Memory Chip Shortage Overview
Memory prices have risen more than sixfold over the past year, ending decades of near‑metronomic decline and sparking a supply crisis that Morgan Stanley equity analysts Shawn Kim and Joseph Moore describe as structural rather than cyclical.
Market Size and Growth
TrendForce forecasts cited in the note project the global DRAM market to expand from about $220 billion in 2025 to roughly $890 billion in 2026, an incremental increase of approximately $670 billion—larger than the entire standalone addressable market for smartphones, PCs or servers.
Historical Pricing Trend
From 1957 to 2020, the price of a gigabyte of DRAM fell roughly tenfold every five years; that era has now ended, according to the analysts.
Demand Drivers and Supply Constraints
Artificial intelligence has generated a sudden, price‑inelastic leap in memory demand, while supply cannot respond quickly because installing new tools, qualifying processes and ramping yield requires a two‑year sequence. Three DRAM makers, which together control about 90 % of DRAM supply and virtually all high‑bandwidth memory (HBM), are steering scarce leading‑edge wafers toward higher‑margin HBM and server DRAM.
Bit‑level supply is growing only about 30 % a year, limited by extreme‑ultraviolet lithography tools and wafer capacity, whereas revenue is rising roughly fourfold. The analysts note that “almost the entire spend surge is therefore price, not volume.”
Capacity Outlook and Consumer Shortfalls
Global DRAM wafer capacity is expected to expand by about 30 % by 2027, but the industry’s focus on AI applications is likely to leave consumer markets undersupplied. PC DRAM supply is projected to fall roughly 15 % short of demand by 2027, equivalent to about 58 million units, while smartphone DRAM is expected to face a 12 % shortfall, or around 134 million units.
High‑Bandwidth Memory (HBM) Share
HBM consumes three to four times more wafer capacity per usable bit than conventional DRAM. Consequently, HBM’s share of leading‑edge memory wafer capacity is expected to rise from about 6 % in 2023 to 34 % by 2028.
Pricing Implications for OEMs
To preserve gross margins based solely on higher memory costs, average selling prices would need to increase by roughly 34 % for smartphones, 67 % for PCs, 83 % for servers and 14 % for storage products. A 67 % increase in PC average selling prices would represent the largest such rise on record, exceeding pandemic‑era inflationary increases by a factor of eight to nine.
Market Dynamics
The broker explains that “nobody passes all of this through, which is why it surfaces instead as margin pressure, spec cuts and delayed launches.” Memory is an intermediate input embedded in capital goods and services; electronic components are up approximately 30 % year‑on‑year in producer prices.
A two‑tier market is forming: hyperscalers are locking in supply through long‑term agreements and pre‑payments, while other buyers compete for a smaller, more volatile residual pool.