After decades of declining costs, consumer electronics ranging from computers to video game consoles are jumping in price as the artificial intelligence boom drives a global shortage of memory and storage chips.
“The vast majority of the chips are going to the AI buildout and the data center revolution we’re seeing,” Wedbush Securities analyst Dan Ives told CBS News. “That’s [fewer] chips for these regular consumer devices. That just further drives up prices.”
On Thursday, Apple and Microsoft each said they were hiking prices on core products, including iPads, certain MacBook models and Xbox consoles, as strong demand for chips drives up the cost of electronic device components. Apple could also raise iPhone prices to offset rising manufacturing costs, according to analysts at market researcher International Data Corporation (IDC).
IDC analyst Nabila Popal said Apple’s price hikes were higher than she had expected. That suggests any iPhone price increases may also be higher than expected, perhaps as much as $200 for the iPhone Pro and Pro Max models.
“I think the days of $50 price increases are over,” she said.
The rise in gadget prices is unusual, as the cost of personal computers and other personal electronics has generally fallen since the 1980s. The latest government inflation data show that prices for computer software and accessories have surged by more than 14% over the last year. Personal computers, such as tablets, home assistants and computer hardware, are up 1.3%.
What’s behind the chip shortage?
The three biggest memory chip manufacturers — Micron Technology, Samsung Electronics and SK Hynix — have historically produced semiconductors for devices such as smartphones and for other consumer products such as cars.
But those chipmakers are now racing to meet surging demand from Alphabet, Amazon, Meta, Oracle and other tech giants — dubbed “hyperscalers” — that need memory chips for the thousands of data centers they are building to provide a range of AI services.
“Basically, we ended up with a situation where those companies, the hyperscalers, started buying the entire capacity from those suppliers” at premium prices, Francisco Jeronimo, vice president for data and analytics at IDC, told CBS News.
Historically, most of Micron, SK and Samsung’s chip production focused on churning out so-called DRAM and NAND semiconductors, the standard memory chips used in smartphones, PCs and other electronics. But semiconductor manufacturers are now devoting more resources to producing so-called high bandwidth memory (HBM) chips used to provide memory for data centers.
For semiconductor makers, HBM chips are more profitable to produce than those used in personal devices, Jeronimo said. Manufacturers effectively said, “What is the point of selling and making memory for smartphones or PCs or any other device when we have this huge opportunity for many years to come?” he added.
Last year, for example, Boise, Idaho-based chipmaker Micron Technology abandoned consumer chip production altogether, framing the decision as a necessary move to meet surging demand tied to AI growth.
As memory and storage supply shrinks amid rising AI demand, chip prices have risen, spurring companies like Apple and Microsoft to pass those costs onto consumers, Jeronimo said, describing the current chip shortage as “way worse” than the supply disruptions during the pandemic caused by factory closures.
“There’s no more stock,” he said. “Every single memory [chip] they buy, it costs 100% to 200% more than six or 12 months ago.”
Wedbush Securities estimates that there are 15 times as many memory chip orders from tech companies as there are available chips.
Meanwhile, boosting chip supplies is difficult due to manufacturers’ limited production capacity and the enormous expense of building semiconductor fabrication facilities, which can cost $10 billion and take up to five years to complete.
“You can’t just snap your fingers and release more memory chips,” Ives said.
How long could the chip shortage last?
Tech analysts and economists predict the chip shortage will persist at least through 2027 and perhaps later, citing the time required to expand or build new plants.
In the meantime, consumers can expect prices to continue rising.
Tech research firm Gartner forecasts that PC and smartphone prices could jump 17% and 13%, respectively, this year from their 2025 levels because of rising chip costs.
Higher prices could cause consumers to hold onto devices longer, denting smartphone sales, according to Jeronimo.
Ives advises consumers to buy their next electronic device now before prices rise further.
“We’re going to continue to see price increases…especially going into the holiday season,” he told CBS News.
