The rapid expansion of artificial-intelligence infrastructure is triggering a global memory chip shortage, as factories prioritize chips for hyperscalers over the kinds used in laptops and smartphones.
The shortage is set to have far-reaching global ramifications. The world’s two biggest memory chipmakers, South Korean companies Samsung Electronics and SK Hynix, are making record sales. New memory chip plants are being announced in countries including Japan, Singapore, and Taiwan. China, facing U.S. export controls, is racing to catch up in memory technology.
The trend is expected to push up prices for consumer electronics globally, threatening the profitability of low-cost smartphones.
Here’s how this memory crunch is playing out.
What are memory chips?
Memory chips are a critical part of the semiconductor family. Made from silicon wafers, they store data and deliver it to processing units — the “brains” that perform computations.
There are two major types of memory chips: Those with dynamic random-access memory, or DRAM, which provides short-term memory for active programs, and chips that use NAND flash, which provides long-term storage for files.
What is happening to chip production?
AI data centers rely on an ultrafast memory architecture called high-bandwidth memory. In HBM, DRAM chips are stacked vertically and placed next to the graphics processing unit. This structure is critical for running large language models, which constantly process massive data sets.
As the AI industry orders vast quantities of HBM chips, manufacturers are diverting capacity away from producing conventional DRAM and NAND chips used in consumer electronics.
Prices for these memory chips are rising at historic rates. In the first quarter alone, DRAM and NAND flash prices are expected to rise by 90%–95% and 55%–60%, respectively, according to market research firm TrendForce.
How are the memory chip manufacturers doing?
SK Hynix, Samsung, and U.S. company Micron account for more than 90% of global memory chip production. The companies are hitting record valuations amid surging demand.
The three companies are all expanding production in Asia, where most semiconductor manufacturing takes place. Micron is planning additional facilities in the U.S., Japan, Singapore, and Taiwan. Samsung and SK Hynix are increasing capacity in South Korea.
The rise of AI and its demand for computing power has given a boost to hardware suppliers in Asia, as some have taken the spotlight from internet companies that long dominated the region’s tech boom. Recently, SK Hynix and Samsung together surpassed the combined market capitalization of Chinese tech giants Alibaba and Tencent for the very first time.
What’s the role of Chinese chipmakers?
China imports most of its memory chips, but it has been trying to make its own as part of the broader push for self-sufficiency in the AI industry. The U.S. in 2024 imposed restrictions on China’s access to HBM chips to limit its AI advancements.
China’s homegrown DRAM maker, ChangXin Memory Technologies, is catching up to Korean rivals in producing HBM for AI chipsets, though it remains several years behind technologically. In September, research firm SemiAnalysis projected the company would account for nearly 15% of global DRAM production by 2026.
Yangtze Memory Technologies, China’s leading NAND flash producer, is also ramping up construction of new fabrication plants. The company is planning to expand into DRAM chips for AI applications, according to Reuters.
What will happen to our phones and laptops?
It will take years for chipmakers to build enough production lines to meet AI-driven demand. Until then, the memory crunch is expected to push up prices for computers, smartphones, tablets, and cars.
Rising memory costs could make low-end devices economically unsustainable for electronics companies, according to Counterpoint Research. Some budget smartphones may be pulled from the market altogether as profit margins shrink.
Counterpoint forecasts that global smartphone shipments will fall by 2.1% in 2026. Chinese brands including Honor, Vivo, and Oppo, which have large portfolios of budget models, are expected to be hit hardest by higher memory costs.
