The wave of investments in artificial intelligence (AI) is creating an unexpected consequence for the consumer electronics market: the surge in memory chip prices is driving up the production costs of smartphones, computers, and other electronic devices, which is weighing on demand and pushing global consumption to its lowest level in years.
This phenomenon is called “chipflation,” where the price of memory chips, one of the most important components of electronic devices, rises rapidly as supply becomes increasingly oriented toward the AI sector.
An inverted downward trend
According to Morgan Stanley, DRAM memory chip prices have been multiplied by more than six over the past year, reversing a downward trend observed for decades. This rise is mainly driven by increased investments by major technology companies in AI-based data centers, which has generated strong demand for high-performance memory chips.
This year, Amazon and three other large tech companies are expected to devote a total of about $725 billion to capital investments, a 76% increase from last year, primarily to expand their AI infrastructure.
The strong demand for high-bandwidth memory chips (HBM), used notably in AI servers, has led manufacturers to prioritize shifting production toward this higher-margin segment. This has resulted in a shortage of conventional DRAM memory chips, driving up prices.
Manufacturing partners’ concerns
An executive at an American smartphone manufacturer said that even the common memory chips used in mid-range phones have seen their prices rise by about $100 compared with the same period last year. The rising cost of components with every order worries manufacturing partners, who fear that this trend will continue.
The rise in component prices has forced many electronics companies to revise their pricing. In Japan, Sharp increased the price of its flagship Aquos smartphone, launched in July, to more than 160,000 yen (about $985), more than 50% higher than its predecessor. Oppo and Xiaomi have also raised prices on several of their models, while Apple is expected to do the same for its premium iPhones soon.
According to a specialized research firm, the global average selling price of smartphones will rise by $94 this year, reaching around $550 per unit, before increasing by about $23 in 2027.
It isn’t just about phones; prices of computers and gaming consoles are also rising. Apple raised the price of its MacBook Neo by $100 in June. The Japanese manufacturer Vaio has increased its prices in April, while Sony and Nintendo have also raised the prices of their PlayStation 5 and Switch 2 consoles.
