The world’s gadget-makers—who assembled this week in Las Vegas for the Consumer Electronics Show—would be forgiven for harbouring mixed feelings about the year ahead. Excitement over the prospect of clever new devices powered by artificial intelligence is as strong as ever. Yet by gobbling up memory chips, which are essential for everything from smartphones and personal computers (PCs) to gaming consoles and cars, AI is creating a supply crunch for electronics-makers.
Jeffrey Clarke, chief operating officer of Dell, a manufacturer of computers, has called the situation “the most unprecedented mismatch in demand and supply” he has ever seen. Xiaomi, a Chinese smartphone-maker, has warned of delays and rising prices. Analysts predict that prices for PCs could jump by 15-20% in response. IDC, a data firm, reckons that if the situation persists, global smartphone shipments could fall by as much as 5% this year, and PC sales by roughly twice that.
Semiconductors are a cyclical business, prone to swing from surplus to shortage. Yet this cycle may be different, as demand for AI reshapes how memory chips are made, priced and allocated. For consumers, the consequences could last for years.
At the centre of the squeeze is DRAM, the memory used in smartphones, laptops and servers. Advanced AI processors, such as those made by Nvidia, depend on a specialised variant known as high-bandwidth memory (HBM), which stacks chips vertically to increase speed while reducing power use. The rapid construction of data-centres has sent demand for HBM soaring. Producing it is resource-intensive: HBM requires three to four times as many silicon wafers as standard DRAM.
Supply is highly concentrated. Just three firms—SK Hynix and Samsung Electronics of South Korea, and Micron of America—rake in more than 90% of global DRAM revenue. All three are switching capacity to HBM, which will account for half of global DRAM revenue by the end of the decade, up from 8% in 2023, reckons Bloomberg Intelligence, a research group. HBM typically yields operating margins of 50% or more, compared with 35% for standard memory. Investors have rewarded the strategy. Since the start of 2025 the trio’s share prices have risen by an average of 200% (see chart 1).
But the flip side is that more basic memory chips, which account for 15-40% of the cost of smartphones and PCs, are becoming scarcer and costlier. The price for the DRAM found in most consumer electronics, known as DDR4, has risen by 1,360% since April 2025 (see chart 2).
The impact will be uneven. Apple, with its pricey i-gadgets and enormous scale, will be better placed 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 prices for its laptops on January 5th. Xiaomi has said memory costs will have a “big impact” on margins. Carmakers may feel the strain most: as vehicles incorporate more electronics, the amount of DRAM per car is growing rapidly.
Relief will come slowly. Memory-makers plan to spend about $61bn on capital investment for DRAM this year, a 14% increase on 2025. But new capacity takes as long as two years to come online. Moreover, 60-70% of planned investment is earmarked for HBM, reckons Jukan Choi of Citrini Research, a firm of analysts. Chinese producers, which have become big suppliers of basic DRAM in recent years, are unlikely to plug the gap; they too are focusing on HBM. For now, only an unravelling of the AI boom would ease the shortage. Consumers may soon feel the pain.
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