Your next smartphone may cost more. AI is the reason
What's the story
Smartphone users may have to shell out more money in the near future, thanks to a shortage of memory chips. The issue has been triggered by the growing demand from artificial intelligence (AI) data centers. Major tech companies are investing heavily in building the hardware for AI tools like ChatGPT. This growing demand is creating supply chain problems as chipmakers intentionally keep supply tight to avoid price drops that could hurt their profits.
Price impact
Chip shortage to impact retail prices significantly
Lu Weibing, the president of Chinese electronics giant Xiaomi, has warned that the supply chain pressure for memory chips will be much worse in 2026 than it is this year. He said during an earnings call that "everyone will likely observe that retail prices for products will see a significant increase." William Keating, head of semiconductor and tech consulting firm Ingenuity, echoed this sentiment by saying all companies manufacturing PCs, smartphones, servers, etc., will be affected by the chip shortage.
Chip demand
DRAM and NAND chips in high demand
The shortage is mainly due to high demand for key chips known as DRAM and storage components called NAND. These are found in everyday gadgets but are also needed to process the vast amounts of data generated by generative AI. This is driving up memory chip prices, which in turn is boosting revenue for manufacturers such as Samsung, SK Hynix, Micron, and SanDisk.
Supply response
Samsung plans new semiconductor plant to meet demand
Samsung has announced plans to build a new semiconductor plant in South Korea to meet the soaring demand. SK Hynix recently reported its best-ever quarterly performance, driven by the full-scale rise in prices of DRAM and NAND. Industry analysts TrendForce have lowered their 2026 global production forecasts for smartphones and notebook laptops due to this memory chip shortage.