I wrote about the impacts of AI development a while back. One of the factors I mentioned was technology waste which touches on the concept of AI being a massively wasteful consumer of things like high-performance GPUs, disk storage, and RAM. This consumption is driving up prices for basic technology infrastructure at an alarming rate.
A recent article in Rock, Paper, Shotgun recounts the statement of the leader of one of the largest memory providers indicating that RAM shortages and price increases are expected to continue until at least 2028. This is bad news for anyone who wants to upgrade or buy an electronic device that uses RAM, which is most of them.
Impact of AI on price increases
One of the basic rules of capitalism is that you always aim to charge the highest price that the market is willing to bear unless you are trying to undercut the competition. At a certain point there is very little incentive to lower prices and nearly unlimited incentive to raise them. This comes most commonly when there is a near monopoly in a particular supply chain or limited supplies that constrain rate of manufacturing.
For RAM there are only three companies that between them account for over 90% of global RAM manufacturing capacity: Samsung, Hynix, and Micron. These companies maintain a robust “moat” around their businesses through the high cost and long timelines for building up RAM manufacturing capacity. AI applications consume vast amounts of RAM and AI companies have nearly infinite bankrolls to support their infrastructure buildouts. The small number of companies supplying RAM and AI deployment’s willingness to pay nearly any price mean that the price of RAM has raced up over the last 12 months, over 500% on average.
For an average consumer the increases in RAM prices has led to major price increases for computing devices. Things like iPads and MacBooks and PCs have increased by around 20%. Similar increases have been seen with XBox and Playstation consoles. All of these are devices that traditionally either stay the same price with increased capacity or decrease in cost. In some cases the RAM shortages have led to products being unavailable or hard to come by: Valve’s Steam Machine is a good example of this, costing over $1,000 and being hard to get regardless of price.
There are likely other factors at work here beyond simple supply chain constraints. The major manufacturers are constraining the supply of consumer grade parts themselves to shift manufacturing capacity to higher-margin specialized components for the AI industry. There are also allegations of price fixing between the three major RAM manufacturers. It is unlikely that these kinds of dirty dealing circumstances will be proven but, big business being what it is, the allegations sound very plausible.
Looking forward
High RAM prices will stay high for as long a time as the manufacturers feel they can squeeze the market. Electronic gadgets will be more expensive in a year than they are now, sometimes surprisingly so. And some devices will suffer from outright lack of availability for extended periods.
My gut tells me that the next generation of game consoles will likely cost well in excess of $1,000, and there will be long wait times similar to those from around the COVID period. Waiting for a price decrease will only be viable if you can delay your purchase for a couple of years at least, and even then market collusion and profiteering suggest that expecting price decreases might be a fool’s game.