Memory chip shortage hammers phones and cars as AI devours supply

The global memory chip shortage, driven by insatiable demand from AI data centers, is now squeezing two of the world's largest consumer industries simultaneously. Qualcomm ↘ 2.63% reported a 20 percent drop in handset-chip revenue this week, MediaTek disclosed a matching 20 percent decline in mobile-chip sales, and automakers are racing to lock in supply before conditions worsen further.

Smartphone Market in Retreat

Qualcomm's fiscal third-quarter results, reported July 29, showed handset-chip revenue falling 20 percent year over year to $5.09 billion as phone makers cut orders due to scarce and expensive memory. CEO Cristiano Amon described a "challenging memory and supply environment" and warned that prices on Qualcomm products would rise starting September 1.telegraphindia+2

Global smartphone shipments dropped 11 percent in the second quarter to their lowest level for the period since 2013, according to Counterpoint Research. MediaTek, reporting results on Friday, said its mobile-chip revenue fell 20 percent as higher component costs weighed on demand, and the company now expects global smartphone shipments to decline about 15 percent in units for the full year.kfgo

Counterpoint Research's Tarun Pathak told The Telegraph that the impact would be "more visible in budget and mid-range smartphones, where margins are thin and even small component cost increases can influence pricing decisions".telegraphindia

Auto Industry Feels the Squeeze

General Motors ↗ 0.52% has coined the term "chipflation" to describe the cost pressure, flipping its North American vehicle pricing forecast from a 0.3 percent decline to a 0.3 percent increase this year. In China, BYD raised prices on its driver-assistance features by 20 percent, citing global memory price spikes.autonocion

On July 1, GM signed a strategic supply agreement with Micron ↘ 5.90% to lock in volumes of low-power DRAM, NOR flash, and UFS NAND. Ford ↘ 1.21% followed days later with its own long-term deal, announced July 6. Both agreements are part of at least 16 such contracts Micron discussed on its most recent earnings call.supplychaindive+1

According to Micron, the average car is expected to carry 278 gigabytes of combined DRAM and NAND memory by the end of 2026, up from 90 gigabytes in 2023, with high-end models requiring up to two terabytes.autonocion

No Quick Resolution Expected

Analysts at J.P. Morgan and Morningstar expect memory supply tightness to persist well into 2027. MediaTek raised its estimate of the addressable market for custom AI data-center chips in 2027 to $80 billion and approved $5 billion in financing to expand into that business, underscoring how AI infrastructure spending continues to absorb memory capacity that other industries need.globalbankingandfinance+1

The shortage's fundamental cause remains unchanged: AI data-center buildouts by companies such as Alphabet ↗ 6.88% are consuming an ever-larger share of memory chip production, leaving less for phones and vehicles.fortune