Micron, a key supplier of memory chips for major AI companies like Nvidia, has issued a stark warning: the world is heading into a serious memory chip shortage that is unlikely to be resolved quickly.
The company's prediction carries significant weight, especially given its recent groundbreaking ceremony for a massive $100 billion chip factory near New York. This new facility is planned to house four enormous fabrication plants, each comparable in size to 10 football fields. Micron anticipates the first chips from this site will be produced in 2030. In addition to the New York expansion, Micron is also adding two more fabs adjacent to its Research and Development buildings in Boise, Idaho. One of these fabs is slated to commence operations in 2027, while the planning for the second is still underway.
These ambitious expansions are part of Micron's strategic plan to shift 40% of its DRAM production to the United States. The company is leveraging a $6.2 billion grant from the Chips Act, secured in 2024, to facilitate this move. Additionally, Micron is benefiting from a 35% tax credit that applies during the construction phase.
High-Bandwidth Memory Driving Demand
Manish Bhatia, who oversees operations at Micron, explained the critical factor behind the looming shortage: high-bandwidth memory (HBM), which is essential for AI systems, is consuming such a substantial portion of the global memory chip output that very little is left for other product categories.
Manufacturers of smartphones and personal computers are now actively working to secure chip supplies for years in advance. This urgency is particularly acute for the period beyond 2026, when demand is projected to escalate further, partly due to anticipated major initial public offerings from companies like OpenAI, which could significantly impact the market.
Impact on Smartphone and PC Markets
The strain on supply chains is already being felt. On Friday, the Chinese news outlet Jiemian reported that three of China's largest smartphone brands – Xiaomi, Oppo, and Transsion – are revising their sales targets downwards for 2026. While these companies did not comment directly, the report suggested that Oppo might reduce its shipments by as much as 20% due to rapidly increasing memory prices.
In December, Counterpoint Research indicated that global smartphone sales could decline by 2.1% this year. The rising cost of chips is disrupting production schedules. Similarly, Dell and other PC manufacturers have also signaled expectations of further delays and reduced unit production.
Industry Focus Shifts to AI Memory
The memory chip industry's focus has overwhelmingly shifted towards AI applications. Micron, along with competitors Samsung and SK Hynix, experienced significant stock growth last year. However, the market is now facing a situation where products are largely sold out. SK Hynix has stated that it has no available chips for delivery in 2026, and Micron has reported a similar sell-out for its AI-focused memory for the current year.
In a strategic move in December, Micron discontinued its Crucial brand for consumer memory. This decision was made to prioritize supply for major AI customers such as Nvidia. The immense demand from the AI sector is prompting Micron to accelerate the construction of new fabrication plants in both the United States and Asia.
Micron announced on Saturday its plan to invest $1.8 billion to acquire a plant site in Taiwan that already possesses existing infrastructure. This acquisition is expected to expedite the production of DRAM wafers. Manufacturing at this Taiwanese site is scheduled to commence in the latter half of 2027.
DRAM is a fundamental type of memory crucial for chips manufactured by companies like Nvidia and Intel. It plays a vital role in high-bandwidth memory, which empowers AI systems to perform complex computational tasks. Bhatia noted that the Taiwan and other Asian sites will continue to be hubs for new chip technology development. However, the majority of the expanded production capacity is being directed towards the United States.