Chips at a booth in a mall in Shenzhen. The crunch is unfolding as investors question whether the billions of dollars poured into AI infrastructure have inflated a bubble. PHOTO: REUTERS
SINGAPORE – An acute global shortage of memory chips is forcing artificial intelligence (AI) and consumer-electronics companies to fight for dwindling supplies, as prices soar for the unglamorous but essential components that allow devices to store data.
Japanese electronics stores have begun limiting how many hard-disk drives shoppers can buy. Chinese smartphone makers are warning of price increases.
Tech giants including Microsoft, Google and ByteDance are scrambling to secure supplies from memory-chip makers such as Micron, Samsung Electronics and SK Hynix, according to three people familiar with the discussions.
The squeeze spans almost every type of memory, from flash chips used in USB drives and smartphones to advanced high-bandwidth memory (HBM) that feeds AI chips in data centres.
Prices in some segments have more than doubled since February, according to market-research firm TrendForce, drawing traders betting that the rally has further to run.
The fallout could reach beyond tech. Many economists and executives warn the protracted shortage risks slowing AI-based productivity gains and delaying hundreds of billions of dollars in digital infrastructure.
It could add inflationary pressure just as many economies are trying to tame price rises and navigate US tariffs.
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“The memory shortage has now graduated from a component-level concern to a macroeconomic risk,” said chief executive Sanchit Vir Gogia of Greyhound Research, a technology advisory firm. The AI build-out “is colliding with a supply chain that cannot meet its physical requirements”.This Reuters examination of the spiralling supply crisis is based on interviews with almost 40 people, including 17 executives at chipmakers and distributors. It shows industry efforts to meet the voracious appetite for advanced chips – driven by Nvidia and tech giants like Google, Microsoft and Alibaba – created a dual bind.
Chipmakers still cannot produce enough high-end semiconductors for the AI race, yet their tilt away from traditional memory products is choking supply to smartphones, personal computers and consumer electronics.
Some are now hurrying to course-correct.
Average inventory levels at suppliers of dynamic random-access memory (DRAM) – the main type used in computers and phones – fell to two to four weeks in October from three to eight weeks in July and 13 to 17 weeks in late 2024, according to TrendForce.
The crunch is unfolding as investors question whether the billions of dollars poured into AI infrastructure have inflated a bubble. Some analysts predict a shake-up, with only the biggest and financially strongest companies able to stomach the price increases.
One memory-chip executive told Reuters the shortage would delay future data centre projects. New capacity takes at least two years to build but memory-chip makers are wary of overbuilding for fear it could end up idle should the demand surge pass, the person said.
Samsung and SK Hynix have announced investments in new capacity but have not detailed the production split between HBM and conventional memory.
SK Hynix has told analysts that the memory shortfall would last through late 2027, Citi said in November.
“These days, we’re receiving requests for memory supplies from so many companies that we’re worried about how we’ll be able to handle all of them. If we fail to supply them, they could face a situation where they can’t do business at all,” Mr Chey Tae-won, chairman of SK Hynix parent SK Group, said at an industry forum in November.
OpenAI in October signed initial deals with Samsung and SK Hynix to supply chips for its Stargate project, which would require up to 900,000 wafers per month by 2029. That is about double the current global monthly HBM production, Mr Chey noted.
In hindsight, “one could say the industry was caught off guard”, said TechInsights senior research fellow Dan Hutcheson.
Samsung raised prices of server memory chips by up to 60 per cent in November. Nvidia chief executive Jensen Huang acknowledged the price surge as significant but said the company had secured substantial supply.
Google, Amazon, Microsoft and Meta in October asked Micron for open-ended orders, telling the company they will take as much as it can deliver, irrespective of price, according to two people briefed on the talks.
China’s Alibaba, ByteDance and Tencent are leaning on suppliers, dispatching executives to visit Samsung and SK Hynix in October and November to lobby for allocation, the two people and another source told Reuters.
“Everyone is begging for supply,” one said.
Sticker shock prices
Chinese smartphone makers Xiaomi and Realme have warned they may have to raise prices.Realme India’s chief marketing officer Francis Wong told Reuters the steep increases in memory costs were “unprecedented since the advent of smartphones” and could force the company to lift handset prices by 20 per cent to 30 per cent by June.
Xiaomi told Reuters it would offset higher memory costs by raising prices and selling more premium phones, adding that its other businesses would help cushion the impact.
In November, Taiwanese laptop maker Asus said it had about four months of inventory, including memory components, and would adjust pricing as needed.
In Tokyo’s electronics hub of Akihabara, stores are restricting purchases of memory products to curb hoarding. A sign outside PC shop Ark says that since Nov 1, customers have been limited to buying eight products across hard-disk drives, solid-state drives and system memory.
Clerks at five shops said shortages pushed prices sharply higher in recent weeks. At some stores, a third of products were sold out.
The hikes are driving customers to the second-hand market – benefiting people like Mr Roman Yamashita, owner of iCON in Akihabara, who said his business selling used PC parts is booming.
Sales manager Eva Wu at component trader Polaris Mobility in Shenzhen said prices are changing so rapidly that distributors issue broker-style quotes that expire daily – and in some cases hourly – versus monthly before the crunch.
In Beijing, a DDR4 seller said she hoarded 20,000 units in anticipation of further increases.
In California, Mr Paul Coronado said monthly sales at his company Caramon, which sells recycled low-end memory chips pulled from decommissioned data-centre servers, have surged since September. Almost all its products are now bought by Hong Kong-based intermediaries who resell them to Chinese clients, he added.
It was doing about US$500,000 (S$648,000) a month, he said. “Now it’s US$800,000 to US$900,000.” REUTERS
AI frenzy is driving a new global supply chain crisis
Smartphone makers are warning of price increases from acute global shortage of memory chips. Read more at straitstimes.com. Read more at straitstimes.com.