Japanese electronics retailers have started restricting the quantity of hard disks that customers can purchase. Chinese smartphone producers are warning of price rises. Tech heavyweights including Microsoft, Google, and ByteDance are trying to obtain supply from memory-chip makers such as Micron, Samsung Electronics and SK Hynix, according to three people familiar with the conversations. The strain spans practically every type of memory, from flash chips used in USB drives and cellphones to advanced high-bandwidth memory (HBM) that feeds AI systems in data centers. According to market analysis firm TrendForce, prices in some segments have more than doubled since February, attracting speculators who wager that the boom will continue.
The effects could stretch beyond tech. Many economists and businessmen say the persistent shortage risks halting AI-based productivity improvements and delaying hundreds of billions of dollars in digital infrastructure. Additionally, it might increase inflationary pressure at a time when many economies are attempting to control price increases and deal with U.S. tariffs. “The memory shortage has now graduated from a component-level concern to a macroeconomic risk,” said Sanchit Vir Gogia, CEO of Greyhound Research, a technology advising firm. The development of AI “is colliding with a supply chain that cannot meet its physical requirements.”
This Reuters study of the mounting supply crisis is based on interviews with over 40 people, including 17 executives at chipmakers and distributors. It reveals industry efforts to meet strong appetite for sophisticated chips — pushed by Nvidia and tech giants like Google, Microsoft and Alibaba — produced a twin bind: Chipmakers still can’t produce enough high-end semiconductors for the AI race, and their tilt away from traditional memory products is strangling supply to smartphones, PCs and consumer devices. Some are now hurrying to course-correct. This is AI Weekly, covering everything from plays created using AI to multi-billion-dollar deals.
For the first time, information about the global rush by IT companies and price hikes recorded by Chinese and Japanese electronics merchants and component suppliers is presented here. Average inventory levels at providers of dynamic random-access memory (DRAM) — the main type used in computers and phones — plummeted 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. Investors are beginning to wonder if the billions of dollars invested in AI technology have created a bubble. Some analysts foresee a shakeout, with only the biggest and financially strongest enterprises able to bear the price increases.
Future data center projects would be delayed due to the shortfall, a memory-chip executive told News Channel. New capacity takes at least two years to create but memory-chip makers are leery of overbuilding for fear it could wind up idle should the demand surge pass, the person added. OpenAI in October announced first negotiations with Samsung and SK Hynix to supply chips for its Stargate project, which would require up to 900,000 wafers per month by 2029. According to Chey, that is roughly twice the current monthly production of HBM worldwide. Samsung told News Channel it is monitoring the market but wouldn’t comment on pricing or customer relationships. In order to fulfill the rising demand for memory, SK Hynix announced it is increasing production capacity.
ByteDance did not respond to inquiries regarding the chip strain, and Microsoft declined to comment. Micron and Google didn’t reply to comment inquiries. “STARTING FOR SUPPLY” After ChatGPT’s release in November 2022 triggered the generative AI boom, a global rush to build AI data centers drove memory companies to allocate more manufacturing to HBM, used in Nvidia’s strong AI processors. Competition from Chinese rivals creating lower-end DRAM, such as ChangXin Memory Technologies, has encouraged Samsung and SK Hynix to speed their migration to higher-margin products. The South Korean manufacturers account for two-thirds of the DRAM market.
According to a letter reviewed by News Channel, Samsung informed customers in May 2024 that it intended to stop producing one type of DDR4 chips, an older variety used in PCs and servers, this year. (According to two sources, the corporation has since altered its plans and will increase output.) In June, Micron said it had warned customers it will stop selling DDR4 and its counterpart LPDDR4 – a kind used in smartphones – in six to nine months. ChangXin followed suit in stopping most DDR4 production, one insider added. The firm declined to comment. This move, however, coincided with a replacement cycle for traditional data centers and PCs, as well as stronger-than-expected sales of smartphones, which rely on conventional CPUs.
According to Dan Hutcheson, senior research fellow at TechInsights, “one could say the industry was caught off guard” in retrospect. Samsung boosted pricing of server memory chips by up to 60% last month, News Channel has learned. While visiting South Korea in October, Nvidia CEO Jensen Huang dined fried chicken with Samsung Electronics Chairman Jay Y. Lee and announced deals. Huang acknowledged the price increase as noteworthy but claimed Nvidia had secured considerable supply. According to two people briefed on the discussions, Google, Amazon, Microsoft, and Meta requested open-ended purchases from Micron in October, informing the business that they would accept as much as it could deliver, regardless of price. SMARTPHONE STICKER SHOCK
Xiaomi and Realme, two Chinese smartphone manufacturers, have issued a warning that they could need to increase their pricing. Francis Wong, Realme India’s chief marketing officer, told News Channel the significant hikes in memory costs were “unprecedented since the advent of smartphones” and could cause the business to lift handset pricing by 20% to 30% by June. “Some manufacturers might save costs on imaging cameras, some on processors, and some on batteries,” he said. “However, there is no way to transfer the cost of storage; it must be fully absorbed by all manufacturers.” Xiaomi told News Channel it would offset increasing memory costs by boosting prices and selling more luxury phones, adding that its other operations would help cushion the impact.
In November, Taiwanese laptop maker ASUS said it had around four months of inventory, including memory components, and would change pricing as needed. TRADERS RUSH IN To reduce stockpiling, retailers in Tokyo’s electronics district of Akihabara are limiting memory product purchases. A sign outside PC shop Ark claims that starting November 1 consumers have been limited to buying a total of eight products among hard-disk drives, solid-state drives and system memory. Ark chose not to respond. Clerks at five outlets reported shortages had pushed prices considerably higher in recent weeks. At some places, one-third of merchandise were sold out.
Products such as 32-gigabyte DDR5 memory – popular with gamers – were over 47,000 yen, up from roughly 17,000 yen in mid-October. The price of more expensive 128-gigabyte systems had more than doubled to almost 180,000 yen. The hikes are sending buyers to the secondhand market – helping entrepreneurs like Roman Yamashita, owner of iCON in Akihabara, who said his company selling used PC parts is flourishing. Eva Wu, a sales manager at component trader Polaris Mobility in Shenzhen, said prices are shifting so rapidly that distributors offer broker-style quotes that expire daily – and in some cases hourly – unlike monthly before the crunch. A DDR4 vendor in Beijing claimed to have stockpiled 20,000 units in preparation for future price rises.
Some 6,000 miles away in California, Paul Coronado said monthly sales at his company, Caramon, which sells recycled low-end memory chips salvaged from retired data-center servers, have tripled since September. Almost all its items are now bought by Hong Kong-based intermediaries who resale them to Chinese buyers, he said. “We were doing about $500,000 a month,” he claimed. “It’s between $800,000 and $900,000 now.”
