Asian markets experienced heavy losses on Friday as the Kospi fell about 8% while Japan's Nikkei 225 Index dropped 4.5%. According to Forex Today, the ongoing selloff in technology stocks is pressuring market sentiment globally, with Nasdaq Futures down more than 1% in early European trading. The risk-averse atmosphere reflects investor concerns over surging chip costs and inflation fears that are prompting reassessment of the AI-driven tech rally. Deutsche Bank analysts have identified a 'memory supply crisis' among chipmakers, with the AI investment cycle driving demand for chips of all kinds, sending prices through the roof for all device makers. This follows South Korea's benchmark index experiencing a 20-minute trading halt on Friday, marking the second such instance during the week.
According to latest analysis by Jefferies Equity Research, the memory component price crisis is set to intensify significantly in the coming quarters. Memory component prices are expected to rise 50% in the third quarter of 2026, with another 40% hike anticipated in the fourth quarter. The cost of DRAM (Dynamic Random-Access Memory) and NAND flash is expected to go up 40-50% in Q3 2026 compared to the ongoing quarter. The price is further expected to increase 40-45% in 2027 on a year-on-year basis, with the memory component price point potentially seeing respite in 2028 with a projected 15-20% supply growth due to capacity additions. This comes as manufacturers prioritise High-Bandwidth Memory chips for AI data centres, which have 10 times higher margins than standard consumer memory products.
The memory supply crisis is creating significant inflationary pressures across consumer electronics. Qualcomm and AMD have both flagged memory constraints actively hitting consumer-device demand, according to Deutsche Bank. Electronic components and accessories, which captures semiconductor and memory-devices prices, rose 26.9% year-over-year in May, up from a 5.9% year-over-year rise in January. Within a span of five hours Thursday, Apple Inc. and Microsoft Corp. hiked prices for popular products including Xbox video-game consoles, Macs and iPads, with both companies blaming an unprecedented shortage of memory chips driven by the artificial intelligence boom. Apple raised prices on Macs and iPads by $200 or more on some models and Microsoft raised Xbox prices for the third time in 13 months, with Sony Group Corp. raising the price of its flagship PlayStation 5 by as much as $150 in March. The AI squeeze is crowding out the economy's ability to serve the day-to-day needs of ordinary people, creating broader economic concerns beyond just tech stocks.
The memory shortage has reached critical levels as manufacturers prioritise AI-focused production over consumer devices. Up to 50% of total memory chip production capacity has been occupied by long-term contracts between chipmaking firms and major tech companies, reducing supply availability for regular consumers. This figure is expected to rise to 70%, significantly impacting availability of memory components for PCs, laptops, consoles, and smartphones. The situation is further complicated by manufacturers reducing focus on producing standard DDR5 PC RAM due to these chips using more silicon than domestic versions, while prioritising High-Bandwidth Memory chips for AI data centres. However, the situation may improve by 2028 when Chinese firms such as CXMT and YMTC may develop enough inventory to cater to offshore markets as part of their 'Epic Expansion Initiative'.
Despite the persistent supply shortage, major semiconductor manufacturers are announcing massive expansion plans. Samsung Electronics Co. and SK Hynix Inc. are expected to announce new chip manufacturing investments worth hundreds of billions of dollars on Monday, according to South Korean media reports. The Samsung Group is set to unveil a 1,000 trillion won ($651 billion) spending package over the next decade, in what would be the largest such plan in the country's history, as reported by Maeil Business Newspaper. Samsung planned to spend more than $73 billion this year on capacity expansion and research even before Monday's expected announcement. SK Hynix plans a $29 billion US listing, after Chairman Chey Tae-won said earlier this month that he intends to double capacity over the next half-decade. TSMC capital expenditures for this year alone are expected to reach $56 billion, while Micron Technology Inc. is building new factories in Idaho and New York State. However, industry executives warn the shortage will persist for years, with Micron CEO Sanjay Mehrotra stating there is 'no line of sight' to when supply will catch up with demand.
