Gadget prices fell for decades. Then AI squeezed chips

AI boom – After decades of falling costs, consumer electronics prices are rising as the artificial intelligence boom drains supply of memory and storage chips needed by data centers. Apple, Microsoft and Xbox-related hardware are among the companies signaling higher pri

The price jump doesn’t arrive like a single, dramatic shock. It creeps in through the places consumers don’t usually watch—memory chips and storage capacity—and then shows up on receipts for everyday gadgets.

For decades, the cost of personal electronics has generally dropped since the 1980s. Now that trend is reversing. As artificial intelligence drives a global shortage of memory and storage chips, consumer electronics ranging from computers to video game consoles are beginning to get more expensive.

Dan Ives, a Wedbush Securities analyst, framed the squeeze bluntly: “The vast majority of the chips are going to the AI buildout and the data center revolution we’re seeing.” The result is “fewer” chips for consumer devices, which “just further drives up prices.”

On Thursday, Apple and Microsoft both said they were hiking prices on core products, including iPads, certain MacBook models and Xbox consoles, pointing to strong demand for chips that’s raising the cost of components.

Apple’s moves could spread further. Analysts at International Data Corporation (IDC) said Apple could also raise iPhone prices to offset rising manufacturing costs. IDC analyst Nabila Popal said those price hikes were higher than she had expected. suggesting any iPhone increases may be higher than planned too—perhaps as much as $200 for iPhone Pro and Pro Max models.

“I think the days of $50 price increases are over,” Popal said.

The shift is unusual enough that it stands out against the long arc of cheaper hardware. The latest government inflation data show that prices for computer software and accessories have surged by more than 14% over the last year. Personal computers—such as tablets, home assistants and computer hardware—are up 1.3%.

The engine behind the shortage sits with the biggest memory chip makers: Micron Technology, Samsung Electronics and SK Hynix. Historically, they produced semiconductors for devices such as smartphones and for other consumer products like cars. Today, their attention is being pulled toward a different customer—AI and the data centers built to serve it.

Those semiconductor makers are now racing to meet surging demand from Alphabet, Amazon, Meta, Oracle and other tech giants, often called “hyperscalers.”

Francisco Jeronimo, vice president for data and analytics at IDC, described how the buying pressure changed the market: “Basically, we ended up with a situation where those companies, the hyperscalers, started buying the entire capacity from those suppliers” at premium prices.

In the past. much of Micron. SK Hynix and Samsung’s output focused on DRAM and NAND semiconductors—the standard memory chips used in smartphones. PCs and other electronics. Now semiconductor manufacturers are devoting more resources to high bandwidth memory (HBM) chips, used to provide memory for data centers.

For chipmakers, Jeronimo said HBM chips are more profitable to produce than the ones used in personal devices. Manufacturers. he said. effectively asked. “What is the point of selling and making memory for smartphones or PCs or any other device when we have this huge opportunity for many years to come?”.

That strategic pivot has already shown up in real-world decisions. Last year, Boise, Idaho-based chipmaker Micron Technology abandoned consumer chip production altogether, framing the decision as a necessary move to meet surging demand tied to AI growth.

As memory and storage supply shrinks while AI demand rises, the chip cost has begun to flow through to consumers. Jeronimo said companies like Apple and Microsoft are passing those costs onto buyers. He also described the current shortage as “way worse” than the supply disruptions during the pandemic. when factory closures played a major role.

“There’s no more stock,” Jeronimo said. “Every single memory [chip] they buy, it costs 100% to 200% more than six or 12 months ago.”

Some numbers make the imbalance hard to ignore. Wedbush Securities estimates there are 15 times as many memory chip orders from tech companies as there are available chips.

Even fixing the problem isn’t straightforward. Boosting chip supplies is difficult because manufacturers have limited production capacity. and building semiconductor fabrication facilities can cost $10 billion and take up to five years to complete. Ives summed up the frustration with a quick reality check: “You can’t just snap your fingers and release more memory chips.”.

How long will it last? Tech analysts and economists predict the chip shortage will persist at least through 2027 and perhaps later, pointing to the time required to expand or build new plants.

In the meantime, higher prices are likely to keep coming. Gartner forecasts that PC and smartphone prices could jump 17% and 13%. respectively. this year from their 2025 levels because of rising chip costs. Jeronimo said higher prices could also push consumers to hold onto devices longer, denting smartphone sales.

Ives’ advice is blunt, and it lands on a familiar question—do you buy now, or wait? “We’re going to continue to see price increases…especially going into the holiday season,” he told CBS News. “Ives advises consumers to buy their next electronic device now before prices rise further.”

AI chip shortage memory chips storage chips Apple price hikes Microsoft price hikes Xbox consoles iPhone Pro price increases Micron Samsung SK Hynix hyperscalers HBM DRAM NAND cybersecurity not relevant