HBM snatches all chip production capacity? Global memory supply tightens, smartphones may be impacted next year

The explosive growth in demand for artificial intelligence is causing a global shortage of memory chips, with chip manufacturers and analysts warning that this shortage could impact the consumer electronics and automotive industries next year. Chip manufacturers are shifting their production focus to the lucrative AI application chips, resulting in limited supply of low-cost memory chips needed for traditional consumer products.

According to a previous article by Wallstreetcn, Zhao Haijun, co-CEO of SMIC, stated during last Friday's earnings call that memory prices in the industry have risen significantly, and the "memory super cycle" will negatively impact end manufacturers. He mentioned that concerns over the shortage of memory chips have led customers to delay orders for other types of chips.

"Everyone is reluctant to place too many orders or ship too much in the first quarter of next year because they don't know how many phones, cars, or other products the (memory chip industry) can supply."

Another article from Wallstreetcn also mentioned that Samsung Electronics has quietly raised prices on some memory chips by 30%-60% in October. Market research firm TrendForce predicts that the memory industry has begun a "strong price increase cycle," which may force downstream brands to raise retail prices.

Analysts point out that AI demand is expected to far exceed this year by 2026, while the severe downturn in the memory industry during parts of 2023 and 2024 has led to insufficient investment, and although new capacity construction has begun, it will take time to come online.

AI Server Demand Crowding Out Traditional Market Supply, HBM Taking All Chip Capacity?

Chip manufacturers are shifting their production focus to advanced memory chips required for AI computing, reducing production investment needed for consumer products. AI servers primarily rely on processors designed by companies like NVIDIA, which heavily depend on high-bandwidth memory (HBM).

Dan Nystedt, Vice President of TriOrient Research, stated, "AI construction is absolutely consuming a large amount of available chip supply, and from an overall demand perspective, 2026 looks set to far exceed this year." He noted that memory companies like SK Hynix and Micron are chasing AI demand because AI server companies are willing to pay a premium for high-quality chips.

Memory suppliers have been chasing as much AI demand as possible, benefiting from typically higher profit margins. Nystedt warned that "this could be very bad for PCs, laptops, consumer electronics, and cars that rely on cheap memory chips."

Supply Tightness Driving Up Chip Prices

In the face of supply constraints, memory companies are reportedly beginning to raise chip prices. M.S. Hwang, Research Director at Counterpoint Research, stated, "As memory prices rise and supply shrinks, concerns about production bottlenecks are increasing." Supply shortages have already impacted the low-end smartphone and set-top box markets, but risks may further expand. Hwang pointed out that some Asian markets are "feeling more severe pressure" due to a high reliance on low-cost devices, but he reminded that supply constraints are a global issue.

TrendForce predicts that the price increase cycle in the memory industry may force downstream brands to raise retail prices, adding pressure to the consumer market. The research institution expects that consumer products such as smartphones and laptops will face greater price and demand pressures.

Insufficient memory capacity exacerbates downstream market tension

The memory industry has encountered severe downturns during certain periods in 2023 and 2024, leading to insufficient industry investment, which further exacerbates the current supply tightness. Nystedt stated, "They are now building new capacity, but it will take time to become operational."

This capacity shortage sharply contrasts with the surge in AI demand, creating a market environment with a severe supply-demand imbalance. Analysts expect that this supply tightness may persist until the end of 2025 or even longer before new capacity is put into large-scale production.

Consumers may pay the price for memory shortages, with price pressures facing a variety of products from smartphones to cars.