Harvard’s Willy Shih warns AI demand is straining chip supply chains

In short: Economist Willy Shih says the rush to build AI systems is putting new stress on the global supply chain, especially for memory chips.

What's going on

Willy Shih, an economist at Harvard Business School and author of the upcoming book Where Does My Stuff Come From?, spoke on The Verge’s Decoder podcast about the real world limits behind today’s AI boom. A supply chain is the full “route” a product takes, from raw materials to factory work to shipping, like a long relay race with many handoffs.

Shih said markets often find ways around US tariffs, which are extra taxes on imports. Companies may shift final assembly to places like Mexico or Vietnam to reduce those costs, even if many parts still come from China. He described this as “tariff engineering,” which is basically rearranging steps in the process so the paperwork, and the tax bill, looks different.

He also argued that bringing complex products fully back to the US is harder than it sounds. The iPhone is one example. Some parts come from highly specialized places, such as advanced chips made mostly in Taiwan, and the final phone still needs large-scale manual assembly that is difficult to copy quickly.

A separate pressure point is memory. Shih said AI companies are buying huge amounts of RAM, which is a computer’s short-term working memory (like a desk where you spread papers out while you work). When demand grows faster than factories can produce, prices rise, and everyday electronics can get more expensive.

What to watch

Shih expects more supply chain workarounds and continued uncertainty if trade rules keep changing. Watch RAM pricing, consumer electronics prices, and whether companies pause new factory plans because the rules feel too unstable.

Source: The Verge AI