Global Tech Manufacturers Face Declining Demand Amid Soaring Memory Chip Costs

Key Points Summary:

• Global sales of smartphones, PCs, and gaming consoles are projected to decline as companies raise prices to counteract soaring memory chip costs.

• Major memory chip producers report strong earnings due to high demand from the AI sector, which threatens consumer electronics prices and availability.

• Analysts predict pressure on low- and mid-range device manufacturers, with memory prices expected to surge further into 2026.

Global demand for smartphones, personal computers, and gaming consoles is anticipated to contract this year as manufacturers, including Raspberry Pi and HP Inc., raise prices to cope with soaring memory chip costs. The increasing utilization of memory chips for artificial intelligence infrastructure by major U.S. tech firms—such as OpenAI, Google, and Microsoft—has greatly reduced available supply, leading to higher prices as producers allocate resources to high-margin data centers over consumer electronics.

The world's three largest memory chipmakers—Samsung, SK Hynix, and Micron—have reported challenges in meeting demand, which has driven their quarterly earnings upward. According to Intel’s CFO, David Zinsner, the rising prices of memory chips will significantly influence the personal computer sector, potentially limiting revenue opportunities for companies like Intel itself. Research firms IDC and Counterpoint have revised their forecasts, now predicting a minimum 2% decline in global smartphone sales this year, marking the first such downturn since 2023. Similarly, IDC estimates a 4.9% decline in the PC market for 2026 after a robust growth of 8.1% last year, while TrendForce forecasts a 4.4% drop in console sales.

As several companies have already initiated price increases, industry leaders such as Apple and Dell face critical decisions about absorbing costs or passing them on to consumers, risking reduced demand. Analyst Jacob Bourne from Emarketer noted that the scale of the chip shortage will inevitably lead to higher prices, contributing to weakened sales of consumer devices in 2026—especially amidst broader inflationary pressures.

Intel's CEO, Lip-Bu Tan, highlighted that larger manufacturers might secure more memory chips, while smaller firms struggle, with many unable to complete their products. Following Intel's earnings, the company forecasted quarterly revenue and profits below market expectations, causing its shares to plummet 13% in after-hours trading, with rival AMD also seeing a 1.2% decline.

This challenging landscape will likely impact manufacturers of budget and mid-range devices, particularly Chinese brands like Xiaomi and TCL, along with PC makers such as Lenovo. Adding to this pressure, the memory price increases are expected to extend into next year—Counterpoint projects a further 40% to 50% surge in the first quarter.

Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide, mentioned the troubling spike in memory prices, indicating consumers should prepare for significantly higher costs for laptops, mobile phones, wearables, and gaming devices. Furthermore, Dell and Lenovo have signaled price hikes of up to 20% in early 2026.

Shares of major firms like Raspberry Pi, Xiaomi, Dell, HP Inc., and Lenovo have all seen declines over the last three months, with Xiaomi experiencing the steepest drop at 27.2%. HP's CEO, Enrique Lores, recently noted plans to raise PC prices in response to substantial memory chip costs, while Raspberry Pi's CEO admitted the cost surge has been "painful."

This decline in demand could adversely affect electronics-focused retailers such as Best Buy, which previously warned that tariff-driven price hikes might deter buyers. Looking ahead, Apple is set to report earnings on January 29, followed by Dell on February 26, and Xiaomi in late March. Some analysts believe Apple's scale, pricing power, and strong supplier network may enable it to better navigate the current memory price surge than its smaller counterparts, as the company typically maintains steady prices for its flagship iPhone models and has absorbed significant tariff-related costs in the past.

Morningstar analyst William Kerwin remarked that while Apple utilizes contract pricing to secure more stable costs, it is not entirely insulated from needing to increase prices in response to rising input expenses.