Retailers and manufacturers try to limit price hikes as AI raises chip costs

In short: Companies are using pricing and supply tactics to keep phones and computers affordable as AI demand pushes up the cost of key parts.

What's going on

AI data centers, meaning large buildings full of computers that run AI services, are buying huge amounts of memory chips and graphics chips. That is like restaurants buying up most of the flour in a city, leaving less for home bakers. As a result, the parts used in everyday devices are getting more expensive.

Reports cited in recent coverage say memory prices have jumped sharply, with some categories rising by large percentages over the past couple of years. One measure of semiconductor and electronic component prices has risen about 26% year over year, the biggest increase in decades. Analysts also expect prices for PCs, tablets, and smartphones to rise around 10% to 20%, mainly because memory and storage parts cost more.

In response, manufacturers, distributors, and retailers are trying to soften the blow for shoppers. One approach is long-term supply deals that lock in production and smoother pricing, even if the buyer pays more upfront. Another is changing product lineups, such as offering more mid-range models or shipping base versions with less memory or storage so the sticker price stays closer to what people expect.

What to watch

These efforts may limit sudden jumps at the checkout, but they do not remove the underlying problem. Many economists and analysts expect tight supply and higher component costs to last for years as AI data centers keep expanding. Shoppers may see smaller memory upgrades in entry-level devices, more expensive high-end configurations, and more advice to buy earlier in a product cycle to avoid later price increases.

Source: NYTimes