The unprecedented boom in AI, with its rapidly intensifying requirements for computational power and memory, has resulted in skyrocketing demand for memory chips. Companies use AI software tools to analyze vast datasets and deploy AI agents to automate routine business tasks.
But the memory chip supply that powers these business applications has not kept pace with soaring demand, resulting in what some have called “RAMageddon.”
A Cascading Effect
Chey Tae-won, chairman of the South Korean company SK Group, which owns semiconductor manufacturer SK Hynix, predicted in March 2026 that global shortages of memory chips could continue until 2030. Sanjay Mehrota, CEO of Micron, another memory chip maker, said recently that demand is so high that customers can currently only get half to two-thirds of the memory that they are currently demanding.
One of the most in-demand types of memory for AI applications is known as high-bandwidth memory, or HBM. Rather than attempting to shrink memory chips into a two-dimensional footprint, HBM takes advantage of a third dimension, stacking and connecting thin layers of memory vertically into a three-dimensional package. By fitting more memory into roughly the same space, engineers are able to design chips to support the vast data requirements of large language models and generative AI tools.
But the focus on high-performance memory like HBM has cascading effects on other types of memory, such as the more traditional DRAM, which is used in products like smartphones and computers. Shifting production capacity to HBM to meet demand risks creating DRAM shortages, warned Chey. HBM fabrication utilizes a significant quantity of silicon wafers, he added, which serve as the base upon which all chips are built—and as a result, there could be a wafer shortage of over 20%.
Prices Climb
The result? High demand and constrained supply result in increased prices for memory chips, and high chip costs trickle down to higher prices for the finished products. For example, some Samsung memory chips have increased in price by 60%. The average sales price of a new smartphone is estimated to rise by 14%, and laptop manufacturers are reportedly planning to raise prices by 10% to 30%.
Product shortages and delays are also potential impacts – for example, gaming company Valve has delayed the production schedule for their new gaming console, the Steam Machine, due to “memory and storage shortages”.
A Structural Shift
During the last chip shortage, pandemic lockdowns and increasing demand rippled through global supply chains, impacting numerous industries, including automotive. While it took some time for supply and demand to reach an equilibrium as the economy gradually opened back up, this current shortage represents a different kind of imbalance – a “structural shift” in demand for high-performance memory based on the rapid integration of AI into almost every facet of the economy.
New chip fabrication facilities under construction won’t relieve the unmet demand in the short-term.
For manufacturers that rely upon memory chips as inputs to their products, a strategic orientation to procurement and supply chain management is needed. The Kraljic Matrix is a planning tool within the supply chain management community that helps businesses categorize purchases into categories based on two factors – the risk exposure of the supply chain and the impact of supply disruptions to profitability.
In cases where both supply chain risks and the impacts of shortages are high—the case for many tech companies that are driving the demand for memory chips—these purchases are categorized as “strategic items.” Such items, in this case memory chips, represent inputs that are most critical for the success of the purchasing company.
Manufacturers should continually monitor and assess the risks associated with these strategic suppliers and devise backup plans if disruptions in supply should occur. These tactics could include finding additional sources of supply, maintaining inventory buffers and even considering design alternatives to their products. Of course, not all of these tactics are feasible in all situations, and risk management plans need to be strategically tailored to the unique situation of each company and its supply chain.
With the imbalance between demand and supply for critical memory chips, shortages and high prices are expected. While it is impossible to tell exactly how long this imbalance will last and what its magnitude might be, in the short term, companies that rely on memory chips as strategic inputs must be ready to carefully manage their risks and strengthen their supplier relationships.
