World looking at another inflation, this time blame RAM and not oil
If you buy a laptop or phone this year, you would pay 20 to 30 per cent more compared to last year. There is a RAM-driven inflation in the tech world, it is going to make everything more expensive.
When we think of global inflation, “oil” is the first word that comes to mind. Oil, and if you ask Donald Trump, he would add to it Hormuz. But increasingly, even as the danger of Oil Shock due to the Middle East shenanigans seems to have subsided, there is another threat rising. It is RAM, the supply of it, the price of it, and what it is doing to the world of tech.
People who keep an eye on all things tech already know it fairly well. On Thursday night masses became aware of it, with a jolt and some disbelief, when Apple increased the prices across product categories by as much as 85 per cent in India. Globally too the price increase has been similarly steep for MacBooks and iPads. Although the iPhone has been spared for now, chances are that when the new one launches in September, it is also going to come with a higher sticker price.
Of course, an iPhone and Oil are different kinds of commodities. One is almost a luxury, with many cheaper alternatives available. Oil, meanwhile, is essential. But it’s not about the iPhone and the MacBook, even though their price bump has sparked a busy chatter and meltdowns on social media. The Apple price hike is a symptom. The disease is the RAM and Storage supply crunch. It is devastating the entire tech world in ways few could have predicted, and has a potential to create spillover effects that may add to inflationary forces.
Look at it this way. Oil is the commodity that makes the world go around because it provides energy that powers everything, from food production to travel. Any change in the price of oil has an impact on everything else. Similarly, RAM and Storage (read NAND) are the commodities that make the tech world possible. If you have a device that is smart, it has NAND and RAM inside it. It might be very low, say 1 megabyte in a SIM card. Or it might be a lot, say 8 terabytes in a high-end laptop. But it is there. Similarly, in every device where there are calculations happening, such as a smartphone, you need RAM. Again, depending on the purpose and capabilities of a device, the amount of RAM can vary.
In the last 3-4 years, the prices of RAM and Storage have surged significantly. In many cases the price increase is 2X to 4X. To see this price increase without looking at the balance sheets of RAM and NAND suppliers and buyers, just do a quick search for external hard drive or laptop memory on Amazon. What you could have bought for Rs 5000 in 2024 now costs close to Rs 15,000.
The upward price pressure is driven by AI companies, which need all the RAM and NAND the world can produce for their ChatGPTs and Claudes. The AI runs inside data centres that house thousands of servers and graphics cards, mostly manufactured by Nvidia. The latest AI chips like Nvidia B300 aka Blackwell Ultra have up to 288 GB RAM. And in one AI data center there can be thousands of B300 chips. This is just one AI chip. There are tens of other chips, and they all use gigabits and gigabits of RAM and terabytes of NAND.
Given that Big Tech — think Google, Amazon, Anthropic, OpenAI — is currently in the middle of “hyperscaling”, there is a crazy demand for RAM and NAND. Just a handful of these companies are on track to spend over $750 billion on AI related infrastructure this year. To put it into perspective, this is more than the GDP of countries like Israel and Sweden.
The demand is so high, and these two components so critical for AI, that last year there were reports of big tech company executives literally begging RAM and NAND manufactures in South Korea. They wanted RAM and NAND at any price and they were not getting it.
No wonder Apple CEO Tim Cook calls the current situation unprecedented. "This is a hundred-year flood," Cook recently said in an interview with the WSJ. "I've never seen anything like it in any area in over 40 years.”
You would imagine that the invisible hand of capitalism, as Adam Smith called it, would fix the problem. But in the world of high-tech, where there are many barriers and ramping production up or down can take a fair amount of time, the invisible hand of capitalism is not a great guide. And more so when the US under Donald Trump is fully-focussed on blocking and sanctioning Chinese tech companies, including the likes of CXMT, YMTC and SMIC that can help with RAM and NAND production.
Essentially there are only three companies that majorly supply the world with RAM. These are Samsung, SK Hynix, and Micron. Similarly, there are three major NAND suppliers — Samsung, SK Hynix, and Kioxia. The companies are currently in the middle of a business boom, getting billions and billions of dollars in revenue from Big Tech companies. And they seem to be walking the way OPEC does whenever there is a demand to increase oil supply, that is gingerly. Instead of an urgency, the RAM makers seem to be operating with the motto “make hay while the sun shines.” Micron, for example, is predicting that supply crunch will last at least a few more years.
Elon Musk, who is an insider to all this, highlighted it on Friday morning. “The production shortfall relative to demand is insane. MUCH higher production is needed,” he wrote on X.
Even if the current trajectory of demand continues, the supply of RAM and NAND will remain tight. But I suspect Musk is not making his statement based on current demand. He is reading the future where the demand will go even higher because not only many more AI chips will be needed to feed Claude and ChatGPT but memory will also be required for AI-powered robots that are expected to flood the world.
The inflation in the tech world is here to stay. And as our machines, from the servers used by enterprises to the phones that we carry in our pockets, get more expensive, there is a real risk of high-prices beginning to impact the rest of the world.
That is because the world doesn’t only run on energy and oil. It also runs on computers and compute. There are hundreds of servers that power an enterprise, and thousands of laptops that employees need to work. As the cost of IT infrastructure goes up for the world, it is bound to make balance sheets uneven. From your local dentist, who uses a MacBook Pro to run her business, to an airline that needs iPads for its crew, everyone will either increase prices or think twice before offering discounts on their services.
The wave of inflation that arrives may not be as quick in coming as the one brought by oil, where prices have an immediate impact, but it will surely come. All prices will inch upwards. It will not be just the latest iPhone and the latest Xbox that will be pricier in the coming months. But your movie ticket too will cost more, or already does, because the 20 Dell computers that your local cinema hall replaced this year cost it 50 per cent more than the last time. Apple and the rest of the world have hit a memory wall and we all should brace for the impact.
When we think of global inflation, “oil” is the first word that comes to mind. Oil, and if you ask Donald Trump, he would add to it Hormuz. But increasingly, even as the danger of Oil Shock due to the Middle East shenanigans seems to have subsided, there is another threat rising. It is RAM, the supply of it, the price of it, and what it is doing to the world of tech.
People who keep an eye on all things tech already know it fairly well. On Thursday night masses became aware of it, with a jolt and some disbelief, when Apple increased the prices across product categories by as much as 85 per cent in India. Globally too the price increase has been similarly steep for MacBooks and iPads. Although the iPhone has been spared for now, chances are that when the new one launches in September, it is also going to come with a higher sticker price.
Of course, an iPhone and Oil are different kinds of commodities. One is almost a luxury, with many cheaper alternatives available. Oil, meanwhile, is essential. But it’s not about the iPhone and the MacBook, even though their price bump has sparked a busy chatter and meltdowns on social media. The Apple price hike is a symptom. The disease is the RAM and Storage supply crunch. It is devastating the entire tech world in ways few could have predicted, and has a potential to create spillover effects that may add to inflationary forces.
Look at it this way. Oil is the commodity that makes the world go around because it provides energy that powers everything, from food production to travel. Any change in the price of oil has an impact on everything else. Similarly, RAM and Storage (read NAND) are the commodities that make the tech world possible. If you have a device that is smart, it has NAND and RAM inside it. It might be very low, say 1 megabyte in a SIM card. Or it might be a lot, say 8 terabytes in a high-end laptop. But it is there. Similarly, in every device where there are calculations happening, such as a smartphone, you need RAM. Again, depending on the purpose and capabilities of a device, the amount of RAM can vary.
In the last 3-4 years, the prices of RAM and Storage have surged significantly. In many cases the price increase is 2X to 4X. To see this price increase without looking at the balance sheets of RAM and NAND suppliers and buyers, just do a quick search for external hard drive or laptop memory on Amazon. What you could have bought for Rs 5000 in 2024 now costs close to Rs 15,000.
The upward price pressure is driven by AI companies, which need all the RAM and NAND the world can produce for their ChatGPTs and Claudes. The AI runs inside data centres that house thousands of servers and graphics cards, mostly manufactured by Nvidia. The latest AI chips like Nvidia B300 aka Blackwell Ultra have up to 288 GB RAM. And in one AI data center there can be thousands of B300 chips. This is just one AI chip. There are tens of other chips, and they all use gigabits and gigabits of RAM and terabytes of NAND.
Given that Big Tech — think Google, Amazon, Anthropic, OpenAI — is currently in the middle of “hyperscaling”, there is a crazy demand for RAM and NAND. Just a handful of these companies are on track to spend over $750 billion on AI related infrastructure this year. To put it into perspective, this is more than the GDP of countries like Israel and Sweden.
The demand is so high, and these two components so critical for AI, that last year there were reports of big tech company executives literally begging RAM and NAND manufactures in South Korea. They wanted RAM and NAND at any price and they were not getting it.
No wonder Apple CEO Tim Cook calls the current situation unprecedented. "This is a hundred-year flood," Cook recently said in an interview with the WSJ. "I've never seen anything like it in any area in over 40 years.”
You would imagine that the invisible hand of capitalism, as Adam Smith called it, would fix the problem. But in the world of high-tech, where there are many barriers and ramping production up or down can take a fair amount of time, the invisible hand of capitalism is not a great guide. And more so when the US under Donald Trump is fully-focussed on blocking and sanctioning Chinese tech companies, including the likes of CXMT, YMTC and SMIC that can help with RAM and NAND production.
Essentially there are only three companies that majorly supply the world with RAM. These are Samsung, SK Hynix, and Micron. Similarly, there are three major NAND suppliers — Samsung, SK Hynix, and Kioxia. The companies are currently in the middle of a business boom, getting billions and billions of dollars in revenue from Big Tech companies. And they seem to be walking the way OPEC does whenever there is a demand to increase oil supply, that is gingerly. Instead of an urgency, the RAM makers seem to be operating with the motto “make hay while the sun shines.” Micron, for example, is predicting that supply crunch will last at least a few more years.
Elon Musk, who is an insider to all this, highlighted it on Friday morning. “The production shortfall relative to demand is insane. MUCH higher production is needed,” he wrote on X.
Even if the current trajectory of demand continues, the supply of RAM and NAND will remain tight. But I suspect Musk is not making his statement based on current demand. He is reading the future where the demand will go even higher because not only many more AI chips will be needed to feed Claude and ChatGPT but memory will also be required for AI-powered robots that are expected to flood the world.
The inflation in the tech world is here to stay. And as our machines, from the servers used by enterprises to the phones that we carry in our pockets, get more expensive, there is a real risk of high-prices beginning to impact the rest of the world.
That is because the world doesn’t only run on energy and oil. It also runs on computers and compute. There are hundreds of servers that power an enterprise, and thousands of laptops that employees need to work. As the cost of IT infrastructure goes up for the world, it is bound to make balance sheets uneven. From your local dentist, who uses a MacBook Pro to run her business, to an airline that needs iPads for its crew, everyone will either increase prices or think twice before offering discounts on their services.
The wave of inflation that arrives may not be as quick in coming as the one brought by oil, where prices have an immediate impact, but it will surely come. All prices will inch upwards. It will not be just the latest iPhone and the latest Xbox that will be pricier in the coming months. But your movie ticket too will cost more, or already does, because the 20 Dell computers that your local cinema hall replaced this year cost it 50 per cent more than the last time. Apple and the rest of the world have hit a memory wall and we all should brace for the impact.
