Gadget prices have fallen for decades. Then AI happened

After decades of declining prices, consumer electronics are now experiencing a reversal as artificial intelligence (AI) drives up demand for memory and storage chips. This surge in demand has led to a global shortage of semiconductors, pushing up the cost of components used in devices such as smartphones, tablets, and gaming consoles. Major tech companies like Apple and Microsoft have already announced price increases for core products, including iPads, MacBook models, and Xbox consoles, with potential price hikes for iPhones also anticipated.

The shift is largely attributed to the growing reliance on AI by hyperscalers—tech giants such as Alphabet, Amazon, and Meta—that require high-bandwidth memory (HBM) chips for data centers supporting AI services. These companies have outbid traditional consumers of memory chips, such as smartphone and PC manufacturers, for limited production capacity. As a result, chipmakers like Micron Technology, Samsung, and SK Hynix have redirected production toward HBM chips, leaving fewer resources for consumer electronics.

The impact of this shift is evident in recent inflation data, which shows a 14% annual increase in the cost of computer software and accessories, and a 1.3% rise in PC prices. Analysts warn that the shortage is likely to persist through 2027 due to the high costs and long lead times required to expand semiconductor manufacturing capacity. As a result, consumers may face continued price increases, potentially altering purchasing behavior and slowing the replacement cycle for electronic devices.