, chip prices are seeing drastic increases. Samsung was recently reported to have hiked the cost of its smartphone memory chips by up to 60 percent compared to September, amid the intense demand for chip units designed specifically for AI tasks. This, in turn, means a hike in smartphone prices. "I expect pressure to be much heavier next year than this year. Overall, consumers are likely to see a sizeable rise in product retail prices," the Xiaomi official said. It is especially evident in markets such as India, where recently flagship devices like the Oppo Find X9 series and OnePlus 15 have become more expensive compared to their predecessors. The Find X9 has been launched at a starting price of Rs. 74,999, compared to the Find X8's Rs. 69,999. The OnePlus 15, meanwhile, is also Rs. 3,000 more expensive than the OnePlus 13. In a recent conversation with Gadgets 360, iQOO India CEO Nipun Marya talked about the anticipated pricing of the upcoming iQOO 15. Addressing the rumours of a price hike, the official said that "if raw material costs have increased, there is no alternative [to a price hike]." Marya claimed that the company would have been able to digest the rising costs if the increase had been about 5 to 10 percent. However, "No company can exist doing that [absorbing a 60% hike]... It really means a lot for our industry," the official added. This was iterated by the Xiaomi President as well, who claimed that "Some of the pressure may have to be addressed through price hikes, but price increases alone won't be enough to digest it."

Memory chip crunch set to drive up smartphone prices

Consumers may soon pay more for phones and laptops. AI data centers are demanding more memory chips. This is causing a shortage. Chipmakers are keeping supply tight to maintain high prices. Experts predict significant price increases for gadgets in 2026. This trend is expected to continue through early next year. Shoppers could face higher prices for phones, laptops and other gadgets next year, manufacturers and analysts warn, as AI data centres hoover up memory chips used in consumer electronics. The world's biggest tech companies are ploughing head-spinningly huge sums into building the hardware that powers artificial intelligence tools like ChatGPT. Their insatiable demand is snarling up a supply chain kept tight on purpose by chipmakers who are keen to avoid price drops that dent profits, experts say. In 2026, supply chain pressure for memory chips "will be far greater than this year", Lu Weibing, president of Chinese electronics giant Xiaomi, said this week. "Everyone will likely observe that retail prices for products will see a significant increase," he told an earnings call. William Keating, head of semiconductor and tech consulting firm Ingenuity, expects the same. "All companies that manufacture PCs, smartphones, servers etc will be impacted by the shortage," Keating told AFP. "End result: consumers will pay more." In high demand are key chips known as DRAM and storage components called NAND, which are found in everyday gadgets but are also needed to help process the vast amounts of data crunched by generative AI. That's driving up memory chip prices, which in turn is turbocharging revenue for the firms that produce them such as South Korea's Samsung and SK hynix, and Micron and SanDisk in the United States. "AI-related server demand keeps growing, and this demand significantly exceeds industry supply," Kim Jae-june of Samsung Electronics said last month. 'Keep prices high' Samsung said Sunday that it plans to build a new semiconductor plant in South Korea to meet the soaring demand, while SK hynix recently reported its best-ever quarterly performance, "driven by the full-scale rise in prices of DRAM and NAND". Industry analysts TrendForce have lowered 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," TrendForce said. Cars may also be affected, although Keating noted that a smaller portion of their tech relies on memory chips. Last week China's largest contract chipmaker SMIC said customers were hesitant to place orders owing to uncertainty over how many phones, cars, or other products the memory chip industry can supply. The cause of the shortage is two-fold. AI-driven demand is greater than anticipated, but memory chip makers have also been "drastically cutting" spending on expanding capacity in recent years, 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 jumps 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 said.

Why China's largest chipmaker is worried about near future of smartphones, laptops and gadgets

China's largest chipmaker, SMIC, warns of a potential memory chip shortage. This is causing customers to delay orders for other components. Chipmakers are prioritizing high-margin AI memory, impacting supply for phones, cars, and PCs. Prices are rising, and consumers may face higher costs for electronics next year. The CEO of China's largest contract chipmaker, Semiconductor Manufacturing International Corp (SMIC), has issued a warning. During a recent earnings call, SMIC chief Zhao Haijun said that concerns over a looming memory chip shortage are leading customers to scale back orders for other types of chips used in their products. SMIC, China's largest contract chipmaker, issued the warning as more chipmakers and analysts caution that a global memory chip shortage could affect consumer electronics and automotive companies next year. According to CNBC, manufacturers are increasingly shifting production toward high-margin components that support the surge in artificial intelligence. "Everyone is hesitant to place too many orders or ship too much in the first quarter of next year because they don't know how many mobile phones, cars, or other products [the memory chip industry] can supply," Zhao said, according to a Google translation cited in the report. Analysts told CNBC that the bottleneck arises because chipmakers are prioritizing advanced memory -- particularly High-Bandwidth Memory (HBM) -- used in AI computing. AI servers, many of which run on Nvidia processors, rely heavily on HBM, making it a lucrative area of focus for suppliers like SK Hynix and Micron. "The AI build-out is absolutely eating up a lot of the available chip supply, and 2026 looks to be far bigger than this year in terms of overall demand," Dan Nystedt, vice president of research at TriOrient, told CNBC. AI customers are willing to pay steep prices for premium memory, he said, leaving fewer resources for cheaper chips used in PCs, smartphones, and vehicles. "It could be very bad for PCs, laptops, consumer electronics and automotive, which depend on cheap memory chips." "With memory prices rising and availability shrinking, concerns about production bottlenecks are gaining traction," M.S. Hwang, research director at Counterpoint Research, told CNBC. He said supply tightness was already affecting low-end smartphones and set-top boxes and warned that the risk "could broaden." China, he added, is "feeling the pinch more acutely" due to its reliance on low-cost devices, though the issue is global. Consumers may ultimately bear the cost. Market research firm TrendForce said that the memory sector has entered a "robust upward pricing cycle," which could force brands to raise retail prices for smartphones, notebooks, and other consumer devices. (You can now subscribe to our Economic Times WhatsApp channel)