AI created ‘RAMageddon’: Prices of laptops and mobile phones skyrocketed

The data center famine has emptied the shelves

At the heart of the problem is an astronomical race by tech giants like Alphabet, Meta, Microsoft and OpenAI to build data centers that can run and train artificial intelligence algorithms. These giants invest hundreds of billions of dollars and literally swallow up more and more of the global production of memory chips. Their AI accelerators, like those made by Nvidia, come with huge amounts of specialized memory, leaving consumer electronics manufacturers scrambling for the scraps that remain.

Chip manufacturers such as Samsung, Micron and SK Hynix have shifted most of their production capacity from the production of standard DRAM memory, which is used in almost every device, to HBM (High-Bandwidth Memory), a far more profitable memory key to AI. According to the estimates of the analyst company TrendForce, memory intended for artificial intelligence will consume about 70 percent of global production this year, creating a structural imbalance that is not just a passing fluctuation on the market.

Prices went parabolačno

The consequences are moreć visible and reminiscent of hyperinflation. According to the LA Times, the price of one type of DRAM memory jumped 75 percent from December to January alone, and some computer manufacturers report that their suppliers have sent them offers with prices up to 500 percent higher than just a few months ago.

Kelt Reeves, the owner of Falcon Northwest, a company that has been producing high-end computers for 34 years, testified that due to the tripling of the price of memory, he had to raise the price of one of his popular models from approximately $5,800 to more than $7,000. In Seoul, someoneć in the urban computer assembly center, an eerie silence now reigns.

​- It’s actually smarter not to do business today, because prices will almost certainly be higher tomorrow. Unless Steve Jobs rises from the dead and declares that AI is just a bubble, this trend will probably continue for some time – said Suh Young-hwan, owner of three computer equipment stores.

Hit on the wallet: What does it mean for customers?

For consumers, all this means the end of the era of cheap and accessible technology. Analysts predict that the prices of personal computers, tablets and smartphones could rise between ten and 20 percent by the end of the year. Memory, which used to be a negligible part of the cost, now accounts for up to 40 percent of the production cost of some laptops. Manufacturers like Dell, HP and Lenovo more have signaled that price increases are inevitable.

The video game industry was also hit hard by the crisis. Sony is reportedly considering delaying the release of its next PlayStation console to 2028 or even 2029, while Nintendo is considering raising the price of its new Switch 2 console. In addition to higher prices, consumers could also face so-called “shrinkflation,” a practice where manufacturers, in order to keep the price seemingly the same, in devices incorporate components of lower specifications, such as less RAM or slower disks.

There is no relief in sight

A number of technology industry leaders, from Apple’s Tim Cook to Tesla’s Elon Musk, warn that this is just the beginning. Cook has admitted that the shortage will reduce iPhone margins, while Musk has said that Tesla will have to build its own chip factory.

Experts agree that this is not a short-term problem. Forecasts say that the imbalance between supply and demand could last until 2027 or 2028, until new production capacities are built. Tim Archer, CEO of Lam Research, a supplier of chip manufacturing equipment, summed up the seriousness of the situation at a conference.

​- We stand on the threshold of something that is bigger than anything we have faced so far. What lies ahead by the end of this decade, in terms of demand, will surpass all other sources of demand that we have ever seen.