The increasing need for memory chips to power artificial intelligence data centers could lead to dramatic price hikes in U.S. consumer goods and disrupt supply chains, groups representing automakers, retailers, electronic firms and others said on Wednesday.
The groups said in a letter to the U.S. Treasury and Commerce departments that "an urgent imbalance in the market for memory chips could lead to significant and sustained near-term price increases for American households and disrupt critical U.S. supply chains."
The letter shows the growing seriousness of the issue that threatens pricing and supply of key consumer goods. The U.S. government has dedicated billions in subsidies to boost memory-chip production, including at Micron (MU.O).
Groups signing the letter include the Alliance for Automotive Innovation, the National Retail Federation, the Medical Device Manufacturers Association, NCTA — The Internet & Television Association, the Telecommunications Industry Association and others.
The consumption by AI data centers of an enormous share of available memory-chip capacity has resulted in an "unprecedented surge in the price of memory chips and reduced supply of these chips for manufacturing and consumer-facing industries," the letter said.
The groups added, "The real-world impacts of these trends have already begun to show themselves and threaten to deteriorate rapidly if the situation is not remedied."
The Commerce and Treasury departments did not immediately respond to requests for comment, nor did the Semiconductor Industry Association.
Reuters reported in December that the acute global shortage of memory chips is forcing AI and consumer electronics companies to fight for dwindling supplies, as prices soar for the unglamorous but essential components that allow devices to store data.
The U.S. business groups added that they are seeing "price increases for a broad range of everyday consumer electronics and information technology products; significantly higher costs for building, maintaining, and upgrading our nation’s internet and telecommunications infrastructure; risks to the production and availability of automobiles, medical devices, and other manufactured goods."
Reuters reported this week that the global smartphone market is heading for its steepest annual contraction on record, with shipments projected to slump by 13.9% this year to 1.08 billion units, according to Counterpoint Research, which cited a worsening shortage of memory chips.
The impact is felt most acutely in lower-end smartphones as chipmakers shift production capacity to AI-related chips, making entry-level devices less economical to produce.
