The prices of several popular products, including the Xbox gaming console, Mac computers, and the iPad, were raised by both Apple (AAPL) and Microsoft (MSFT) within just five hours on Thursday.
Both corporations attributed the price hikes to an unprecedented shortage of memory chips, a situation driven by the artificial intelligence boom. Despite high-profile industry efforts to expand production capacity, this chip supply crisis and its impact on consumer goods prices are not expected to end in the near term.
Both Samsung Electronics and SK Hynix are anticipated to announce new chip manufacturing investment plans totaling hundreds of billions of dollars this coming Monday. The Samsung Group, which includes Samsung Electronics, is set to unveil a plan to invest 1,000 trillion won ($651 billion) over the next decade, marking the largest investment initiative in South Korea's history.
Nevertheless, industry executives warn that the supply shortfall could persist for several more years as data centers continue to "voraciously absorb" chips. Micron Technology (MU) CEO Sanjay Mehrotra stated on Wednesday that while supply conditions might improve by 2028, it is currently "not in sight" when supply will catch up with demand.
This implies that chip prices are likely to keep rising, forcing consumers to pay more for laptops, phones, and other electronic devices. According to data from market research firm inSpectrum Tech Inc., the price of DDR5 memory chips, commonly used in personal computers, has more than tripled over the past year.
"Given the current outlook, the tight chip supply-demand situation is likely to last until 2028, so prices are not expected to fall back until perhaps the end of 2027," said industry research analyst Jake Silverman. "Consumer electronics prices may still have to rise, though likely at a more moderate pace than before to maintain reasonable product margins."
The AI infrastructure construction boom, fueled by NVIDIA (NVDA) graphics processors, has fundamentally transformed the memory chip market. The shortage has been exacerbated because the industry did not anticipate the arrival of this AI wave.
Following the pandemic, the chip sector experienced a severe supply glut, leading companies to hold back on investing in capacity expansion. Now, the few manufacturers that survived the industry shakeout—some only just barely—find themselves in an unprecedentedly favorable position. They are being pursued by investors, sought after by desperate customers, and generating record-breaking profits.
The shortage is not limited to memory chips. Logic chips used for processing are also in short supply, contributing to the ongoing price increases.
Taiwan Semiconductor Manufacturing (TSM) has indicated that even with new U.S. production capacity coming online in the coming years, it will be unable to meet the growing demand from its American clients, company President C.C. Wei told shareholders this month.
He later told the media, "The pace of AI development has exceeded our expectations."
Wei also revealed that he had asked NVIDIA CEO Jensen Huang why he hadn't given advance warning about the impending AI boom. Wei said Huang's response was that he himself had not foreseen it either.
"No one saw this coming—not even TSMC," Wei stated.
Despite this, companies are doing their utmost to accelerate capacity expansion.
TSM's capital expenditure for this year is projected to reach $56 billion. Meanwhile, SK Hynix plans to raise $29 billion through a U.S. listing, with Chairman Chey Tae-won stating earlier this month the intention to double production capacity within the next five years.
Even before its official investment announcement on Monday, Samsung had already planned to spend over $73 billion this year on expanding capacity and research & development.
Concurrently, Micron is striving to increase output by boosting efficiency at its existing factories while integrating capacity from recent acquisitions. The company is also constructing new fabrication plants in Idaho and New York.
"We are doing everything we can. We have increased our capital expenditure further this year to improve production efficiency and squeeze as much capacity as possible out of our existing fabs," said Manish Bhatia, Micron's Executive Vice President of Global Operations, in an interview on Wednesday.
However, for consumers looking to purchase an Xbox or a MacBook, these efforts are likely too little, too late. For instance, Sony Group raised the price of its flagship PlayStation 5 by up to $150 in March. Since then, memory chip prices have continued to climb.
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