Every phone, laptop, smart TV, and modern car depends on a specific type of computer chip: memory. It is the component that lets devices do several things at once, store information quickly, and run smoothly. Until recently, it was one of the few parts of consumer electronics that reliably got cheaper every year. That trend has reversed sharply.
The reason is straightforward. The companies racing to build AI systems need enormous quantities of these memory chips to power their data centres. Google, Microsoft, Amazon, Meta, and dozens of others are on track to spend around $650 billion on AI infrastructure in 2026 alone, up roughly 80% from last year. To secure supply, they are signing long multi-year contracts and paying whatever price it takes. The three companies that make nearly all of the world's memory chips, Samsung, SK Hynix, and Micron, are rationally shifting production toward these high-paying customers.
The result is a zero-sum problem. As IDC put it plainly: every chip allocated to an AI data centre is a chip denied to a smartphone, a laptop, or a car. Estimates now suggest that up to 70% of all memory chips produced globally in 2026 will go to data centres. That leaves the rest of the economy scrambling for what remains.
The price effects are already visible. Memory prices roughly doubled between early 2025 and the end of the year, then surged another 40% in just the first quarter of 2026. For budget smartphones priced under $200, the cost to build a single device has risen by 20 to 30% since last year. Mid-range devices have seen production costs rise 10 to 15%. Analysts at Counterpoint Research estimate average smartphone prices could jump nearly 7% this year, compared to the 3.6% rise previously expected.
This goes well beyond phones. Laptop makers Lenovo, Dell, HP, Acer, and ASUS have all warned clients of price increases in the range of 15 to 20%. Sony and Nintendo have flagged that the shortage could affect gaming console pricing and product timelines. Honda has had to cut car production targets. Tesla's CEO has publicly said the company may need to build its own memory factory. Intel told its customers directly: "There's no relief until 2028."
The shortage is also hitting business equipment. Networking gear, servers, and enterprise hardware all use the same memory. Cisco has warned that its profit margins are being squeezed by rising memory costs. Any organisation that buys or leases computers, phones, or connected devices as part of normal operations, which is nearly every business, will feel this in procurement budgets before the year is out.
The uncomfortable truth is that there is no fast fix. Building a new chip factory takes years and billions of dollars, and the next meaningful new production capacity is not expected to come online until 2027 at the earliest. Meanwhile, demand from AI data centres is only going up. The sector was previously driven by consumer electronics; now it is being reshaped by a much larger and more persistent buyer.
For businesses, the practical implication is simple: any hardware purchases that can be moved forward should be. Prices are not going down in the near term, and supply is not getting easier. Procurement teams planning equipment refreshes or fleet upgrades in late 2026 or 2027 should budget for meaningfully higher unit costs, and factor in longer lead times. The era of cheap, abundant memory that defined the past decade is, for now, over.