In just five hours on Thursday, Apple and Microsoft raised prices on a number of popular products, including Xbox game consoles, Mac computers and iPads. Both companies attributed the price increases to an unprecedented shortage of memory chips triggered by the artificial intelligence boom. However, despite the industry's high-profile push to expand production capacity, the chip supply crisis and its impact on consumer prices will not end in the short term.
Samsung Electronics and SK Hynix are expected to announce a new round of chip manufacturing investment plans totaling hundreds of billions of dollars next Monday. Among them, Samsung Group, owned by Samsung Electronics, will announce plans to invest 1,000 trillion won (US$651 billion) in the next ten years, which will become the largest investment plan in South Korea's history.
Micron Technology CEO Sanjay Mehrotra
However, even so, industry executives warn that supply shortages will continue for several years as more and more data centers "crazyly absorb" chips. Micron Technology CEO Sanjay Mehrotra said on Wednesday that while chip supply conditions may improve in 2028, there is still "no visibility" when supply will catch up with demand.
That means chip prices are likely to continue to rise, forcing consumers to pay more for laptops, cell phones and other electronic devices. According to market research firm inSpectrum Tech Inc. According to data, in the past year, the price of DDR5 memory chips commonly used in personal computers has increased more than three times.
"At present, the tight supply and demand situation for chips is likely to continue until 2028, so prices are unlikely to fall back before the end of 2027," said industry research analyst Jake Silverman. "Prices of consumer electronics may still have to continue to rise, although the increase may be more moderate than before to maintain reasonable profit margins on products."
The boom in artificial intelligence infrastructure construction driven by NVIDIA graphics processors has completely changed the memory chip market. And because the entire industry had not anticipated the arrival of this wave of AI, the supply shortage problem has further intensified.
After the COVID-19 epidemic ended, the chip industry once fell into a serious oversupply situation, so companies did not invest in expanding production capacity. Now, those few manufacturers that have survived the industry reshuffle—some of them just barely surviving—are facing an unprecedentedly favorable situation. Investors are chasing them, customers are clamoring to buy them, and they're making record profits.
It's not just memory chips that are in short supply. Logic chips used for computing are also in short supply, driving chip prices to continue to rise.
TSMC said that even if new U.S. production capacity comes online in the next few years, the company will still be unable to meet the continued growth in demand from U.S. customers, TSMC President Wei Zhejia told shareholders this month.
He later told the media, “The development speed of artificial intelligence has exceeded our expectations.”
Wei Zhejia also revealed that he once asked Nvidia CEO Jensen Huang why he did not warn himself in advance that the AI boom was coming. Wei Zhejia said that Huang Renxun’s answer was that he himself did not expect this AI boom at the time.
Wei Zhejia said, "No one saw this coming -- not even TSMC."
Despite this, companies are still doing their best to speed up the expansion of production capacity.
TSMC’s capital expenditures this year are expected to reach $56 billion. At the same time, SK Hynix plans to go public in the United States to raise US$29 billion. Chairman Chey Tae-won said earlier this month that it plans to double its production capacity in the next five years.
Before officially announcing the new investment plan on Monday, Samsung had originally planned to invest more than US$73 billion this year to expand production capacity and research and development.
At the same time, Micron is working to increase production by improving the efficiency of existing factories while integrating new capacity it acquires. In addition, the company is also building new wafer fabs in Idaho and New York state in the United States.
Manish Bhatia, executive vice president of global operations at Micron, said in an interview on Wednesday, "We are doing everything we can. This year we have further increased capital expenditures to improve production efficiency and squeeze as much capacity as possible from existing fabs."
However, for consumers who are ready to buy an Xbox or MacBook, these efforts may be too late and far from enough. For example, Sony Group raised the price of its flagship product PlayStation 5 by up to $150 in March this year. Since then, memory chip prices have continued to rise.