Semiconductor Manufacturing International (SMIC), China's largest chip manufacturer, has issued a warning that the semiconductor industry is entering a "crisis mode" as electronic device makers aggressively compete for memory chips amid an unprecedented global supply shortage. The surge in demand may lead to overbooking, causing order numbers to appear higher than actual needs.
Zhao Haijun, Co-CEO of SMIC, revealed that he has witnessed five previous upward cycles in memory chips, and each time a severe chip shortage occurs, there is a noticeable increase in "double booking."
He compared the situation to booking airline tickets, explaining that if one airline is fully booked, passengers will immediately book with another, making total bookings look inflated even though actual travel demand hasn't risen correspondingly.
"Currently, memory-related chips and power chips are in severe shortage, yet fierce competition exists within the industry to secure these chip groups," Zhao Haijun said.
The SMIC CEO stated that the company still expects growth, believing that AI-related memory chip orders will continue to support expansion.
He also pointed out that some sales channels and intermediaries in the supply chain have hoarded large quantities of memory chips, hoping to resell them at higher prices during the shortage. However, these stocks are expected to be released by year-end when new production capacity comes online.
Moreover, SMIC signaled to electronic device manufacturers not to view the memory chip shortage too negatively or rush to cut orders for other essential chip types, as if demand recovers alongside new memory chip capacity in Q3, producers could face shortages of other chip types needed for assembly.
In recent years, investment in AI infrastructure such as data centers has expanded significantly, increasing demand for memory chips beyond production capacity. The hardest hit during this chip shortage crisis are mid- and low-end mobile phone manufacturers, likely causing smartphone prices to rise and shipments to decline in 2026. It is also predicted that high chip prices and market shortages will persist through 2027.
According to Counterpoint data cited by CNBC, smartphone shipments are projected to fall about 2.1% this year, while prices may rise 6.9% compared to last year, up from an earlier forecast of 3.6% price increase.
Dynamic Random-Access Memory (DRAM), used in AI data centers, is also a key smartphone component. This year, DRAM prices surged sharply due to demand clearly exceeding supply.
Counterpoint data indicates that for smartphones priced under 200 US dollars (approximately 6,300 baht), production costs per unit have risen about 20% to 30% since early this year, covering the total parts cost per device. Meanwhile, mid- and high-end smartphones have seen material costs increase about 10% to 15%.
These parts price hikes are likely to be passed on to consumers, pushing up the average selling price of smartphones.
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