AI euphoria is creating a big problem for consumer electronics . Prices are exploding for a crucial component
The world's electronics manufacturers, gathered recently in Las Vegas for the Consumer Electronics Show (CES), would be justified in having mixed feelings about this year. Enthusiasm for new smart devices powered by Artificial Intelligence is as strong as ever.
But by gobbling up vast amounts of memory chips, essential for everything from smartphones and personal computers (PCs) to gaming devices and cars, AI is creating supply problems for electronics manufacturers, writes The Economist.
Jeffrey Clarke, chief operating officer of computer maker Dell, called the situation “the most unprecedented mismatch between demand and supply” he has ever seen. Xiaomi, the Chinese smartphone maker, has warned of delays and price hikes.
Analysts predict that PC prices could rise by 15–20% as a result. IDC, a research firm, estimates that if this situation continues, global smartphone shipments could fall by up to 5% this year, while PC sales could fall by about twice that much.
Semiconductors are a cyclical industry, prone to swinging from surplus to shortage. But this cycle could be different, as AI demand is reshaping the way memory chips are manufactured, priced, and distributed. For consumers, the consequences could last for years.
At the heart of this problem is DRAM, the memory used in smartphones, laptops and servers. Advanced AI processors, such as those made by Nvidia, depend on a specialized variant known as high-bandwidth memory (HBM), which stacks chips vertically to increase speed and reduce power consumption.
The rapid construction of data centers has caused demand for HBM to explode. Its production is resource-intensive: HBM requires three to four times more silicon wafers than standard DRAM.
Supply is extremely concentrated. Just three companies, SK Hynix and Samsung Electronics of South Korea, and Micron of the US, control over 90% of global DRAM revenue and are shifting capacity towards HBM, which, according to Bloomberg Intelligence, will account for half of global DRAM revenue by the end of the decade, up from 8% in 2023.
HBM typically generates operating margins of around 50% or more, compared to around 35% for standard memory. Investors have rewarded this strategy: since the beginning of 2025, the share prices of these three companies have increased by an average of 200% (see chart 1).
The flip side of the coin is that basic memory chips, which account for 15–40% of the cost of smartphones and PCs, are becoming rarer and more expensive. The price of DRAM used in most consumer devices, known as DDR4, has increased by 1,360% since April 2025 (see chart 2).
The impact will be uneven. Apple, with its expensive hardware and large production scale, will be better able to absorb higher costs and secure supply. Samsung will benefit from in-house memory production. Others are not so lucky.
Asus, a Taiwanese PC maker, raised laptop prices on Jan. 5. Xiaomi said memory costs would have a “major impact” on margins. Carmakers could feel the pressure the most: As vehicles incorporate more and more electronics, the amount of DRAM for cars is growing rapidly.
The relief will come slowly. Memory makers plan to spend about $61 billion on DRAM capital expenditures this year, a 14% increase from 2025. But new capacity takes up to two years to come online. Moreover, 60–70% of the planned investments are for HBM, according to Jukan Choi of Citrini Research.
Chinese manufacturers, who have become major suppliers of mainstream DRAM in recent years, are unlikely to fill the gap; they too are focusing on HBM. For now, only a slowdown in the AI boom will alleviate the shortage. Consumers could soon feel the consequences./monitor
