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Memory Chip Supply Crisis Deepens as the AI Frenzy Accelerates

An acute global shortage of memory chips is forcing artificial intelligence companies to compete for dwindling supplies. Consumer-electronics companies are also battling for these components. Prices are soaring for the unglamorous but essential components that allow devices to store data.

Japanese electronics stores have begun limiting how many hard-disk drives shoppers can buy. Chinese smartphone makers are warning of price increases. Tech giants including Microsoft (MSFT.O), opens new tab, Google (GOOGL.O), opens new tab and ByteDance are scrambling to secure supplies from memory-chip makers such as Micron (MU.O), opens new tab, Samsung Electronics (005930.KS), opens new tab and SK Hynix (000660.KS), opens new tab, according to three people familiar with the discussions.

The squeeze spans almost every type of memory. This includes flash chips used in USB drives and smartphones. It also involves advanced high-bandwidth memory (HBM) that feeds AI chips in data centers. Prices in some segments have more than doubled since February. This information is according to market-research firm TrendForce. The surge is drawing in traders betting that the rally has further to run.

The fallout could reach beyond tech. Many economists and executives warn the protracted shortage risks slowing AI-based productivity gains. It may also delay hundreds of billions of dollars in digital infrastructure. It could also add inflationary pressure just as many economies are trying to tame price rises and navigate U.S. tariffs.

The memory shortage has now graduated from a component-level concern to a macroeconomic risk. Sanchit Vir Gogia, CEO of Greyhound Research, a technology advisory firm, said this. The AI build-out “is colliding with a supply chain that cannot meet its physical requirements.”

This Reuters examination of the spiraling supply crisis is comprehensive. It is based on interviews with almost 40 people. These include 17 executives at chipmakers and distributors. It shows industry efforts to meet voracious appetite for advanced chips — driven by Nvidia (NVDA.O), opens new tab and tech giants like Google, Microsoft and Alibaba (9988.HK), opens new tab — created a dual bind: Chipmakers still can’t produce enough high-end semiconductors for the AI race, yet their tilt away from traditional memory products is choking supply to smartphones, PCs and consumer electronics. Some are now hurrying to course-correct.

Details of the global scramble by tech firms and price increases described by electronics retailers and component suppliers in China and Japan are reported here for the first time.

Average inventory levels at suppliers of dynamic random-access memory (DRAM) — the main type used in computers and phones fell 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 crunch is unfolding as investors question whether the billions of dollars poured into AI infrastructure have inflated a bubble. Some analysts predict a shakeout, with only the biggest and financially strongest companies able to stomach the price increases.

One memory-chip executive told Reuters the shortage would delay future data-center projects. New capacity takes at least two years to build. Memory-chip makers are cautious about overbuilding. They fear it could end up idle should the demand surge pass, the person said.

Samsung and SK Hynix have announced investments in new capacity. However, they haven’t detailed the production split between HBM and conventional memory.