AI and smartphones and computers "compete" for chips: Phone manufacturers warn prices may rise by 30%, memory shortages expected to last until 2027

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The global storage chip industry is experiencing a supply crisis, as artificial intelligence data centers and consumer electronics manufacturers compete for increasingly scarce storage chips. Soaring prices threaten a wide range of products from smartphones to AI projects. This shortage affects almost all types of storage, from USB flash drives to high-end HBM chips, and may not only drive up consumer goods prices but also undermine the return on AI infrastructure investment, evolving into a macroeconomic risk.

According to media reports on Wednesday, SK Hynix expects the shortage of storage chips to persist until the end of 2027. Tech giants like Microsoft and Google are scrambling to secure supplies from storage chip manufacturers such as Micron, Samsung Electronics, and SK Hynix. Japanese electronics stores have begun limiting the number of hard drives consumers can purchase, and Chinese smartphone makers are warning that prices may rise.

According to research firm TrendForce, prices for some storage chips have more than doubled since February this year. The average inventory level for DRAM suppliers fell from 13-17 weeks at the end of 2024 to 3-8 weeks in July and further down to 2-4 weeks in October. Chipmakers Samsung, SK Hynix, and Micron have all seen their stock prices rise this year due to chip demand.

Counterpoint Research estimates prices for both advanced and traditional storage chips will rise 30% in the fourth quarter, with a possible further increase of 20% in early 2026. Francis Wong, Chief Marketing Officer of Realme India, told Reuters that the steep rise in storage costs is "unprecedented since the advent of smartphones" and could force the company to raise phone prices by 20% to 30% before June.

Supply Chain Mismatch Triggers Crisis

This crisis stems from the disconnect between chip makers' strategic shifts and market demand. The generative AI boom sparked by the launch of ChatGPT in November 2022 prompted a global wave of AI data center construction, leading storage chip manufacturers to allocate more capacity to high-bandwidth memory used in Nvidia’s AI processors.

In May 2024, Samsung notified customers of its plan to discontinue production of a DDR4 chip—a legacy product used in PCs and servers—according to a letter seen by the media. Micron said in June that it had notified customers that it would stop supplying DDR4 and its corresponding smartphone LPDDR4 chips within six to nine months.

However, this transition coincides with the upgrade cycle of traditional data centers and PCs, as well as stronger-than-expected smartphone sales—all of which rely on legacy chips. Dan Hutcheson, Senior Research Fellow at TechInsights, said in hindsight, "You could say the industry was caught off guard."

According to earlier media reports, last month Samsung raised server storage chip prices by up to 60%. Nvidia CEO Jensen Huang visited Korea in October and met Samsung Electronics Chairman Lee Jae-yong to announce a deal; Huang admitted that prices had risen significantly but said Nvidia had secured ample supply.

Tech Giants 'Bid' for Storage Chips

According to two sources, Google, Amazon, Microsoft, and Meta submitted open orders to Micron in October, telling the company they would accept all the capacity it could deliver, regardless of price.

Two sources and another informant said these companies sent executives to visit Samsung and SK Hynix in October and November, lobbying for quotas. One source said, "Everyone is pleading for supply."

In October, SK Hynix said all its chips for 2026 were sold out, while Samsung said it had secured customers for next year's HBM chip production. Both companies are expanding capacity to meet AI demand, but new plants for legacy chips won't be operational until 2027 or 2028.

SK Group Chairman Chey Tae-won said at an industry forum in Seoul last month: "These days we receive so many requests for memory supply from various companies that we're worried about how to handle them all. If we can't supply them, they may be unable to continue business entirely."

OpenAI signed preliminary agreements with Samsung and SK Hynix in October to supply chips for its Stargate project, which will need up to 900,000 wafers a month by 2029. Chey Tae-won said this is about twice the current global monthly HBM output.

Consumers Under Pressure as Prices Rise

The impact of the memory shortage is being passed on to the consumer side. Xiaomi and Realme have warned they may have to raise prices. Realme Marketing Director Wang Shuo said, "Some manufacturers may cut costs on cameras, some on processors, some on batteries. But memory costs must be fully absorbed by all manufacturers; there's no way to pass it on."

Xiaomi stated it would offset higher memory costs through price hikes and by selling more high-end phones, adding that other business lines would help buffer the impact. In November, laptop manufacturer Asus said it had about four months of inventory (including memory components) and would adjust pricing as needed.

In Tokyo’s Akihabara electronics center, stores are limiting purchases of storage products to curb hoarding. A bulletin board outside PC store Ark shows that since November 1, the total number of hard drives, SSDs, and system memory a customer can buy is capped at eight units. Staff in five stores said the shortage had caused prices to surge sharply in recent weeks, with some stores sold out of a third of products.

The 32GB DDR5 memory kits favored by gamers are priced at over 47,000 yen, up from about 17,000 yen in mid-October. High-end 128GB kits have more than doubled in price, reaching about 180,000 yen.

Chipmaker Winbond, which has about a 1% share of the DRAM market, is among the first to announce expanded capacity to meet demand. Its board approved a plan in October to sharply increase capital expenditure to US$1.1 billion. Winbond President Chen Pei-ming said, "Many customers have come to us saying, 'I really need your help'; one even requested a six-year long-term agreement."

Traders Flood the Secondary Market

Soaring prices are driving customers to the secondary market. Roman Yamashita, owner of Akihabara used PC parts store iCON, said his business is booming.

Eva Wu, sales manager at Shenzhen component trader Polaris Mobility, said prices are changing so rapidly that distributors' price quotes expire daily—in some cases hourly—whereas before the shortage, they were updated monthly. In Beijing, a DDR4 seller said she had hoarded 20,000 units, expecting prices to rise further.

In California, Paul Coronado said his company Caramon, which sells reclaimed low-end memory chips from retired data center servers, has seen monthly sales surge since September. Now almost all the products are purchased by Hong Kong intermediaries and resold to Chinese customers. He said, "We used to sell about US$500,000 a month, now it's US$800,000 to US$900,000."

Sanchit Vir Gogia, CEO of technology consulting firm Greyhound Research, said, "The memory shortage has now escalated from a component-level issue to a macroeconomic risk." AI infrastructure construction "is colliding with a supply chain unable to meet its real needs." The ongoing shortage could drag down AI-driven productivity growth, delay hundreds of billions of dollars in digital infrastructure investment, and add inflationary pressure at a time when many economies are trying to contain price increases and deal with US tariffs.

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