A severe shortage of memory chips worldwide is forcing artificial intelligence (AI) firms and consumer electronics manufacturers to compete for dwindling supplies, driving prices of these critical components to record highs.
In Japan, electronics retailers have begun limiting purchases of hard drives, while Chinese smartphone makers like Xiaomi and Realme have issued price hike warnings. Major tech companies, including Microsoft, Google, and ByteDance, are scrambling to secure supplies from chip manufacturers such as Micron Technology, Samsung Electronics, and SK Hynix.
The supply crunch spans all types of memory chips—from flash storage used in USB drives and smartphones to high-bandwidth memory (HBM) essential for AI data centers. According to TrendForce, prices for some categories have more than doubled since February, attracting traders betting on further increases.
The shortage could extend beyond the tech sector. Economists and executives warn that prolonged constraints may hinder AI-driven productivity growth, delay multi-billion-dollar digital infrastructure projects, and exacerbate inflation amid global efforts to stabilize prices.
Sanchit Vir Gogia, CEO of Greyhound Research, stated, "The memory chip shortage has escalated from a component-level issue to a macroeconomic risk," citing supply chain bottlenecks in AI infrastructure development.
A Reuters investigation, based on interviews with nearly 40 industry insiders, reveals that chipmakers face a dual challenge: struggling to meet soaring demand for advanced AI chips while reducing output for traditional memory products, tightening supplies for smartphones, PCs, and consumer electronics.
TrendForce data shows average DRAM inventory levels have plummeted—from 13–17 weeks at the end of 2024 to just 2–4 weeks in October.
Investors now question whether the billions poured into AI infrastructure have created a bubble. Some analysts predict industry consolidation, with only the largest, most financially resilient firms able to withstand price volatility.
A memory chip executive warned that shortages could delay data center projects, as expanding production takes at least two years. Samsung and SK Hynix have announced capacity expansions but remain cautious about overbuilding.
Citigroup noted SK Hynix expects shortages to persist until late 2027. SK Group Chairman Chey Tae-won admitted the company may struggle to fulfill all orders, emphasizing that some clients risk operational shutdowns without guaranteed supply.
In October, OpenAI signed preliminary agreements with Samsung and SK Hynix to procure chips for its "Stargate" project, which by 2029 could require 900,000 wafers monthly—double current global HBM output.
**Desperate Buyers** Since ChatGPT's 2022 debut, AI data center construction has surged, prompting chipmakers to prioritize HBM production for NVIDIA's high-performance processors. Meanwhile, competition from Chinese firms like CXMT in mid-to-low-end DRAM has pushed Samsung and SK Hynix toward higher-margin products.
Samsung initially planned to halt DDR4 chip production but reversed course due to unexpected demand from traditional data centers and PCs. Micron also notified customers it would discontinue DDR4 and LPDDR4 chips within months.
In November, Samsung raised server memory prices by up to 60%. NVIDIA CEO Jensen Huang acknowledged "significant" price hikes but confirmed sufficient supply for his company.
Google, Amazon, Microsoft, and Meta reportedly placed "blanket orders" with Micron—agreeing to buy whatever quantity was available, regardless of price. Chinese tech giants Alibaba, ByteDance, and Tencent also pressured suppliers for additional allocations.
**Smartphone Price Shock** Realme India's CMO Francis Wong warned storage cost surges—unprecedented in smartphone history—may force 20–30% price increases by mid-2025. Xiaomi plans to offset costs by raising prices and boosting premium model sales.
Taiwan's ASUS said its memory inventory covers four months but will adjust pricing as needed. Winbond Electronics, a smaller DRAM maker, approved a $1.1 billion capital expenditure hike after clients sought six-year supply contracts.
**Secondary Market Boom** In Tokyo's Akihabara district, stores imposed purchase limits on storage devices as prices skyrocketed. A 32GB DDR5 kit surged from ¥17,000 ($110) to ¥47,000 ($300) in weeks, driving consumers to used markets.
Shenzhen trader Eva Wu noted quotes now change hourly instead of monthly. A Beijing dealer stockpiled 20,000 DDR4 chips anticipating further gains. In California, reseller Caramon reported monthly sales jumping from $500,000 to $800,000–$900,000, with most chips shipped to China via Hong Kong intermediaries.
Counterpoint Research forecasts memory prices will rise 30% this quarter, potentially another 20% by early 2026.
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