How the AI boom is stoking prices of less trendy memory chips

The global rush by chip-makers to produce artificial intelligence (AI) chips is tightening supply of less glamorous chips used in smartphones, computers and servers, spurring panic buying by some customers and a surge in their prices, industry executives and analysts said.

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Rising competition from lower-end chips from Chinese rivals prompted Samsung and SK Hynix to accelerate moves to higher-end chips.

(PHOTO: REUTERS)

The unexpected ripple effect of the AI boom is giving a much-needed boost to memory-chip makers, including Samsung Electronics, which has lagged rivals in offering advanced AI chips, and a rally in their share prices.

Supply of the more mundane semiconductors has become so tight that the global memory-chip industry is poised to head into what some analysts call a “super cycle”, as device makers frantically stock up on memory chips, executives said.

“Within the last month or two, there’s been a huge demand surge,” said Mr Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide.

“It does seem like things have happened in a fast and furious way,” he added.

“There is definitely scrambling going on and more soon. And there is double/triple ordering going on, like we’ve seen in many past shortages.”

Memory-chip makers started allocating more of their production capacity to high-bandwidth memory (HBM) chips, used to build Nvidia’s powerful AI chipsets, after ChatGPT kicked off a generative AI craze following its release in November 2022 and a global rush to build AI data centres.

Rising competition from lower-end chips from Chinese rivals like CXMT prompted South Korea’s Samsung and SK Hynix, which control around 70 per cent of the global Dram chip market, to accelerate moves to higher-end chips.