Chipflation is here and you'll have to pay for it
MUMBAI: If you think the AI boom will only make MacBooks and iPads more expensive, you are wrong. You probably do not realise it, but a host of products you use every day have memory chips in them-this is because devices are getting 'smart' which means they require more memory to process data and run applications.From your connected speakers, smartphones, TVs to even smaller kitchen appliances, everything has chips.
Prices of products such as smart TVs have already been rising and the rush to expand AI infrastructure will only make supplies of chips scarce, driving chipflation. And consumers will have to pay for it."Memory component prices continue to remain on an upward trajectory with eMMC prices having gone up by almost 12 times while DDR memory prices have increased by nearly 15 times.
Prices across the (smart TV) category have already seen an increase of nearly 30% over the last few months. If price pressures continue, further price revisions may become inevitable," said Arjun Bajaj, director at Videotex which manufactures TVs for brands.The current chip crunch is heavily driven by semiconductor fabs diverting capacity towards high-bandwidth memory (HBM) for the AI boom.
This has sent standard DRAM, NAND and legacy microcontrollers spiking across the board, said Rahul Sharma, co-founder at MiPhi and Bhagwati Products which manufactures smartphones and other electronics for brands such as Oppo, Vivo and Lenovo.For consumers, this means higher prices for everything from SD cards to smartphones and for brands, it's a race to secure the chips before competitors or further cost escalations, said Nikhil Rajpal, founder & CEO at smart devices firm Qubo.
Some small smartphone and PC manufacturers are already facing heat because of their inability to procure chips, said Parv Sharma, senior analyst at Counterpoint Research, projecting demand for smartphones and PCs at the lower and medium end to take a hit. "Consumers with smaller budgets may go slow on upgrades," Sharma said.
The research firm forecasts global smartphone shipments to decline to about 1.1 billion units, the lowest annual volume since 2013.There will be an increase of around 10-15% in chip prices this quarter due to the shift of allocation of chips to AI sector/data centres instead of the low margin consumer electronics market.
"We were comfortable with stocks for Q1 but expect limited supply in Q2," said Kamal Nandi, business head at appliances business of Godrej Enterprises Group, expecting a price hike of 1-2%. The broader chipflation has driven up component costs for small kitchen appliances by 15-20% over the past year, said Ravi Saxena, founder & CEO at Wonderchef, adding that the impact has been limited given that chips and electronic modules roughly make up about 5-8% of its component costs.Get the latest business news and top stories.
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