AI and smartphones "compete" for chips: smartphone manufacturers warn that prices may rise by 30%, and storage shortages will continue until 2027

The global storage chip market is experiencing a supply crisis, with artificial intelligence data centers and consumer electronics manufacturers competing for increasingly scarce storage chips. The soaring prices threaten a range of products from smartphones to AI projects. This shortage involves nearly all types of storage, from USB flash drives to high-end HBM chips, which could not only drive up consumer goods prices but also drag down the return on investment in AI infrastructure, evolving into a macroeconomic risk.

According to media reports on Wednesday, SK Hynix expects the storage shortage to last until the end of 2027. Tech giants like Microsoft and Google are scrambling to secure supplies from storage chip manufacturers such as Micron, Samsung Electronics, and SK Hynix. Japanese electronics stores have begun to limit the number of hard drives consumers can purchase, and Chinese smartphone manufacturers have warned that prices may rise.

Market research firm TrendForce shows that since February of this year, some storage chip prices have more than doubled. The average inventory level for dynamic random-access memory suppliers has dropped from 13 to 17 weeks at the end of 2024 to 3 to 8 weeks in July of this year, and further down to 2 to 4 weeks in October. The stock prices of chip manufacturers Samsung, SK Hynix, and Micron have all risen this year due to chip demand.

Counterpoint Research predicts that prices for advanced and traditional storage chips will rise by 30% in the fourth quarter, with a potential further increase of 20% in early 2026. Realme's Chief Marketing Officer in India, Francis Wong, told Reuters that the sharp rise in storage costs is "unprecedented since the advent of smartphones," which may force companies to raise smartphone prices by 20% to 30% before June.

Supply Chain Mismatch Triggers Crisis

This crisis stems from a misalignment between the strategic shifts of chip manufacturers and market demand. The generative AI boom triggered by the release of ChatGPT in November 2022 has led to a global surge in AI data center construction, prompting storage chip manufacturers to allocate more capacity to high-bandwidth memory used for NVIDIA AI processors.

Samsung notified customers in May 2024 of its plan to discontinue a DDR4 chip—an older product used for PCs and servers—according to a letter seen by the media. Micron stated in June that it had informed customers it would stop supplying DDR4 and its corresponding LPDDR4 chips for smartphones within six to nine months.

However, this transformation coincides with the upgrade cycle of traditional data centers and PCs, as well as an unexpected surge in smartphone sales, all of which rely on traditional chips. TechInsights senior researcher Dan Hutcheson stated that in hindsight, "one could say the industry was caught off guard." According to previous media reports, Samsung raised the prices of server storage chips by up to 60% last month. NVIDIA CEO Jensen Huang met with Samsung Electronics Chairman Lee Jae-Yong during his visit to South Korea in October and announced the deal, acknowledging that the price surge is significant but stating that NVIDIA has secured a large supply.

Tech Giants "Seeking" Storage Chips

According to two insiders, Google, Amazon, Microsoft, and Meta placed open orders with Micron in October, informing the company that they would accept all the capacity it could deliver, regardless of price.

According to two insiders and another source, these companies sent executives to visit Samsung and SK Hynix in October and November to lobby for quotas. One source stated, "Everyone is begging for supply."

SK Hynix stated in October that all its chips for 2026 are sold out, while Samsung indicated that it has secured customers for HBM chips to be produced next year. Both companies are expanding capacity to meet AI demand, but new factories for traditional chips will not be operational until 2027 or 2028.

SK Group Chairman Chey Tae-won stated at an industry forum in Seoul last month, "These days, we are receiving so many requests for storage supply from companies that we are worried about how to handle all these requests. If we cannot supply them, they may face a situation where they cannot conduct business at all."

OpenAI signed a preliminary agreement with Samsung and SK Hynix in October to supply chips for its Stargate project, which will require up to 900,000 wafers per month by 2029. Chey Tae-won stated that this is about twice the current global monthly production of HBM.

Consumer Side Under Pressure from Price Increases

The impact of the storage shortage is being transmitted to the consumer side. Xiaomi and Realme have warned that they may have to raise prices. Realme's marketing director Wang Shuo stated, "Some manufacturers may save costs on cameras, some on processors, and some on batteries. But storage costs are something all manufacturers must fully absorb; there is no way to pass it on."

Xiaomi stated that it will offset higher storage costs by raising prices and selling more high-end phones, adding that other businesses will help buffer the impact. In November, laptop manufacturer ASUS stated that it has about four months of inventory (including storage components) and will adjust pricing as needed.

In Akihabara, Tokyo's electronics center, stores are limiting the purchase of storage products to curb hoarding. A sign outside the PC store Ark indicates that starting from November 1, customers are limited to purchasing a total of eight hard drives, solid-state drives, and system memory. Staff from five stores reported that the shortage has led to a sharp increase in prices in recent weeks, with one-third of products sold out in some stores.

The price of the commonly used 32GB DDR5 memory for gamers has exceeded 47,000 yen, up from about 17,000 yen in mid-October. The price of high-end 128GB sets has more than doubled, reaching about 180,000 yen.

Chip manufacturer Winbond Electronics, which holds about 1% of the DRAM market, is one of the first companies to announce capacity expansion to meet demand. Its board approved a plan in October to significantly increase capital expenditure to $1.1 billion. Winbond President Chen Pei-Ming stated, "Many customers come to us saying 'I really need your help,' and one even requested to sign a six-year long-term agreement."

Traders Flood into the Secondary Market

Rising prices are driving customers to the second-hand market. Roman Yamashita, the owner of the second-hand PC parts store iCON in Akihabara, stated that his business is thriving.

Eva Wu, the sales manager of Shenzhen component trader Polaris Mobility, mentioned that price changes are so rapid that the quotes released by distributors expire daily— in some cases, hourly— whereas before the shortage, they were updated monthly. In Beijing, a DDR4 seller indicated that she has stockpiled 20,000 units, anticipating further price increases.

In California, Paul Coronado stated that his company Caramon sells recycled low-end storage chips removed from decommissioned data center servers, with monthly sales surging since September. Almost all products are now purchased by intermediaries in Hong Kong and then resold to Chinese customers. He said, "Our monthly sales used to be about $500,000, now it's $800,000 to $900,000."

Sanchit Vir Gogia, CEO of tech consulting firm Greyhound Research, stated, "The storage shortage has now escalated from a component-level issue to a macroeconomic risk." The "AI infrastructure buildout is colliding with a supply chain that cannot meet its actual demands." This ongoing shortage could hinder productivity growth based on AI and delay hundreds of billions of dollars in digital infrastructure investments, while also potentially increasing inflationary pressures as many economies attempt to control rising prices and cope with U.S. tariffs