Memory chip shortage could soon impact consumers, expert says

Willy Shih, a professor at Harvard Business School explains why a memory chip shortage is wreaking havoc on the consumer electronics industry.

Computer chip demand has skyrocketed this year and one Harvard professor points to AI as a potential cause.

Willy Shih told CTV Your Morning on Wednesday that AI companies are buying up memory chips to feed their data centres, causing a potential spike in price for consumer electronics.

“We have three manufacturers worldwide who have most of the manufacturing capacity for memory,” said Shih, an academic at the Harvard Business School. He added that the big three chip manufacturers —Samsung Electronics, SK Hynix, and Micron Technology — are prioritizing supplying AI data centres, since the chip manufacturers “can make more money selling those chips to the data centre guys.”

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Memory chips are a critical part of computers, and as more and more devices become “smart,” Shih said more demand is generated for memory chips. Since the manufacturers are focusing on supplying data centres, he thinks that could raise the price of consumer electronics who are competing for the chips.

When demand rises, prices usually follow until supply increases. However, computer chip manufacturing is a “classic boom and bust business,” Shih said.

A chip factory takes about two years to construct. Shih suggested that some companies may be skeptical to build one, since the demand for chips may soften once the data centre boom cools off, and the value of the chip lessens.

• READ MORE: Micron surges as global memory chip shortage boosts profit forecast

Thankfully for consumers, Shih said most PC manufacturers foresaw this chip demand crunch and stocked up ahead of time. However, that stockpile is running out and he warned consumers of rising chip prices in the near future.

“The bottom line is: we’re going to see more (chip) cost increases,” Shih said.

Shih said chip manufacturers are expanding supply, with factories being built in the United States and South Korea.

• READ MORE: Potential U.S. semiconductor manufacturing boom complicated by Trump’s economic policies

But the real question, Shih added, is whether the AI data centre building boom continues, and if so, at what capacity.

“The pace they’re going at, and the consumption of chips, and everything, it’s hard to imagine they can keep that up,” he added.