Within a span of five hours Thursday, Apple Inc. and Microsoft Corp. hiked the prices for such popular products as Xbox video-game consoles, Macs and iPads. Both companies blamed an unprecedented shortage of memory chips driven by the artificial intelligence boom. And despite high-profile efforts to increase supply, the crunch and its impact on consumer prices won't end anytime soon.
On Monday, Samsung Electronics Co. and SK Hynix Inc. are expected to announce new chip manufacturing investments worth hundreds of billions of dollars, according to South Korean media reports. The Samsung Group, of which Samsung Electronics is a part, is set to unveil a 1,000 trillion won ($651 billion) spending package over the next decade, in what would be the largest such plan in the country's history, Maeil Business Newspaper reported Friday.
Sanjay Mehrotra
Photo Credit: (Photo: Bloomberg)
And yet, industry executives warn the shortage will persist for years, as new data centers vacuum up chips. Micron Technology Inc. Chief Executive Officer Sanjay Mehrotra said Wednesday that while chip availability may improve in 2028, there is “no line of sight” to when supply will catch up with demand.
That means chip prices will likely keep rising, forcing consumers to pay more for laptops, phones and other devices. Already, the price of a DDR5 chip typically used in personal computers has increased more than fourfold in the last year, according to data from inSpectrum Tech Inc.
Memory Chip Cost Surge
Photo Credit: (Photo: Bloomberg)
“With tight supply and demand likely lingering into 2028 at this point, pricing is unlikely to decline through 2027,” said analyst Jake Silverman with Bloomberg Intelligence. “Consumer device prices may have to keep increasing, albeit at more moderate rates just to sustain healthy product margins.”
The AI infrastructure boom led by Nvidia Corp.'s graphics processing unit chips has upturned the memory market. The supply crunch has been exacerbated by the fact that the industry didn't see the boom coming.
Hit by a massive chip glut after the Covid-19 pandemic, companies didn't invest in expanding capacity. Now, the handful of producers that survived – some just barely – find themselves in a unique position. Investors love them, their customers are desperate and they're raking in profits like never before.
It's not just memory chips that are in short supply. Logic chips used for computation are also scarce, driving up prices.
C.C. Wei
Photo Credit: (Photo: Bloomberg)
Taiwan Semiconductor Manufacturing Co., the biggest producer of advanced logic chips, won't be able to fulfill demand led by American customers even as more manufacturing capacity comes online in the US over the next few years, Chief Executive Officer C.C. Wei told shareholders this month.
“AI development has gone beyond our expectations,” he later told reporters.
Wei added that he once asked Jensen Huang why the Nvidia boss did not warn him in advance about the AI boom. Huang, Wei said, didn't anticipate the boom, either.
“No one foresaw this coming — including TSMC,” Wei said.
The companies are expanding manufacturing as quickly as they can.
TSMC capital expenditures for this year alone are expected to reach $56 billion. SK Hynix plans a $29 billion US listing, after Chairman Chey Tae-won said earlier this month that he intends to double capacity over the next half-decade.
And even before Monday's expected announcement, Samsung planned to spend more than $73 billion this year on capacity expansion and research.
Micron, meanwhile, is trying to coax additional production from its current facilities even as it adds supply from an acquisition in Taiwan. The company also is building new factories in Idaho and New York State.
“We're doing everything we can,” said Manish Bhatia, executive vice president of Micron's global operations, in an interview Wednesday. “We increased capex even this year to be able to do some more productivity improvements and squeeze more production out of our existing fabs.”
For consumers seeking to buy an Xbox or MacBook, however, it's too little, too late. Sony Group Corp., for example, raised the price of its flagship PlayStation 5 by as much as $150 in March. Since then, memory prices have only gone up.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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