Consumer electronics companies face production crises as memory costs surge due to AI-driven demand. Mono Technologies co-founder Tomaž Zaman saw costs for 8 gigabytes of Micron DRAM jump from $35 to $300, forcing reconsideration of a second production run for 1,300 customers who placed $100 deposits. The AI boom has created a global supply crunch as chipmakers consume increasing memory volumes, pressuring companies across the electronics market from niche startups to established brands like GoPro and Sonos.
Mono Technologies Faces Production Halt as DRAM Costs Jump 757%
Mono Technologies assembled and shipped nearly 1,000 units of its $600 router development kit earlier this year. The company's cost for 8 gigabytes of DRAM from Micron increased from $35 during product development to $300 today. Zaman said the company must either increase the price by at least one-third or introduce a new model with 75% less memory. "Even a router of our class, it's a poor value if you make it at $900, $1,000," Zaman told CNBC. "But we have to, or we trim it down to the bare minimums."
GoPro Warns of Potential Business Failure Amid Memory Cost Surge
GoPro warned this month that it might go out of business after memory costs shot up between 80% and 115% at the end of the first quarter. The action camera maker heard from memory suppliers in April about "planned reductions in the production of the memory used in its products," leading to lower projected sales volumes. Shares of speaker maker Sonos are down 23% this year as memory prices pressure margins.
Nabila Popal, an analyst at IDC, described the current situation as an "absolute existential crisis" for smaller Android phone manufacturers and "local players that are making devices below $100." "They won't be able to get the memory because memory suppliers are only answering calls of the big players," Popal said.
Micron Revenue Quadruples as Memory Prices Soar
Micron said revenue in the latest period more than quadrupled in its quarterly earnings report on Wednesday. The company's gross margin more than doubled to almost 85% from 39% a year ago. Micron shares jumped 16% on the results and are now up about 800% over the past year. The average selling price of Micron's dynamic RAM in the third quarter rose more than 260% from a year ago.
Sumit Sadana, Micron's chief business officer, said in an interview that the company has struck long-term supply agreements with consumer-oriented smartphone and PC companies. "We spend a lot of time thinking about how do we manage the business and the supply and the allocation of these scarce volumes to customers and segments and markets and geographies to ensure that we are being thoughtful, responsible and fair in our approach," Sadana said.
Apple and Microsoft Implement Price Increases on Consumer Devices
A day after Micron's results, Apple raised prices on a wide range of iPads and Macs. The company said in a statement that it has "never seen a component price increase this much, this quickly." CEO Tim Cook, in a Wall Street Journal interview published last week, called the memory situation a "hundred-year flood."
Within hours of Apple's announcement, Microsoft said the price of the Xbox Series S would increase by $100 to about $500. The company said in a blog post that consoles are typically sold for less than they cost to make. "Console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027," Microsoft said. "The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles."
W5 Technologies Server Costs Nearly Double in Months
Elaine Ferguson, co-founder of W5 Technologies, is wrestling with RAM costs and lead times for communications equipment her company makes for defense contractors. Earlier this year, W5 placed an order for a server from a major manufacturer at $8,839, up from $5,373 in 2020. "We just ordered another one for another sale," Ferguson said. "It is now just under $15,000 and the lead time is anytime we get it, we're lucky to get it."
Instead of receiving the server in May, Ferguson said she's now not expecting it until August. Industries ranging from telecommunications and medical devices to retailers are concerned about the price increases, according to a letter from lobbyists sent to the Department of Commerce earlier this month.
Companies Adjust Production Models and Seek Funding
Mono Technologies' Zaman said he's working on development and qualification for the company's next model. The company is fundraising, hoping to find investors to back a new and larger production run. W5 Technologies offered its defense contractor client a used server that's currently being tested and payment to fly the team out for installation.
FAQ
What caused the memory shortage affecting consumer electronics companies?
The AI boom created a global supply crunch as artificial intelligence chipmakers like Nvidia consume increasing amounts of memory for their processors and advanced systems. Memory suppliers prioritize large-scale buyers, leaving smaller manufacturers unable to secure adequate supply at affordable prices.
How much did memory costs increase for electronics manufacturers?
Mono Technologies saw costs for 8 gigabytes of Micron DRAM jump from $35 to $300. GoPro reported memory costs increased between 80% and 115% at the end of the first quarter. Micron's average selling price for dynamic RAM rose more than 260% year-over-year in the third quarter. W5 Technologies' server costs increased from $8,839 to just under $15,000.
Which major tech companies raised prices due to memory costs?
Apple raised prices on a wide range of iPads and Macs, stating it has "never seen a component price increase this much, this quickly." Microsoft increased the Xbox Series S price by $100 to about $500, citing console storage and memory prices that increased by more than 2.5x.
