Memory Chip Shortage Drives Up Prices for Phones and PCs as AI Demand Soars

TLDR

• Memory chip prices have jumped 50% due to AI data center demand from companies like OpenAI, Alphabet, and Microsoft
• Global smartphone sales are expected to fall 2% in 2026, marking the first decline since 2023
• PC market is projected to shrink 4.9% this year while console sales may drop 4.4%
• Memory prices could rise another 40-50% in Q1 2026, with some products seeing 1,000% inflation over two quarters
• Low and mid-range device makers like Xiaomi, Lenovo, and TCL face the biggest pricing pressure

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Memory chip prices have surged 50% over the past year as major tech companies buy massive amounts of chips for AI data centers. Companies like OpenAI, Alphabet, and Microsoft are purchasing huge volumes of memory for AI servers. This demand has pulled supply away from consumer electronics.

Alphabet Inc., GOOGL

Samsung Electronics, SK Hynix, and Micron Technology control most of the global memory chip market. All three companies have reported strong earnings as prices climbed. The chip makers are now prioritizing sales to data centers because they offer higher profit margins.

The price increases are spreading across consumer markets. Research firms IDC and Counterpoint now predict global smartphone sales will drop at least 2% in 2026. This would be the first yearly decline since 2023.

IDC expects the global PC market to shrink by 4.9% this year. That follows 8.1% growth in 2025. Console sales are also projected to fall 4.4% in 2026 after growing 5.8% last year, according to TrendForce.

Device Makers Face Tough Decisions

Hardware manufacturers must now choose between absorbing higher costs or passing them to consumers. Many companies are already raising prices. Jacob Bourne, an analyst at Emarketer, said manufacturers might absorb some costs but the shortage is large enough that consumers will see higher prices.

He added that this trend will likely reduce device sales throughout 2026. The price pressure comes during a period of broader inflation.

Counterpoint estimates memory prices could jump another 40% to 50% in the first quarter of 2026. This follows the 50% increase seen last year. Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide, said some products have seen 1,000% price inflation over the last two quarters.

Gonnerman said consumers should expect to pay higher prices for laptops, mobile phones, wearables, and gaming devices soon. The pricing pressure is expected to continue through 2026 and possibly into next year.

Companies like Raspberry Pi and HP have already announced price increases. HP CEO Enrique Lores said in November the company would raise PC prices due to memory chip costs. Raspberry Pi’s CEO called the cost surge “painful” in a December blog post announcing price increases.

Impact on Different Manufacturers

Low and mid-range device makers are expected to face the biggest challenges. These include Chinese smartphone makers Xiaomi and TCL Technology, along with PC maker Lenovo. These companies operate with thinner profit margins than premium brands.

TrendForce reported that Dell Technologies and Lenovo were planning price increases of up to 20% in early 2026. Stock prices for Raspberry Pi, Xiaomi, Dell, HP, and Lenovo all fell in the final three months of 2025. Xiaomi posted the largest drop at 27.2%.

The weaker demand outlook could hurt retailers like Best Buy. The company had already warned that tariff-driven price increases might discourage buyers.

Apple appears better positioned than most competitors to handle the price surge. The company has strong pricing power and uses long-term contracts with suppliers. These contracts help protect against sudden price swings.

Apple typically keeps iPhone prices stable in the U.S. between its September product launches. Last year, the company absorbed hundreds of millions of dollars in tariff-related costs instead of raising prices. William Kerwin, a Morningstar analyst, said Apple uses contract pricing rather than spot pricing for purchases, which secures better prices.

Apple will report earnings on January 29, while Dell is scheduled to report on February 26. Xiaomi typically reports in late March.

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