Chip Crisis Sends Consumer Tech Prices Soaring

SPEAKER_1 (0:01)

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Luke Vargas (0:18)

Get ready for pricier electronics as a memory chip shortage squeezes consumer tech. Plus another week, another partial government shutdown with no immediate end in sight, and we'll dig into the strangest American winter in years.

Carl Churchill (0:33)

We have extreme cold on the Eastern US., but then in the Western US., we are dealing with record-breaking temperatures in many instances. We pulled readers and 52% so far have said this winter is worse than they remember.

Luke Vargas (0:47)

It's Tuesday, February 17th. I'm Luke Vargas for the Wall Street Journal, and here is the AM Edition of What's News, the top headlines and business stories moving your world today. A growing and acute shortage of memory chips is squeezing the makers of phones, laptops, and game consoles, sending consumer tech prices skyrocketing. With AI demand gobbling up high-end semiconductors, our Korea Bureau Chief Tim Martin said that non-AI buyers are having to choose between raising prices, trimming margins, or reducing device memory.

Timothy W. Martin (1:23)

So we've seen PC makers like Dell raise prices for some commercial laptops by as much as 30%. Acer, for some of their budget computers, have reduced the amount of memory that come in certain models. And with Xiaomi, a Chinese smartphone company, they got rid of the lower memory option for certain lines of phones. So you can only get the higher memory options which allow them to protect their margins.

Luke Vargas (1:51)

And Tim told us that even some of the bigger tech companies won't be immune to the memory shortage.

Timothy W. Martin (1:55)

Some of the biggest names in tech, your Apples, your Samsungs, your Nintendos, they have ability to buy in advance in bulk before some of these price hikes really take off. But those stockpiles only last so long. So at some point, they'll be back in the market buying memory at these astronomical prices. I mean, we've never seen price rises like this so quickly. We've seen a sevenfold increase for the major types of memory just in the past 12 months or so. Things have never skyrocketed like this before. And this is posing a new problem to companies.

Luke Vargas (2:29)

Tim said that the current chip crunch does have parallels to pandemic era shortages, but is likely to be more severe and longer lasting.

Timothy W. Martin (2:36)

We're unlikely to see any type of slowdown in these prices for years. And this creates not just a short term headache for these tech hardware companies, but sort of almost like an existential evolution that they'll have to think how do we now compete against this new category of AI to get the really essential components we need. These skyrocketing prices for the basic components for these products are translating into forecast for lower sales. Because their products are becoming more expensive, people are buying fewer of them, which means they have less margin or more pressure on their balance sheets. This is a new type of threat to the supply chain that companies are really scrambling to try and figure out.

Luke Vargas (3:20)

The heart of the issue is chip manufacturing, with new factories or fabs being built but just not quickly enough. US memory chip maker Micron is rushing to add capacity. It's spending $200 billion on factories in Idaho, New York and Japan that will open in 2028 Meanwhile, NVIDIA supplier SK Hynex is also building new fabs in Indiana and South Korea with two new factories opening this year. The US government is emerging from the holiday weekend partially shut down. Partially here means just the Department of Homeland Security. Its immigration enforcement personnel are still working and getting paid, but not so for the TSA. Staffers at the nation's airports can still log hours, but likely won't be compensated for that until after the shutdown is resolved. And with the House and Senate on break this week, that could be a little while. Lawmakers remain at odds over the terms of a DHS funding package, with Democrats mandating that ICE and CBP agents don body cameras, unmask, wear visible identification, and need warrants signed by a judge in order to enter homes. On CBS's Face the Nation, Democratic House Minority Leader Hakeem Jeffries and White House Border Czar Tom Homan squared off on those proposals.

Hakeem Jeffries (4:38)

Police officers don't use masks. County sheriffs don't use masks. State troopers don't use masks. Why is it that ICE agents who are untrained are being unleashed on American communities with this type of lawlessness, violence, and brutality?