The memory shortage shaking Apple and Microsoft is ‘existential crisis’ for smaller players

Earlier this year, Mono Technologies assembled and shipped nearly 1,000 units of its flagship product, a $600 router development kit. Co-founder Tomaž Zaman, who started Mono in 2024, found early traction with networking aficionados, who use the product to speed their internet connections.

Then came the memory crunch, which has driven up the cost to produce practically every electronic device on the planet. Now, Zaman isn’t sure what to do, especially for the 1,300 prospective customers who put down a $100 deposit for his next production run.

Mono’s cost for 8 gigabytes of a type of DRAM from Micron shot up from $35 when he was first developing the product to $300 today. At his three-person company, Zaman said he hasn’t decided if he’ll go ahead with a second batch and increase the price by at least one-third, or introduce a new model with 75% less memory.

“Even a router of our class, it’s a poor value if you make it at $900, $1,000,” Zaman told CNBC in an interview. “But we have to, or we trim it down to the bare minimums.”

Zaman’s experience is becoming common across the consumer electronics market, from iconic devices like iPads and Xbox consoles to niche products that are barely past the testing phase. Costs are soaring due to a global supply crunch caused by the artificial intelligence boom, which has led chipmakers like Nvidia to suck up ever-increasing amounts of memory for their processors and advanced systems.

But while tech giants like Apple and Microsoft, which both announced price hikes this week, have a hefty cash cushion, supply chain leverage and customers numbering in the millions or billions, a much wider swath of businesses face potentially dire straits. Most consumer electronics companies have little margin to spare and can’t confidently raise prices in an economy already grappling with inflationary pressures.

GoPro, the struggling maker of action cameras, warned this month that it might go out of business after memory costs shot up between 80% and 115% at the end of the first quarter. And shares of speaker maker Sonos are down 23% this year as memory prices pressure margins.

Nabila Popal, an analyst at IDC, described the current situation as an “absolute existential crisis” for companies such as smaller Android phone manufacturers or “local players that are making devices below $100.”

“They won’t be able to get the memory because memory suppliers are only answering calls of the big players,” Popal said.