Not Only Smartphones & PCs; Memory Chip Shortage To Hit India's AI, Datacenter Push Memory chips constitute 10-15 per cent of server costs and the increasing cost of the chips will directly raise capex for India's large AI/datacenter builds and slow rollout. Advanced memory prices are likely to surge by another 50 per cent from current levels through most of 2026.

Late 2025 is witnessing the global memory chip industry grappling with an unprecedented DRAM (Dynamic Random Access Memory) shortage. The crisis has spread into nearly all memory types, spanning consumer flash chips in USB drives and smartphones to advanced high-bandwidth memory (HBM) powering AI data centers. The cause? Rising demand for HBM and next-generation server memory, leading to manufacturing constraints, record-high prices and supply rationing.

Skyrocketing demand from AI infrastructure and consumer electronics is overwhelming global supply. SK Hynix, the world's largest memory chip supplier, expects the shortage to persist until late 2027.

India too is feeling the heat on AI servers and premium devices.

As India has an ambitious gameplan for datacenter, AI boom, and consumer electronics, the shortage and rising prices will have a domino effect. The country will see tighter supply, longer lead times and higher prices for AI servers and premium devices, slowing some datacenter and AI rollouts.

"Memory chips constitute 10-15 per cent of server costs and increasing memory cost, directly raises capex for India's large AI/datacenter builds and slows rollouts. However, given these challenges, India will still remain competitive due to other aspects: relative cost in other geographies, availability of talent etc," said Sujay Shetty, MD, ESDM and Semiconductor, PwC India.

Major memory manufacturers—including Samsung, SK Hynix, and Micron—are redirecting investment and production toward AI-focused memory technologies such as HBM and advanced LPDDR. This strategic pivot has slowed expansion in commodity DRAM ( used in everyday devices such as PCs, phones).

Meanwhile, AI data centers operated by Nvidia, Google, and Microsoft are driving unprecedented demand, aggressively consuming HBM and LPDDR, effectively outbidding consumer PC, gaming, and smartphone markets for available DRAM. Even traditional memory segments face shortages.

The growing phenomena has caused a ripple effect on DRAM prices: its costs are up 18–25 per cent already, with more hikes expected in early 2026. "This has led to many OEMs to increase prices of budget laptops and mobile phones by 10-15 per cent. OEMs are also exploring to reduce base RAM/configurations, or delay launches, especially in mid‑ to high‑end segments," Shetty added.

DRAM price surges have already increased low-, mid- and high-end smartphone BoM costs by around 25 per cent, 15 per cent and 10 per cent, respectively. Further cost impacts are expected in the 10-15 per cent range through Q2 2026, Counterpoint Research said in its latest report. Global smartphone shipments may decline 2.1 per cent next year as a shortage of memory chips drives up costs and squeezes production. The average selling price for handsets is set to rise 6.9 per cent globally next year, reflecting a 10 per cent to 25 per cent jump in the overall cost of components.

Demand for memory solutions is at an all-time high driven by cloud AI training, inferencing, and the proliferation of GenAI on edge devices such as smartphones and laptops.

"However, what we are seeing now is fear-driven momentum. Just as we saw during the Covid-19 pandemic, speculative demand is compounding with genuine scarcity. This 'snowball effect' is fueling an aggressive upward trajectory in pricing that goes beyond simple supply-demand mechanics. This is likely the new normal, as the market remains tightly controlled by only three or four major global players," explained Neil Shah, industry analyst & co-founder at Counterpoint Research.

The crunch is hitting commoditized consumer markets harder than niche sectors. As shortages intensify, rising costs will inevitably be passed down. For Indian consumers, this means feeling the pinch.

"We expect end-device prices for smartphones and laptops to rise by 10–20 per cent as OEMs find themselves unable to absorb the premium. Simultaneously, the timeline for this crisis is extended. Our research indicates that advanced memory prices are likely to surge by another 50 per cent from current levels through most of 2026," Shah added.

For Indian enterprises - from telcos to IT giants building AI datacenters—this will drastically increase infrastructure CAPEX over the next two years, "It will require significant contingency planning," said Shah.

J.P. Morgan 2026 Memory Market Outlook predicts that Memory Giants' market cap will approach $1 trillion this year, to reach $1.5 trillion in 2027.