Memory chip shortage squeezes smartphone and PC production as AI infrastructure demands soar

Qualcomm, Arm Hit by Concern That Memory Shortage Is Spreading

The memory shortages are likely to persist, with Intel Corp. CEO Lip-Bu Tan saying that suppliers have told him that things won't improve until 2028. Shares of Qualcomm Inc. and Arm Holdings Plc fell steeply after the semiconductor companies delivered quarterly reports, hurt by concern that a shortage of memory chips will crimp growth in the electronics industry. Both stocks declined more than 8% in extended trading late Wednesday after management signaled that memory constraints will limit phone production. Qualcomm is the largest maker of processors that run smartphones, and Arm gets much of its revenue from royalties on technology used by that industry. The historic build-out of artificial intelligence infrastructure is driving the shortage of memory chips, which help computers manage data. Manufacturers of the components have concentrated on supplying AI data centers, leaving less production for phone components. That means fewer products ultimately reach consumers, who will have to pay higher prices. "Industrywide, memory shortages and price increases are likely to define the overall scale of the handset industry," Qualcomm Chief Executive Officer Cristiano Amon told analysts on a conference call. Amon said Chinese customers in particular have said they'll build fewer phones than planned because they can't get enough memory chips. On the other hand, both Qualcomm and Arm are poised to benefit from the AI boom. The companies are positioning themselves to get more revenue from data center operators -- a shift that should help them in the long run. But they're still vulnerable to swings in the smartphone market. One silver lining is that phone manufacturers are prioritizing the most expensive phones. That's helping bolster Qualcomm's sales of higher-end chips and propping up Arm's royalty revenue. Other companies have raised alarm bells about the memory crunch. MediaTek Inc., a chipmaker based in Taiwan, cited the issue during a conference call this week, calling it an "evolving" situation. Intel Corp. CEO Lip-Bu Tan, meanwhile, said the shortages are likely to persist for years. "There's no relief as far as I know," he said during an event Tuesday. Suppliers have told him that things won't improve until 2028, Tan said. Samsung Electronics Co., SK Hynix Inc. and Micron Technology Inc. are the three biggest makers of memory chips. Their technology is used to hold information in everything from cars to smartphones, but a key focus right now is keeping up with AI demand. Data centers rely on an advanced chip called high-bandwidth memory, or HBM, to run AI software and services. Memory companies have invested heavily in expanding production of those components -- at the expense of other supplies. The industry is now attempting to increase its total capacity. But that will take time: Building and equipping factories can take more than a year.

Samsung, SK Hynix warn of squeezed chip supplies for PCs, phones due to AI boom

SEOUL, Jan 29 (Reuters) - Two of the world's top chipmakers warned on Thursday that computer and smartphone companies were set to bear the brunt of a worsening shortage of DRAM chips used in their products, as the makers prioritise demand for more lucrative chips required to build AI infrastructure. The warnings by Samsung Electronics (005930.KS), opens new tab and SK Hynix (000660.KS), opens new tab, which control two thirds of the DRAM chip market and count the likes of Apple (AAPL.O), opens new tab as customers, underscore growing margin pressure on consumer electronics makers and potential supply chain disruptions. "PC and mobile customers are having difficulties securing memory supplies, as they are being directly and indirectly affected by supply constraints and strong demand for server-related products," Park Joon Deok, head of DRAM marketing at SK Hynix, told analysts on a post-earnings call. The race to build AI infrastructure has prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory (HBM) for AI servers, squeezing the supply of conventional DRAM chips. Chipmakers, bruised by aggressive capacity expansion after the 2017 supercycle, have been more conservative about adding more production lines in recent years, a move that has contributed to the current supply shortage. Samsung said such expansion would remain limited in 2026 and 2027. As the crunch is set to persist, some manufacturers have already started adjusting their products to cope with the shortage and surging prices, they said. "Due to a recent surge in memory chip prices, PC and mobile customers are adjusting purchase volumes," SK Hynix said in its earnings conference call. "Some customers are taking a more conservative approach to shipment plans or considering adjusting (memory chip) specification in their price-sensitive product ranges." Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least 2% this year, reversing earlier forecasts for growth. The PC market is expected to shrink at least 4.9% in 2026, IDC estimated, after an 8.1% growth last year. Samsung, the world's second-largest smartphone maker, is also bracing for the impact of the chip shortage, with its mobile business profit slumping 10% in the fourth quarter. Cho Seong, a Samsung mobile business executive, warned of a "challenging year" in 2026, expecting flat global smartphone shipments this year and risks of downward adjustment due to memory chip prices. Investors will look for comments from its bigger smartphone rival Apple on how it aims to navigate a global memory chip crunch, as it reports quarterly results later on Thursday. PRIORITISING AI DEMAND Samsung prioritised supplying server customers in the fourth quarter and plans to continue increasing the portion of AI related products, a move that could lead to further constraints in the output of conventional memory chips. Samsung's aggressive push into AI memory chips comes as the tech giant seeks to narrow its market share gap with SK Hynix in the lucrative segment. SK Hynix, a leading chip supplier for Nvidia (NVDA.O), opens new tab, led the HBM chip market last year with a 61% share, followed by Samsung at 19% and Micron (MU.O), opens new tab at 20%, according to Macquarie Equity Research. HBM chips are used to build AI chipsets. SK Hynix vowed on Thursday to maintain its "overwhelming" market share in the next-generation HBM4 chips, highlighting intensifying competition with Samsung, as they vie for market share in the AI chip race. Reporting by Heekyong Yang and Hyunjoo Jin; Editing by Miyoung Kim and Raju Gopalakrishnan Our Standards: The Thomson Reuters Trust Principles., opens new tab

Apple warns memory costs are starting to bite as Samsung, SK Hynix prioritise AI chips - The Economic Times

Apple said rising memory chip prices had started to pressure profitability in the current quarter, ⁠echoing warnings from South Korean chipmakers that are diverting production toward higher-margin memory chips that support AI workloads. "We do continue to see market pricing for memory increasing significantly," Apple CEO Tim Cook said on Thursday when asked on an earnings call about how the crunch was showing up in the company's production plans for the year. While he said the impact of the memory shortage had "minimal impact" in the holiday quarter ended December 31, which is typically its strongest for sales, he expected it would have more of an impact in the current quarter. Apple will likely need more and more memory chips as demand for its latest iPhone 17 has surged, especially in China and India. Cook called demand for the device in the December quarter "staggering," but declined to answer a question from an analyst on whether Apple might raise product pricing because of the paucity of memory chips. The comments come after warnings from Samsung Electronics and SK Hynix, which combined control two-thirds of the DRAM chip market and count the likes of Apple as customers, that computer and smartphone companies were set to bear the brunt of a worsening shortage of DRAM chips used in their products. The consequences include growing margin pressure and potential supply chain disruptions. The race to build AI infrastructure has prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory (HBM) for AI servers, squeezing the supply of conventional DRAM chips. Adding to the shortage is the fact that chipmakers, bruised by aggressive capacity expansion after 2017, have become more conservative about adding more production lines. This has contributed to the current supply shortage. Samsung said such expansion would remain limited in 2026 and 2027. As the crunch is set to persist, some manufacturers have already started adjusting their products to cope with the shortage and surging prices. "Due to a recent surge in memory chip prices, PC and mobile customers are adjusting purchase volumes," SK Hynix said on its earnings conference call on Thursday. "Some customers are taking a more conservative approach to shipment plans or considering adjusting (memory chip) specification in their price-sensitive product ranges." Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least 2% this year, reversing earlier forecasts for growth. The PC market is expected to shrink at least 4.9% in 2026, IDC estimated, after an 8.1% growth last year. Prioritising AI demand Samsung, the world's second-largest smartphone maker, is also bracing for the impact of the chip shortage, with its mobile business profit slumping 10% in the fourth quarter. Cho Seong, a Samsung mobile business executive, warned on Thursday of a "challenging year" ⁠in 2026, expecting flat global smartphone shipments and ⁠risks of downward adjustment due to memory chip prices. "PC and mobile customers are having difficulties securing memory supplies, as they are being directly and indirectly affected by supply constraints and strong demand for server-related products," Park Joon Deok, head of DRAM marketing at SK Hynix, told analysts on its earnings call. Samsung prioritised supplying server customers in the fourth quarter and plans to continue increasing the portion of AI-related products, a move that could lead to further constraints in the output of conventional memory chips. Samsung's aggressive push into AI memory chips comes as the tech giant seeks to narrow its market share gap with SK Hynix in the lucrative segment. SK Hynix, a leading chip supplier for Nvidia, led the HBM chip market last year with a 61% share, followed by Samsung at 19% and Micron at 20%, according to Macquarie Equity Research. HBM chips are used to build AI chipsets.

Samsung, SK Hynix warn of squeezed chip supplies for PCs, phones due to AI boom

SEOUL, Jan 29 (Reuters) - Two of the world's top chipmakers warned on Thursday that computer and smartphone companies were set to bear the brunt of a worsening shortage of DRAM chips used in their products, as the makers prioritise demand for more lucrative chips required to build AI infrastructure. The warnings by Samsung Electronics and SK Hynix, which control two thirds of the DRAM chip market and count the likes of Apple as customers, underscore growing margin pressure on consumer electronics makers and potential supply chain disruptions. "PC and mobile customers are having difficulties securing memory supplies, as they are being directly and indirectly affected by supply constraints and strong demand for server-related products," Park Joon Deok, head of DRAM marketing at SK Hynix, told analysts on a post-earnings call. The race to build AI infrastructure has prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory (HBM) for AI servers, squeezing the supply of conventional DRAM chips. Chipmakers, bruised by aggressive capacity expansion after the 2017 supercycle, have been more conservative about adding more production lines in recent years, a move that has contributed to the current supply shortage. Samsung said such expansion would remain limited in 2026 and 2027. As the crunch is set to persist, some manufacturers have already started adjusting their products to cope with the shortage and surging prices, they said. "Due to a recent surge in memory chip prices, PC and mobile customers are adjusting purchase volumes," SK Hynix said in its earnings conference call. "Some customers are taking a more conservative approach to shipment plans or considering adjusting (memory chip) specification in their price-sensitive product ranges." Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least 2% this year, reversing earlier forecasts for growth. The PC market is expected to shrink at least 4.9% in 2026, IDC estimated, after an 8.1% growth last year. Samsung, the world's second-largest smartphone maker, is also bracing for the impact of the chip shortage, with its mobile business profit slumping 10% in the fourth quarter. Cho Seong, a Samsung mobile business executive, warned of a "challenging year" in 2026, expecting flat global smartphone shipments this year and risks of downward adjustment due to memory chip prices. Investors will look for comments from its bigger smartphone rival Apple on how it aims to navigate a global memory chip crunch, as it reports quarterly results later on Thursday. PRIORITISING AI DEMAND Samsung prioritised supplying server customers in the fourth quarter and plans to continue increasing the portion of AI related products, a move that could lead to further constraints in the output of conventional memory chips. Samsung's aggressive push into AI memory chips comes as the tech giant seeks to narrow its market share gap with SK Hynix in the lucrative segment. SK Hynix, a leading chip supplier for Nvidia, led the HBM chip market last year with a 61% share, followed by Samsung at 19% and Micron at 20%, according to Macquarie Equity Research. HBM chips are used to build AI chipsets. SK Hynix vowed on Thursday to maintain its "overwhelming" market share in the next-generation HBM4 chips, highlighting intensifying competition with Samsung, as they vie for market share in the AI chip race. (Reporting by Heekyong Yang and Hyunjoo Jin; Editing by Miyoung Kim and Raju Gopalakrishnan) By Heekyong Yang and Hyunjoo Jin