Why is the memory chip shortage wreaking havoc on the consumer electronics industry?
The boom in investment in artificial intelligence has led to a shortage in the world’s memory chip supply, a situation that is no less than a crisis for consumer electronics companies around the world.
Shortages of random access memory, or RAM – a key component in most modern devices – could soon drive up prices and cause shipping delays on everything from laptops to smartphones to gaming consoles and automobiles.
“We’ve seen a huge increase in investment in AI data centers, and it’s like taking all the oxygen out of the room, if you will,” said Willy Shih, a professor of management practice at Harvard Business School.
The surge in artificial intelligence is causing a worldwide shortage of memory chips, which could soon send prices soaring for everything from smartphones to laptops and video game consoles.
Just three companies are responsible for manufacturing the world’s RAM supply: South Korea’s Samsung and SK Hynix, and their American counterpart Micron Technology.
the latter two are completely sold out of high-bandwidth memory chips during the rest of the year.
Where these companies used to manufacture traditional DRAM (dynamic random access memory) and flash memory for consumer electronics, “they have reallocated a lot of their capacity to the new and more profitable high-bandwidth memory segment,” which is used for AI, Shih said.
“I think what most people are surprised by is how this AI spending has really taken away all the demand and created a shortage,” Shih said. More Capacity and Plant To meet that demand. “But it takes some time to heal.”
Big Tech is poised to impact
Some of the world’s largest makers of consumer electronics have indicated they have little breathing room once their current stockpile of memory chips runs out. Others have said the shortage is impacting their outlook for the coming year.
Cristiano Amon, CEO of American chip and software manufacturer Qualcomm, has held his company responsible for this. Weak second quarter forecast On lack of memory. Intel CEO Lip-Boo Tan caution There may be no relief from the shortage for at least the next two years. HP has confirmed this started raising prices on my pc, and have dell Allegedly It is doing the same for its corporate clients.
Meanwhile, Apple CEO Tim Cook said during The company’s recent first-quarter earnings show that the tech giant expects market pricing for memory to “significantly increase” in the near future.
“As always, we will look at a number of options to address this,” Cook told investors.
Interpretations were mixed. While some analysts have written that Apple has a track record of keeping retail prices under control during volatile periods, others have written that the company would face US$2 or $3 billion of additional costs per quarter as a result of the shortage – and that it could raise the price of some products to compensate.
As shortages wreak havoc on the bottom line, a mid-sized consumer electronics company says it will bear the brunt of higher prices.
“Being able to get memory from suppliers has obviously become much more challenging and much more expensive,” said Nirav Patel, founder of Framework, a US-based repairable computer manufacturer.
The company is selling the memory modules that come with its laptops at cost to avoid raising prices for its consumers.
“Instead of trying to increase and gain margins here, what we’re really doing is making sure consumers can get a working computer,” Patel told CBC News.
gaming industry collapses
Investors are worried that major video game makers will Push release date or raise prices On newer consoles – for example, Sony’s PlayStation, Microsoft’s Xbox or the latest models of the Nintendo Switch – to reduce the impact of memory chip shortages.
“These companies are certainly formulating a number of strategies right now. And many of those strategies will involve price increases,” said Jeffrey Grubb, a gaming industry reporter based in Cleveland, Ohio.
The amount of memory required for a PC to operate a new game includes approximately 16 GB of RAM and 16 GB for the discrete video card (VRAM).
“When you add those things up, we’re in the range of about 32 GB of memory. And that’s going to be the standard now,” Grubb explained.
Some major game-makers are already looking at ways to offset the inevitable increase in their input costs by charging additional fees to existing consumers and expanding other parts of their business.
For example, Sony CEO Lin Tao said during the company latest earnings call It is intended to mitigate the impact of higher memory costs by “prioritizing monetization of the installed base to date,” especially for consumers who own the company’s PS5.
It’s a tricky game, Grubb says, because Sony and other gaming companies “have already done so much to satisfy consumers.”
Electronic Arts, the maker of video games like The Sims and Madden NFL, is being acquired for US$55 billion, the largest leveraged buyout effort in history. Many details of the deal remain unknown, but as Michel Ghoussoub reports, it’s likely to create more uncertainty in the Canadian gaming industry, given EA’s dominant presence across the country.
Other companies are trying to take a different approach. Wary of shortages, British developer TT Games announced earlier this month It adapted its Lego Batman game to fit older systems that only recommend 16 GB of RAM instead of the initial recommendation of 32 GB.
The memory shortage is expected to last until the end of the year. From Grubb’s perspective, major chip makers have a high stake in shifting their production capacity from RAM for consumer electronics to high-bandwidth memory for AI data centers.
If that bet doesn’t succeed and appetite for AI investment wanes, another memory-related crisis could loom, he said, if companies are forced to reverse their plans.
“The companies that make that memory are going to have to shift their focus back to consumers, (and) start building new facilities that can handle this different kind of memory,” he said. “And it took years to build.”
