Eric Rimkeit, director of marketing with Supplyframe, discusses the impact that the wave of new data centers, in support of advances in artificial intelligence, is having on makers of high-tech consumer products.
The surge in construction of data centers is causing “a huge structural shift” in the market for high-tech components, specifically dynamic random access memory (DRAM) chips and other types of memory, Rimkeit says.
AI “hyperscalers” are currently taking up some 70% of the high bandwidth memory (HBM) market, and that’s even affecting the availability of double data rate (DDR) chips, which are used in general computing by consumer electronics manufacturers such as Apple.
The result for high-tech manufacturers is production delays of up to six months, affecting supplies of smartphones, laptops, high-end gaming modules, TVs and automotive entertainment systems.
Supplies of HBM DRAM are sold out through 2026, and Rimkeit doesn’t see the situation improving until 2027.
In response, high-tech manufacturers have had to turn increasingly to the spot market for DRAM, with such sales increasing over pre-COVID levels by a factor of 400. Some buyers that would otherwise be satisfied with DDR DRAM are moving into HBM because the former is being phased out.
In addition, manufacturers are moving to non-cancellable, non-returnable orders and variable pricing agreements for DRAM — “anything they can do to get supply, and they’re not afraid to pay for it,” Rimkeit says. The result is likely to be higher prices for consumers, with smartphones expected to cost around $50 more this year.
AI data center construction continues apace, but Rimkeit sees a limit to the hyperscaler buildout, leading to an eventual realignment of supply and demand for DRAM chips. “We think the market is going to stabilize in 2027,” he says.