Ai's memory chip shortage plagues smartphone market

The smartphone market experienced its steepest decline on record in the September quarter, with shipments dropping 22% due to soaring memory costs, according to IDC. Memory chip prices surged by 350% over the past year, driven by competition from AI industry players. Nabila Popal, senior research director at IDC, noted that rising costs have forced smartphone manufacturers to raise prices, reduce specifications, and phase out budget models. Chinese brands like Xiaomi and Oppo, which rely on lower-margin devices, were hit hardest, while Apple and Samsung, with higher-margin premium devices, were more resilient. Memory chip producers such as Samsung, SK Hynix, and Micron supply both smartphones and AI processing memory, including high-bandwidth memory (HBM) used in AI accelerators like Nvidia’s GPUs. Memory manufacturers are shifting focus to HBM due to its profitability, with long-term contracts secured by AI infrastructure providers like Google, Meta, and Amazon up to 2030. Despite increased production, manufacturers are slow to expand capacity due to inflated prices. Smartphone consumers are bearing the cost, with average selling prices rising from $450 last year to an expected $581 this year. IDC forecasts global AI infrastructure spending will reach $1.21 trillion annually by 2030.