Memory shortage threatens small businesses’ existence Apple and Microsoft

Earlier this year, Mono Technologies assembled and shipped nearly 1,000 units of its flagship $600 router development kit. Co-founder Tomaž Zaman, who launched Mono in 2024, gained early attention among networking enthusiasts who use the product to speed up their internet connections.

Then came the memory shortage, which raised the cost of manufacturing nearly every electronic device on the planet. Now, Zaman doesn’t know what to do, especially with the 1,300 potential customers who put down $100 deposits for the next production run.

Mono’s 8 gigabyte DRAM type costs micron The price has risen from $35 when he first developed the product to $300 today. Zaman said his three-person company has not yet decided whether to move forward with a second version, increasing the price by at least a third, or introducing a new model with 75% less memory.

“Even if it’s a router in our class, if you’re buying it for $900 or $1,000, it’s not worth it,” Zaman said in an interview with CNBC. “But we have to do that or we’ll cut it down to the bare minimum.”

Zaman’s experience is becoming commonplace across the consumer electronics market, from iconic devices like the iPad and Xbox consoles to niche products barely past the testing stage. Artificial intelligence chip manufacturers are facing soaring costs due to global supply shortages caused by the artificial intelligence boom. Nvidia This is because it consumes ever-increasing memory for processors and advanced systems.

But while the tech giants like it; apple and microsoftboth companies announced price hikes this week, but a far wider range of companies with large cash cushions, leveraged supply chains and millions or billions of customers are facing potentially dire straits. Most appliance manufacturers have little headroom and cannot confidently raise prices in an economy already facing inflationary pressures.

go proThe struggling action camera maker warned earlier this month that it could go out of business after memory costs soared by 80% to 115% at the end of the first quarter. and speaker manufacturer stocks. sonos It’s down 23% this year as memory prices squeeze profit margins.

Nabila Popal, an analyst at IDC, said the current situation is an “absolute existential crisis” for companies such as small Android phone makers and “local companies that make sub-$100 devices.”

“Memory suppliers are only taking calls from large companies, so you won’t be able to get memory,” Popal said.

This week, the other side of the story was also on display.

Micron said in its quarterly earnings report Wednesday that sales in the latest period more than quadrupled and gross profit margin more than doubled to about 85% from 39% a year earlier. Micron’s stock soared 16% following the results and is now up about 800% over the past year, putting it on par with rivals SK Hynix and Samsung.

According to Micron, the average selling price of dynamic RAM in the third quarter rose more than 260% compared to the same period last year. Sumit Sadhana, Micron’s chief business officer, said in an interview that the company has long-term supply agreements with consumer smartphone and PC companies.

“We spend a lot of time thinking about how we manage our business and supply and how we allocate these scarce volumes across customers, segments, markets and geographies to ensure we take a thoughtful, responsible and fair approach,” Sadana said.

The day after Micron’s earnings release, Apple raised prices on a wide range of iPads and Macs, and the company said in a statement that it had “never seen component prices rise this quickly.” CEO Tim Cook said in an interview with the Wall Street Journal last week that memory growth is yet to come, calling the memory situation a “once-in-100-year flood.”

Within hours of Apple’s announcement, Microsoft announced that the price of the Xbox Series S would increase by $100 to about $500. The company said in a blog post that its gaming consoles are typically sold for less than the cost of manufacturing them.

“Console storage and memory prices have increased more than 2.5x and we expect them to double again by fall 2027,” Microsoft said in the post. “The entire consumer electronics industry is suffering from the current parts crisis, but the impact is particularly acute on consoles.”

Both stocks have fallen this week, underperforming broader indexes this year, worrying Wall Street. However, panic levels are much higher in companies that have less close relationships with component suppliers and are exposed to ongoing cost and inventory fluctuations.

Industries ranging from telecommunications to medical equipment to retailers are concerned about the price increases, according to a letter from lobbyists sent to the Commerce Department earlier this month.

In a warning to investors, GoPro said in April that it had heard from its memory suppliers about “plans to reduce production of memory used in its products,” which it said led to lower expected sales volumes. The company did not respond to requests for comment.

Elaine Ferguson, co-founder of W5 Technologies, is grappling with how to deal with crippling RAM costs and delivery times for the communications equipment her company makes for defense contractors.

Earlier this year, W5 ordered a server from a major manufacturer for a satellite communications simulator that the company plans to deliver in May. Ferguson said the price at the time of his order was $8,839, up from $5,373 in 2020.

Since that purchase, the price has almost doubled.

“I just ordered another one for another sale,” Ferguson said. “It’s currently priced at just under $15,000 and has a long delivery time no matter when you get it. You’ll be lucky if you get it.”

Instead of getting it in May, Ferguson said it won’t be available until August. Ferguson said W5 provided its defense contractor client with a used server it is currently testing, as well as payment for the cost of sending a team to install it.

Meanwhile, Mono Technologies is working on developing and qualifying its next model, but Zaman said he doesn’t know when it will be brought to market. He is also raising money and hopes to find investors to support new, large-scale production.

“Products are very expensive to manufacture,” he said.

WATCH: The AI ​​boom is driving up the price of technology