The global memory chip shortage is causing a fierce battle among AI and consumer electronics companies for limited supplies, with prices skyrocketing for these critical components used to store data.
In Japan, electronics stores have started limiting the purchase of hard-disk drives. Meanwhile, Chinese smartphone manufacturers are warning about potential price hikes. Tech giants like Microsoft, Google, and ByteDance are urgently seeking to secure memory chip supplies from leading manufacturers such as Micron, Samsung Electronics, and SK Hynix, according to insiders.
The shortage affects nearly all types of memory, from flash chips in USB drives and smartphones to advanced high-bandwidth memory (HBM) crucial for AI chips in data centers. Some prices have more than doubled since February, according to TrendForce, attracting traders who believe the price surge will continue.
This crisis could extend beyond technology, with many economists and executives warning that the prolonged shortage might hinder AI-related productivity gains and delay massive digital infrastructure investments. It could also contribute to inflation just as many economies are trying to control rising prices and deal with U.S. tariffs.
“The memory shortage has escalated from a component issue to a macroeconomic threat,” said Sanchit Vir Gogia, CEO of technology advisory firm Greyhound Research. The AI expansion “is clashing with a supply chain unable to meet its physical demands.”
This Reuters analysis of the escalating crisis is based on interviews with nearly 40 individuals, including 17 executives at chipmakers and distributors. It reveals how industry efforts to meet the demand for advanced chips — driven by Nvidia and tech giants like Google, Microsoft, and Alibaba — have created a dual constraint. Chipmakers still can’t produce enough high-end semiconductors for the AI boom, while their shift away from traditional memory products has restricted supply for smartphones, PCs, and consumer electronics. Some are now rushing to adjust their strategies.
This report details the global scramble by tech firms and the price increases described by electronics retailers and component suppliers in China and Japan for the first time.
Average inventory levels at dynamic random-access memory (DRAM) suppliers — the main type used in computers and phones — dropped to two to four weeks in October from three to eight weeks in July and 13 to 17 weeks in late 2024, according to TrendForce.
The shortage is unfolding as investors question whether the billions of dollars invested in AI infrastructure have inflated a bubble. Some analysts foresee a shakeout, with only the largest and financially strongest companies able to absorb the price increases.
An executive from a memory-chip company informed Reuters that the shortage would delay future data-center projects. New capacity takes at least two years to develop, but memory-chip makers are cautious about overbuilding to avoid idle capacity if demand subsides, the executive explained.
Samsung and SK Hynix have announced investments in new capacity, but haven’t specified the production split between HBM and conventional memory.
SK Hynix informed analysts that the memory shortfall would persist until late 2027, according to Citi in November.
“We’re receiving so many requests for memory supplies that we’re worried about fulfilling them all. If we fail, companies might not be able to operate,” said Chey Tae-won, chairman of SK Hynix parent SK Group, at an industry forum in Seoul last month. OpenAI signed initial deals with Samsung and SK Hynix in October to supply chips for its Stargate project, which will require up to 900,000 wafers per month by 2029 — about double the current global monthly HBM production, Chey stated.
Samsung told Reuters it is monitoring the market but declined to comment on pricing or customer relationships. SK Hynix said it is increasing production capacity to meet the rising memory demand.
Microsoft declined to comment, while ByteDance didn’t address questions about the chip strain. Micron and Google didn’t respond to comment requests.
‘Begging for supply’
The release of ChatGPT in November 2022 sparked a generative AI boom, leading to a global rush to build AI data centers, prompting memory makers to allocate more production to HBM, used in Nvidia’s advanced AI processors.
Competition from Chinese rivals producing lower-end DRAM, such as ChangXin Memory Technologies, also pushed Samsung and SK Hynix to focus on higher-margin products. These South Korean firms control two-thirds of the DRAM market.
In May 2024, Samsung informed customers it planned to halt production of a type of DDR4 chips — an older variety used in PCs and servers — this year, according to a letter seen by Reuters. (The company has since revised this decision to continue production, according to two sources.) In June, Micron announced it would stop shipping DDR4 and its counterpart LPDDR4 — used in smartphones — in six to nine months.
ChangXin followed suit by ending most DDR4 production, one source claimed. The firm declined to comment.
This shift coincided with a replacement cycle for traditional data centers and PCs, as well as stronger-than-expected smartphone sales, which rely on conventional chips.
“In hindsight, one could say the industry was caught off-guard,” said Dan Hutcheson, senior research fellow at TechInsights. Samsung raised server memory chip prices by up to 60% last month, according to Reuters. Nvidia CEO Jensen Huang, who announced deals and shared fried chicken with Samsung Electronics Chairman Jay Y. Lee during a trip to South Korea in October, acknowledged the significant price surge but stated Nvidia had secured substantial supply.
In October, Google, Amazon, Microsoft, and Meta requested open-ended orders from Micron, indicating they would accept as much as it could deliver, regardless of price, according to two informed individuals.
Chinese companies Alibaba, ByteDance, and Tencent are also pushing suppliers, sending executives to visit Samsung and SK Hynix in October and November to lobby for allocations, according to sources.
“Everyone is begging for supply,” one source said.
The Chinese firms did not respond to questions about the chip crunch. Nvidia, Meta, Amazon, and OpenAI did not respond to requests for comment.
In October, SK Hynix announced all its chips were sold out for 2026, while Samsung stated it had secured customers for its HBM chips to be produced next year. Both companies are expanding capacity to meet AI demand, but new factories for conventional chips won’t be operational until 2027 or 2028. Shares in Micron, Samsung, and SK Hynix have risen this year due to chip demand. In September, Micron forecast first-quarter revenue above market expectations, while Samsung reported its largest quarterly profit in over three years in October.
Consultancy Counterpoint Research predicts prices of advanced and legacy memory to rise by 30% through the fourth quarter, possibly increasing another 20% in early 2026.
Smartphone sticker shock
Chinese smartphone makers Xiaomi and Realme have warned of potential price hikes.
Francis Wong, Realme India’s chief marketing officer, told Reuters that the steep increases in memory costs were “unprecedented since the advent of smartphones” and might force the company to raise handset prices by 20% to 30% by June.
“Some manufacturers might cut costs on cameras, processors, or batteries,” he said. “But storage costs are something all manufacturers must absorb entirely; there’s no way to transfer it.”
Xiaomi informed Reuters it would offset higher memory costs by raising prices and selling more premium phones, adding that its other businesses would help cushion the impact.
In November, Taiwanese laptop maker ASUS reported having about four months of inventory, including memory components, and would adjust pricing as needed.
Taiwanese chipmaker Winbond, which holds about 1% of the DRAM market, was among the first to announce a capacity expansion to meet demand. Its board approved a plan in October to significantly increase capital expenditure to $1.1 billion.
“Many customers have come to us saying, ‘I really need your help,’ and one even requested a six-year long-term agreement,” said Pei-Ming Chen, President of Winbond.
Traders rush in
In Tokyo’s electronics district of Akihabara, stores are limiting memory product purchases to prevent hoarding. A sign outside PC shop Ark states that since November 1, customers are restricted to buying a total of eight products, including hard-disk drives, solid-state drives, and system memory. Ark declined to comment.
Clerks at five shops reported that shortages had sharply increased prices in recent weeks. At some stores, one-third of products were sold out.
Items such as 32-gigabyte DDR5 memory — popular with gamers — were over 47,000 yen, up from around 17,000 yen in mid-October. Higher-end 128-gigabyte kits had more than doubled to around 180,000 yen.
The price hikes are driving customers to the secondhand market, benefiting people like Roman Yamashita, owner of iCON in Akihabara, who said his business selling used PC parts is booming.
Eva Wu, a sales manager at component trader Polaris Mobility in Shenzhen, said prices are changing so rapidly that distributors are issuing broker-style quotes that expire daily — and sometimes hourly — compared to monthly before the crisis.
In Beijing, a DDR4 seller said she had hoarded 20,000 units anticipating further increases.
Some 6,000 miles away in California, Paul Coronado reported that monthly sales at his company, Caramon, which sells recycled low-end memory chips from decommissioned data-center servers, have surged since September. Almost all its products are now purchased by Hong Kong-based intermediaries reselling them to Chinese clients, he said.
“We were doing about $500,000 a month,” he said. “Now it’s $800,000 to $900,000.”
