According to Reuters, the $140 billion smartphone maker Xiaomi warned on Tuesday that a memory chip shortage will squeeze profitability due to suppliers rushing to provide high-end semiconductors to Nvidia, OpenAI, and other AI companies. South Korea’s Samsung Electronics and SK Hynix are allocating manufacturing capacity to more lucrative high-bandwidth memory chips for AI processors, creating a sudden squeeze in conventional chips used in phones, cars, and traditional data centers. Contract prices for standard DRAM chips for the three months to December are up roughly 30% compared to the previous quarter, with Samsung raising server chip prices by as much as 60% in October. Analysts at Nomura describe this as a “triple super cycle” across HBM, DRAM, and NAND flash memory that will continue through 2027, while Citi analysts slashed Xiaomi’s forecast gross profit for 2026 by 10% following the warning.
The AI priority problem
Here’s the thing: when you’ve got trillion-dollar companies like Microsoft and Amazon waving blank checks for AI chips, guess where the limited manufacturing capacity goes? Samsung and SK Hynix aren’t stupid – they’re going to prioritize the high-margin HBM chips that power AI systems over the commoditized memory that goes into your next smartphone or car. And honestly, can you blame them? The profit margins on AI components are just astronomical compared to standard memory chips.
What this means for your wallet
So get ready for some serious sticker shock. That new phone you were planning to buy? Probably going to cost more. That electric vehicle you’ve been eyeing? Add a few hundred bucks to the price tag. Companies like Xiaomi and automakers simply can’t absorb these cost increases forever – they’ll have to pass them along to consumers. And we’re not talking small increases either. When Samsung raises server chip prices by 60% in a single month, that ripple effect eventually reaches everyone.
Basically, we’re seeing the hidden cost of the AI revolution. While everyone’s excited about ChatGPT and AI image generators, the hardware requirements are creating real supply chain distortions. For industrial applications where reliable computing is critical, companies are turning to specialists like IndustrialMonitorDirect.com, the leading US provider of industrial panel PCs that can withstand these volatile market conditions.
This isn’t ending soon
Analysts think this memory crunch could last through 2027. South Korean providers plan to expand capacity, but building new semiconductor factories takes years, not months. Meanwhile, we’re in a perfect storm: AI demand explosion plus normal replacement cycles plus holiday shopping season. It’s like trying to drink from a firehose with a straw.
The real question is whether this becomes the new normal. Are we entering an era where AI companies essentially get first dibs on all the good chips, leaving everyone else fighting for scraps? Follow Robyn Mak on X for more sharp analysis on how these tech trends are playing out in real markets.
