FOR INSIDERS | How the AI boom is making MacBooks, Xboxes more expensive

The AI boom is fueling massive demand for memory chips, forcing electronics manufacturers to grapple with rising prices that are starting to trickle down to consumers.

Memory chips, which are responsible for storing and processing data, are a key component in everything from smartphones to laptops to cars. But the massive data center buildout is straining supply and driving up costs.

Major U.S. consumer technology companies such as Apple and Microsoft have already announced price hikes for popular laptops, tablets and video game systems as they scramble to adapt to the shift in the memory market.

The rise of AI over the past few years has fueled a push to rapidly build new data centers and bring online additional computing capacity. While much of the conversation has centered around advanced AI chips, memory chips are also a crucial component.

“It’s making things worse for consumer devices because not only is there increased demand on the data center side for memory, but they use a specialized type of memory called HBM [high bandwidth memory],” Jitesh Ubrani, director of consumer devices research at IDC, told The Hill.

“And every time a chip maker or memory supplier chooses to build HBM, they’re foregoing multiple times over the number of memory modules it can build for a consumer device,” he continued.

High bandwidth memory requires about three times the amount of silicon wafer, the foundational material for chips, as the type of memory used in consumer devices, according to Micron, one of the world’s leading memory chipmakers.

Market forces are driving the memory companies to produce more of these high-capacity chips for hyperscalers like Google and Amazon, said Long Le, a teaching professor at the Leavey School of Business at Santa Clara University.

This has resulted in shortages of traditional chips, but the companies “have an incentive to not overproduce these memory chips because overproduction in the past has hurt them,” Le added.

In the past, the industry has operated on a boom-and-bust cycle. Consumer devices became more capable, which resulted in higher demand for memory chips, shortages and higher prices, Ubrani explained.

The major memory companies — Micron, SK Hynix and Samsung — then invested in expanding supply and prices eventually fell.

“What’s different this time around is again the rate of increase, because it’s not just consumer devices........

© The Hill