Qualcomm, Arm Take Hits as Rising AI Memory Requirements Snarl Smartphone Production
Qualcomm predicted lower sales this quarter than Wall Street expected, thanks to a widespread chip shortage.
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Like the protagonist in the sleeper hit movie Memento, the electronics industry is losing memory (chips) every day.
Shares of Qualcomm, one of the world’s largest smartphone chip suppliers, and semiconductor designer Arm Holdings struggled this week amid heightened worries that a memory chip shortage will diminish growth for consumer electronics businesses. Qualcomm predicted lower sales this quarter than Wall Street expected, thanks to the chip shortage, while Arm said the gap could trim as much as 2% from its royalty revenue over the next year.
“Unfortunately, I think that the whole sector is impacted by memory,” Qualcomm CEO Cristiano Amon said on the company’s post-earnings call.
AI Allocation
Where all these chips are going will come as no surprise: artificial intelligence innovation, which tech companies are pouring billions of dollars into. Manufacturers like Samsung and SK Hynix are prioritizing the development of higher-profit chips that power AI over the type of memory needed to power your smartphone and laptop.
It doesn’t look like the shortage will be a thing of the past anytime soon. Analysts at Morningstar say it probably won’t show signs of waning until at least the second half of 2027; Intel CEO Lip-Bu Tan says 2028.
What does that mean for your smartphone and other electronics?
- Higher prices, probably. Samsung president and head of global marketing Wonjin Lee, told Bloomberg last month he expects price hikes: “Prices are going up even as we speak. Obviously, we don’t want to convey that burden to the consumers, but we’re going to be at a point where we have to actually consider repricing our products.”
- Potentially less random-access memory (RAM), which is what lets you switch quickly between apps. A report from researcher TrendForce says DRAM — a type of RAM — capacities in high-end and mid-range models “are expected to hover near the minimum standards, slowing upgrade cycles.” The low-end smartphone market will be most affected, the report added.
Gaming Gripes: Mario and Luigi are taking a hit, too. Nintendo “appears to be looking at an absolute horror show on the cost of building a console, unless memory prices come down sharply,” equity analyst Pelham Smithers told Bloomberg.
