The global semiconductor industry is facing a new wave of uncertainty, and this time the pressure point is not processors or sensors it’s memory chips. During SMIC’s recent earnings call, Co-CEO Zhao Haijun issued a stark warning that customers are becoming hesitant to place orders for the first quarter of next year due to an unpredictable memory supply landscape. SMIC, China’s largest contract chipmaker, says the shortage is now affecting the entire electronics supply chain.
Zhao explained the root of the caution:
“People don’t dare place too many orders for the first quarter next year. Because no one knows how many memory (chips) will actually be available- how many phones, cars, or other products it can support.”
His statement highlights a key reality: even if foundries like SMIC can manufacture processors, display chips, or power controllers, final products such as smartphones and cars cannot be shipped without the DRAM and NAND memory required to complete them.
The AI Boom Is Consuming Global Memory Supply
The current memory shortage is being driven not by traditional consumer demand but by the explosive expansion of AI infrastructure worldwide.
HBM Takes Priority
High-Bandwidth Memory (HBM) used in AI accelerators and large language model training has become the highest-margin product for memory makers. Samsung, SK Hynix, and Micron are pouring capacity into HBM production, leaving less room for traditional DRAM and NAND.
Squeezed Consumer Supply
This shift has created a supply crunch for:
- Smartphone memory
- Automotive DRAM
- PC/laptop memory
- Server modules not tied to AI
As factories prioritize premium AI memory, basic memory components used in millions of consumer devices are becoming harder to secure.
Industry Ripple Effects
1. Supply Chain Caution
Chip designers and OEMs are holding back on orders for non-memory chips because they fear they won’t be able to secure enough DRAM/NAND to complete their products. SMIC says memory suppliers will not commit to firm pricing or availability for Q1.
2. Pricing Pressure
Memory prices have surged, with some suppliers pausing official price quotations due to extreme volatility. As a result, customers are now pushing foundries like SMIC to reduce prices for other chips to offset rising memory costs.
3. Impact on Consumer Devices
Smartphone makers such as Xiaomi have already warned of increased production costs. This trend is likely to lead to:
- Higher retail prices for phones, laptops, and PCs
- Possible production delays
- Slower product launches in early 2025
As AI infrastructure continues to expand at an unprecedented pace, the global memory supply chain faces a tightening squeeze one that may reshape electronics pricing and production cycles throughout the coming year.
