AI’s Brutal Trade-off: Memory Makers' Priority for HBM Leaves Consumer Devices Market in Limbo as DRAM Prices Rise

In the last quarter of 2025, memory prices increased sharply, with no sign of slowing in the year ahead. Due to the current surge in demand for memory in Artificial Intelligence (AI) infrastructure—largely driven by tech giants like NVIDIA, Advanced Micro Devices (AMD), and Google—memory manufacturers are shifting to High-Bandwidth Memory (HBM) chip production to capitalize on the highly profitable opportunity from the rapid scaling of AI data centers. As global demand for expanding AI data centers grows, high-end memory chips are expected to drive production for many memory manufacturers, creating a severe bottleneck in the production of other Random Access Memory (RAM) chips.

Traditionally, RAM production in the past decade has been driven by Dynamic Random Access Memory (DRAM) and NAND flash memory. DRAM chips are widely used across personal consumer devices, including DDR4/DDR5 Synchronous Dynamic Random-Access Memory (SDRAM) in PCs and LPDDR4X/LPDDR5X in mobile devices such as smartphones, laptops, and tablets. In addition to these chips, the past year saw a surge in demand for HBM and server-grade DDR5 to support the rapidly expanding AI market. These HBM chips are considered important to the AI industry because they use Three-Dimensional (3D) stacking and can support higher bandwidths with much lower power consumption and physical footprints than their consumer DRAM counterparts. As a result, the high demand for HBM chips has prompted memory manufacturers to shift production capacity to AI-driven enterprise memory chips, leading not only to reduced PC DDR5 production but also to the acceleration of DDR4's phase-out.

Globally, there are three primary memory vendors, Micron, SK Hynix, and Samsung Electronics, which together hold about 90% of the production line. With the reallocation of supplier capacity toward HBM and high-grade DDR5 in the past year, consumer-grade memory is facing an unprecedented cannibalization of its production supply. Regarding HBM’s production load, Micron’s chief business officer, Sumit Sadana, comments that “Every time we manufacture one extra bit of HBM, we lose three bits of supply of conventional DRAM.”

As memory makers transition to HBM and prioritize enterprise DDR5 production, the supply of consumer-grade RAM is sharply declining. The demand for memory well-suited for AI is materially outpacing supply, which is causing prices to skyrocket for both enterprise-grade and consumer-grade RAM. One of the biggest gut punches of this memory shortage is to the consumer devices market, which gradually recovered from its dip during the COVID-19 pandemic and the Graphics Processing Unit (GPU) shortage that ensued (also triggered by AI’s rapid expansion). The devices market is once again facing a major setback, with consumer electronics margins already thinning. The Average Selling Price (ASP) of consumer devices is set to increase as vendors across the industry face challenges amid this memory shortage crisis, with major players weathering the consequences better than smaller ones. Even though companies like Lenovo, Xiaomi, Huawei, Apple, and HP will undoubtedly face challenges in the coming years, their current scale, inventory, and long-standing deals with memory manufacturers could largely shield them from major short-term disruptions. On the other hand, smaller players like MSI, Gigabyte, and Acer might be forced to raise prices, potentially dampening demand and leaving them struggling to stay afloat.

Although leading manufacturers like Lenovo have reassured consumers that they have stockpiled enough memory chips to offset the current shortage, the ongoing shift to high-volume HBM production will continue to disrupt the long-term supply of DRAM and NAND chips. By stockpiling and strategically allocating, major device vendors such as HP, Dell, Apple, and Lenovo may be able to keep device production relatively stable through 2026. However, the underlying supply constraints are expected to persist throughout this year, with manufacturing capacities for some memory makers already booked until 2028. The device industry’s next major turning point may come in 2027, as existing stockpiles and favorable long-term deals begin to run out, while additional manufacturing supply from new fab construction is unlikely to arrive before late 2027. Ultimately, this bottleneck has and will continue to drive up device ASPs across vendors.

As consumer devices scramble for alternative DRAM supplies, some vendors are beginning to consider smaller memory players. One such benefactor on the global scale is Chinese manufacturer ChangXin Memory Technologies (CXMT), which already has a strong presence established in the Chinese market, supplying LPDDR4 and LPDDR5 generation chips for Xiaomi and Transsion smartphones. The Chinese chipset player is currently benefiting heavily from the DRAM pricing rebound, doubling its Year-over-Year (YoY) revenue in 2025, and is priming itself for international expansion, with its eyes set on a major Initial Public Offering (IPO) in Shanghai. However, the Chinese manufacturer is facing stiff opposition to its international expansion bid, which includes the United States tightening export restrictions and South Korean prosecutors pursuing legal action.

The memory shortage will undoubtedly affect consumers and vendors worldwide, but potentially in asymmetrical ways. It is very likely that major vendors that have hedged prior bets with their larger reserves will win, relying on long-term supply contracts with memory, Central Processing Unit (CPU), and GPU makers that can weather short-term supply chain issues while recalibrating their long-term strategy. Smaller vendors that rely on price as their competitive advantage may see their low margins vanish almost immediately if they try to weather the inevitable memory chip price hike in the coming year without adjusting their prices. If the shortage continues to drive up memory prices, smaller vendors that fail to craft a cohesive long-term plan to mitigate it might face pressure to consolidate with other vendors or be absorbed by a larger player. This reality might not be far off, as only recently, major smartphone player BBK Electronics consolidated its sub-brands, Realme and OnePlus, into its OPPO brand to reduce costs and improve efficiency. Apart from OPPO, BBK Electronics also owns vivo.

Some key opportunities for smaller consumer device vendors involve reevaluating their supply chain and manufacturing strategies. On the supply chain front, ABI Research increasingly sees opportunities for smaller memory producers like CXMT, Nanya Technologies, and Winbond Technologies to succeed by meeting the demand for DRAM in consumer devices. Consumer device vendors will also assess how much prices for HONOR and Lenovo devices will increase relative to competitors as their supply chains increasingly diversify away from these three major companies. This reduces their reliance on them for consumer-grade DRAM. As a result, it becomes more feasible to explore memory manufacturing solutions that are less impacted by market fluctuations, such as the ongoing demand driven by AI growth.

Additionally, reevaluating its device manufacturing strategy internally is crucial for reallocating limited memory chip resources more efficiently. Smaller vendors should concentrate on their niche market segments and unique value propositions in the short term, targeting specific models and price ranges where they can stand out. Reports indicate that major companies like Xiaomi, OPPO, and Huawei have lowered their projected smartphone shipments for 2026, particularly by moving away from mid- to low-end segments and shifting their focus toward flagship devices. This creates an opportunity for smaller vendors to fill market gaps left by these giants and maintain steady revenue among budget-conscious consumers during the shortage. Adjusting the device manufacturing strategy should not focus solely on key penetration targets; it should also consider reviewing device DRAM requirements, where slightly reducing RAM hardware could keep prices stable and help remain competitive against larger players.