Consumers are facing higher prices for smartphones, gaming consoles, and personal computers as the surge in artificial intelligence (AI) investment drives up the cost of memory chips and other semiconductor components. This trend marks a reversal from decades of steadily improving electronic devices becoming more affordable.

Dynamic random-access memory (DRam) chips, essential for many consumer electronics, are in particularly short supply due to increased demand from large-scale AI operators, often referred to as hyperscalers. This demand has led to severe shortages and sharp price increases, affecting nearly every product in the consumer electronics market.

Market analysts report DRam prices have risen fivefold over the past year, with contract prices increasing by 10 to 20 percent quarter on quarter. Manufacturers have shifted production capacity away from lower-end chips, which are typically used in everyday devices, to prioritize high-bandwidth memory chips required for AI applications. Other key components, such as graphics processing units (GPUs) and central processing units (CPUs), are also experiencing supply constraints.

Major technology companies have already responded to these pressures by raising prices. For example, Apple increased prices of certain laptops and tablets by up to $300 to $500 earlier this year, acknowledging that supply limitations would likely impact sales growth. Similarly, gaming console manufacturers Microsoft, Sony, and Nintendo have raised prices by as much as $150 per unit despite hardware typically being sold at a loss, with profits coming from software and subscriptions. Nintendo reported unexpected costs amounting to approximately 30 percent of its annual operating profit due to rising component expenses, causing a notable decline in its share price.

The gaming sector is among the hardest hit, with companies such as Valve reducing production of their handheld Steam Deck devices and adjusting prices accordingly. Analysts warn that if console prices rise beyond $1,000, sales volumes could decline by up to 43 percent over five years.

Mobile device prices have also increased, with the cost of DRam used in smartphones rising by around $250 in the past year, a cost likely to be passed on to consumers in the coming months. Chinese manufacturers like Xiaomi, Oppo, and Vivo, which specialize in budget-friendly electronics, face particular challenges as their customers may struggle to absorb these higher prices.

To address the shortages, some companies are redesigning products with reduced memory components, and industry experts expect supply constraints to persist at least through next year. Industry leaders describe this situation as the “new normal” driven by the ongoing AI supercycle.

The semiconductor sector is attempting to expand capacity with new factories, but executives warn that building such facilities takes years, making a rapid resolution unlikely. Despite these challenges, retail sales of computing and telecoms products grew approximately 40 percent year on year in the quarter ending June, partly due to consumers purchasing devices ahead of further price increases.

Experts predict that consumers will increasingly hold onto existing devices longer as prices rise. Meanwhile, manufacturers may raise product specifications to justify higher prices, though this strategy may not be feasible for budget-focused brands. There is also speculation that console makers may need to innovate with new business models, including increased in-game advertising and subscription services, to offset hardware costs.

Overall, the higher prices for consumer electronics are expected to continue throughout the AI investment cycle, signaling a notable shift in a market accustomed to progressively better technology at falling costs.