First, AI was coming for your job. Now, it’s coming for your device memory.
Soaring demand for computing memory, known as “chipflation,” has increased costs for memory chips used in everything from hulking data centers to TVs, computers and streaming consoles.
“’Chipflation’ is simply the term for rising electronics prices caused by surging memory chip prices – the key components in consumer electronics like laptops and PCs – as a result of a massive supply squeeze,” said Nic Puckrin, founder of Coin Bureau, an education channel for retail crypto investors.
The cost of memory has risen at a staggering rate over the past two years. DRAM, which is the type of memory the typical computer or phone uses, cost as little as 90 cents per gigabyte in August 2024 That price jumped to $3.45 per gigabyte in July, an increase of nearly 400 percent
Consumers can thank AI for that, said Russ Renzas, a cleanroom director at the University of Nevada, Reno.
“Chipflation is a consequence of an unusual demand spike due to AI,” he told The Independentin an email.
Manufacturers are responding to the demand by prioritizing manufacturing for AI data centers rather than the average person, Puckrin said.
“The reason supply is so tight is that there’s so much demand for the chips that power AI data centers right now that chip makers are focusing on making these instead of the chips that go into consumer electronics, which are different,” he said. “That’s exacerbating the shortage and driving prices even higher.”
Other factors are at play in the memory chip market, too. Puckrin pointed out that two memory-chip makers, South Korea-based SK Hynix and Samsung, control 70 percent of the market.
They already have enough orders to exceed supply this year, he said, so they have a rare luxury.
“They can set almost any price they want, within reason, and consumer electronics makers will be forced to buy these chips,” he said. “It’s a simple supply and demand equation.”
And it’s not just that manufacturers are filling orders and raising prices; it’s that they’re prioritizing AI data centers over the average consumer, said Asif Alam, an electrical engineer and president of Florida International University’s Engineering Research Society.
“The companies that make chips earn far more money selling to AI data centers than to the firms that build your television, so they have shifted their factories to serve AI first,” Alam told The Independentin an email.
So, as factories churn out memory chips for AI data centers, consumers tend to get the expensive end of the memory stick.
Not only are chips in short supply, but companies that buy them for phones, computers, tablets and such are paying much higher prices than they used to, said Cassandra W.G. Cummings, CEO of custom electronics design and manufacturing company Thomas Instrumentation Inc.
As a result, consumers are paying higher prices for popular technology ranging from memory kits for computers to well-known gaming consoles.
“Nintendo raised the price of its Switch 2 console and directly blamed higher memory costs,” Alaf said. “Sony and Microsoft raised their console prices too. Televisions, laptops, phones, consoles, and even cars are all affected because they rely on the same chips.”
Indeed, Nintendo bumped up the price of its Switch 2 by $50 in May, and Sony raised PlayStation 5 prices by as much as $150 because of memory costs, according to a May article from CNBC.
In July, Apple CEO Tim Cook said the company was raising prices by $150 to $300 across its product lineup because of memory chip prices
Memory used to make up 2 to 3 percent of the overall cost of a TV but now accounts for 6 to 7 percent, Renzas said in an email to The Independent.
“These costs will invariably be passed on to consumers, generally at [around a] 200 percent markup, so TV prices might be up 10 percent due to the memory shortage,” he said.
Devices that have more memory-intensive needs – laptops, for example – cost 20 percent higher or more because of chipflation, Renzas said.
How long will chipflation last? Experts aren’t certain, but it won’t be over anytime soon, Cummings told The Independentin an email.
“It’s hard to say if this chipflation will slow – typically these things are at their worst in the beginning, like now,” she said. “It takes years to stand up new chip manufacturing factories to increase supply, and until the supply can meet or exceed demand, the prices will stay high and availability will stay low. I doubt these will ease before 2028.”
