A memory chip bottleneck is building across global supply chains as surging demand from the artificial intelligence sector redirects production away from essential consumer and automotive applications.
With manufacturers prioritising high-value AI chips, concerns are growing over reduced availability for standard memory used in mass-market devices, including mobile gadgets and embedded systems.
Semiconductor Manufacturing International Corp (SMIC), China’s largest contract chipmaker, reported that clients are pausing orders for other components due to uncertainty about future memory supply.
Companies producing mobile phones, cars, and electronic goods are bracing for potential shortfalls in early 2025, with stockpiling strategies being cautiously considered.
AI takes supply priority
The current shift in chip production centres on High-Bandwidth Memory (HBM), a format required by AI servers built around processors from firms like Nvidia.
Memory producers, including SK Hynix and Micron, have adjusted operations to meet high-margin demand from AI infrastructure builders in the data centre and cloud sectors.
This reallocation is now straining the broader chip market. Consumer electronics, laptops, and vehicles typically depend on low-cost memory components to keep pricing stable.
With suppliers focusing on premium AI-related chips, availability for basic memory types is declining across several production lines.
Forecasts show that AI server deployments in 2026 could surpass current levels, putting additional pressure on memory capacity across the sector as data usage grows.
Production still behind
A prolonged downturn in 2023 and part of 2024 led many chipmakers to scale back investment and output. Though new capacity is being developed, it will take time to become operational and match today’s surging global needs.
The gap between AI demand and production readiness is already pushing up prices.
Samsung Electronics has increased prices on selected memory chips by up to 60% since September. This follows a broader industry trend of shrinking supply and rising costs.
TrendForce, a market intelligence firm, noted that memory prices have entered a strong upward cycle. The result is likely to be higher costs for smartphones, laptops, and other goods that depend on memory components for efficient performance.
Broader market impact
Cheaper devices like entry-level smartphones and set-top boxes are already experiencing the effects of supply constraints. Industry analysts have indicated that supply limitations are starting to expand beyond low-end goods.
China, which relies heavily on affordable tech, is facing growing pressure from shrinking inventories and rising import costs.
However, the issue is not confined to one region. The global nature of chip supply chains means pricing and availability risks could affect markets worldwide, including Europe and the US.
Consumer electronics brands may be forced to raise retail prices to offset component costs, adding new challenges as 2025 approaches.
As AI growth continues to shape semiconductor priorities and supply strategies, sectors dependent on affordable memory will face increased pressure to adjust to the new demand landscape and balance cost with availability.
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