SMIC: AI memory boom creates smartphone chip shortage

# SMIC: AI Memory Boom Creates Smartphone Chip Shortage

Chinese chipmaker SMIC signaled at an investor meeting deep structural shifts in the global semiconductor market. The frenzied demand for memory for artificial intelligence systems is so powerful that it has begun displacing production of components for more familiar consumer devices — especially smartphones in the mid and low-end price segments. This phenomenon has exposed the fragility of supply chains and demonstrated how quickly the market can restructure when a new technology triggers a wave of investment.

The crux of the problem is that memory production capacity is not unlimited. When demand for high-performance chips (HBM, GDDR6X and other types of memory for AI accelerators) skyrockets, manufacturers redirect resources to these areas because margins are higher and demand is guaranteed. As a result, manufacturers of budget and mid-range smartphones find it increasingly difficult to obtain the needed amount of memory, and when it is available, the price stings. SMIC directly pointed out that companies face two problems simultaneously: component shortages and their rising costs. This creates a vicious circle — in order to remain profitable, manufacturers are forced to raise retail smartphone prices, which reduces their attractiveness to end consumers.

The consequences of this imbalance are already visible. When a smartphone becomes more expensive, demand for it falls. SMIC documented exactly this: orders for budget and mid-budget solutions are declining. People in developing markets, where these devices dominate, are either postponing purchases or seeking cheaper alternatives. This creates problems for the entire ecosystem — from chip manufacturers to retail chains. Meanwhile, orders related to AI and high-performance memory are, conversely, growing. SMIC noted that demand for components for AI applications and the mid-to-high price segment is only increasing, which naturally attracts production capacity in that direction.

This phenomenon reflects a broader trend in the semiconductor industry: in the era of the race for AI technologies, investments and resources are concentrating on advanced, expensive components. This means that segments that were previously considered stable, predictable business are now finding themselves in a peripheral role. Companies like Qualcomm, MediaTek and other mobile chip manufacturers must recalculate their strategies. They can no longer rely on guaranteed availability of cheap memory in the needed volumes.

The paradox is that this situation, on one hand, is logical and reflects market realities. AI chips do indeed require investment in new manufacturing processes and memory technologies. On the other hand, it creates a barrier to mass smartphone distribution in developing countries, where they remain an important tool for accessing the internet and digital services. Solving this dilemma will require either expanding overall memory production capacity, or developing more efficient architectures that require less memory. Until then, the market will remain asymmetrical: expensive cutting-edge devices will be abundant, while affordable smartphones will become scarcer and more expensive.