The global memory chip market is experiencing a crisis driven by surging demand from the artificial intelligence sector, leading to dramatic price increases and potential disruptions across the consumer electronics and automotive industries. What began as a tightening supply in late 2025 has rapidly escalated into a full-blown shortage, with prices for some types of memory soaring to unprecedented levels.
AI Drives Unprecedented Demand
The core of the problem lies in the insatiable appetite of AI applications for high-bandwidth memory (HBM). Companies like Nvidia, AMD and Google require vast quantities of memory for their AI chips, and are prioritizing supply for these high-margin products. This shift in focus is diverting manufacturing capacity away from the more conventional DRAM and NAND chips used in smartphones, PCs, and other consumer electronics. According to Micron business chief Sumit Sadana, the surge in demand “has far outpaced our ability to supply that memory and, in our estimation, the supply capability of the whole memory industry.”
The reallocation of wafer capacity is particularly acute. Each gigabyte of HBM requires roughly three times the wafer capacity of DDR5, meaning that producing the same volume of HBM significantly reduces the overall supply of general-purpose memory. This has resulted in a supply/demand imbalance that is driving prices upwards across the board.
Price Surge and Market Impact
The price increases are substantial. DRAM prices have risen 171% year-over-year, while spot prices for DDR5 have quadrupled since September 2025. Prices for computer memory, or RAM, are expected to rise more than 50% this quarter compared to the last quarter of 2025. This surge is already impacting the financial performance of major memory manufacturers. Micron reported that its net income nearly tripled in the most recent quarter, and Samsung anticipates a similar tripling of its operating profit. SK Hynix is even considering a U.S. Listing amid surging stock prices, having already secured demand for its entire 2026 RAM production capacity.
However, the benefits are not evenly distributed. Consumer electronics manufacturers are facing significant headwinds. Wall Street is scrutinizing companies like Apple and Dell Technologies, questioning how they will manage the shortage and whether they will be forced to raise prices or accept lower profit margins. The impact is expected to be most pronounced on low- and mid-range devices, potentially leading to declining smartphone and PC sales. Analysts predict PC prices could rise 15-20% in the first quarter of 2026.
Beyond Consumer Electronics
The ramifications extend beyond the consumer electronics sector. Cloud infrastructure providers are also feeling the pinch and are likely to pass on increased memory costs to their enterprise customers. The automotive industry faces a more long-term threat. As legacy DRAM production contracts, automakers could face production disruptions as early as 2028. The automotive sector’s reliance on memory for advanced driver-assistance systems (ADAS) and autonomous driving features makes it particularly vulnerable.
Geopolitical Considerations
Geopolitical factors are further exacerbating the situation. United States export controls on HBM and retaliatory measures from China targeting critical minerals are accelerating a trend towards “friend-shoring” – concentrating supply chains within politically aligned nations. This geographic concentration, with three manufacturers – Micron, SK Hynix, and Samsung Electronics – controlling 95% of DRAM production, creates systemic vulnerabilities that extend even to defense systems.
Looking Ahead: A Prolonged Shortage?
The current crisis is not simply a cyclical boom-and-bust scenario, but a structural shift driven by the long-term growth of AI. While some normalization of prices is possible when new fabrication facilities reach volume production, this is not expected before 2027 or 2028. An oversupply scenario remains a possibility in 2028-2029 if AI demand moderates as capacity expands, but for now, the outlook is for continued elevated prices and constrained supply. The memory market is at an “unprecedented inflexion point,” and the consequences are rippling through the global technology landscape.
The situation is being closely monitored by industry analysts, who are revising forecasts to account for the evolving dynamics. IDC is maintaining its official forecasts for now, but has outlined downside risk scenarios for the smartphone and personal computer markets. The global semiconductor ecosystem faces a prolonged period of adjustment as it adapts to the demands of the AI era.
