AI’s Hidden Cost: Why Your Next Tech Purchase Will Likely Be More Expensive
Get ready to dig a little deeper into your pockets. Consumers are bracing for price hikes across a wide range of electronics – potentially up to 20% – as the insatiable demand for artificial intelligence fuels a surge in the cost of crucial memory chips. From smartphones and laptops to everyday home appliances, the impact is expected to be widespread.
The AI-Driven Chip Crunch: What’s Happening?
The root of the problem isn’t a traditional chip shortage, but a shift in priorities. Global investment is pouring into building massive data centers to power AI models. These centers require cutting-edge, high-bandwidth memory (HBM) chips. This intense demand is causing chipmakers like Samsung and SK Hynix to allocate production towards these lucrative AI-focused chips, effectively reducing the supply available for the dynamic random-access memory (DRAM) chips used in consumer electronics.
Dell’s COO, Jeff Clarke, highlighted the unprecedented speed of cost increases in a recent earnings call, stating the company had “never seen costs move at the rate” they were currently rising. Raspberry Pi, the popular British PC maker, was forced to raise prices in December, calling the pressures “painful.” Even industry giants like Lenovo are stockpiling components in anticipation of further price increases.
Beyond PCs and Smartphones: A Ripple Effect
The impact extends far beyond personal computers and smartphones. DRAM chips are integral to a vast array of devices, including automobiles, gaming consoles, and industrial equipment. This broad reliance means the price increases will be felt across multiple sectors. Daniel Kim, an analyst at Macquarie, describes the market as “crazy with buyers in panic,” willing to pay any price to secure sufficient memory.
TrendForce forecasts DRAM prices will jump between 50% and 55% in the fourth quarter of 2025 compared to the previous quarter. Samsung, controlling 70% of the DRAM market alongside SK Hynix, has already raised prices on some memory chips by as much as 60% in recent months. The company reports that orders for 2026 have already exceeded their production capacity.
Who’s Absorbing the Costs? And For How Long?
While cloud service providers like Amazon and Google are securing long-term agreements with chipmakers to guarantee DRAM supply for their AI servers, consumer electronics manufacturers have limited options. Greg Roh, an analyst at Hyundai Motor Securities, explains they’ll largely be forced to accept the higher prices.
Morgan Stanley predicts global spending on AI infrastructure will reach $2.9 trillion by 2028, up from $470 billion in 2025. This massive investment underscores the scale of the demand driving the chip shortage. Citigroup analyst Peter Lee warns that supply will remain tight until at least 2027, with no significant increase in capacity expected in the near term.
Xiaomi, a leading Chinese smartphone manufacturer, anticipates even greater supply chain pressures in 2026 than in 2025, having already increased prices on its flagship products in October.
Semiconductor industry experts are concerned about a potential return to the severe supply chain disruptions seen during the pandemic.
What’s Being Done to Address the Issue?
Both Samsung and SK Hynix are investing heavily in expanding chip production capacity. Samsung is adding a production line at its South Korean plant, while SK Hynix is building a $91 billion chipmaking cluster. However, building new chip fabrication plants is a lengthy process, taking two to three years to complete.
As SK Hynix chair Chey Tae-won stated, the company is “thinking hard about how to address all demand,” but immediate relief isn’t on the horizon. Ultimately, companies will likely have to choose between raising prices or accepting reduced profit margins, as Citi’s Lee suggests.
FAQ: Navigating the Price Increases
- Will all electronics prices increase? Most likely, yes. The impact will be felt across a wide range of devices that rely on DRAM chips.
- How long will these price increases last? Experts predict tight supply and higher prices will persist at least until 2027.
- Is there anything I can do to avoid paying more? Consider purchasing essential electronics sooner rather than later, and explore refurbished options.
- What is HBM and why is it important? High-Bandwidth Memory (HBM) is a type of DRAM specifically designed for high-performance applications like AI, and its demand is diverting resources from consumer-grade chips.
Explore Further: Read more about the latest technology trends on FT.com
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