Manufacturers of the cheapest types of memory, NOR Flash and SLC NAND, are reorienting their capacity toward producing components for artificial intelligence solutions. This is leading to a significant rise in the prices of these chips, which in turn will make a wide range of consumer electronics more expensive, from routers to household appliances.

Changing priorities in the semiconductor industry

The modern semiconductor market is experiencing a real boom driven by the rapid development of artificial intelligence technologies. Powerful AI servers require specialized high-performance chips, including DRAM and HBM (High Bandwidth Memory). These components bring manufacturers significantly higher profits compared with traditional memory chips, which until recently were considered a fairly stable but low-margin product.

Chip fabs have limited production lines. When demand for AI components rises, companies are forced to make difficult decisions about how to allocate resources. In such a case, producing NOR Flash and SLC NAND, which cost only a few cents each, becomes less attractive. NOR Flash plays a critical role in storing firmware for many devices, such as routers, smartwatches, industrial equipment, and household appliances. SLC NAND, in turn, is valued for its exceptional reliability when writing data, making it indispensable in certain industries where errors are unacceptable.

Consequences for the average consumer

Analytical reports point to a “severe undersupply” in the NOR Flash and SLC NAND market. These technologies did not require major updates for a long time and remained affordable thanks to stable, predictable demand. However, the AI revolution has radically changed this paradigm. Now every available production line is optimized to maximize profit rather than to maintain mass output of cheaper components.

This directly affects electronics manufacturers with low margins. Household appliances and networking equipment traditionally operate with minimal markups. Any increase in component costs is immediately reflected in the final price of products for consumers.

A similar situation was previously seen in the DRAM and SSD flash memory market. At that time, the reallocation of manufacturing capacity to HBM for data centers led to a significant increase in the prices of these components. Now this trend is extending to the simplest types of memory, which were once considered stable and inexpensive.

At first glance, a few percent increase in firmware chips may seem insignificant. However, when multiplied across millions of routers, smart devices, household appliances, and industrial controllers, it turns into a substantial rise in the cost of finished products.

Forecast for the Ukrainian market

The Ukrainian electronics market depends heavily on imports. Therefore, the global shortage of NOR Flash and SLC NAND will have a delayed effect, showing up in consumer goods prices with a certain lag that could reach several months. Domestic manufacturers and equipment assemblers should already factor the risk of higher component prices into their financial forecasts for the coming year. Consumers, in turn, should prepare for a gradual rise in the price of everyday electronics that until recently belonged to the most affordable segment of the market.

This situation highlights the global interdependence in electronics manufacturing and how changes in one sector, particularly in innovative industries, can have unpredictable consequences for others. On the one hand, we are seeing rapid progress in artificial intelligence, opening up new possibilities. On the other hand, it creates certain challenges for the production of mass-market, affordable goods that form the backbone of modern everyday life.

Historically, the development of semiconductor technologies has always been linked to a constant search for efficiency and lower production costs. The emergence of new, more profitable uses for existing manufacturing capacity has always led to temporary market fluctuations. One example is the 2017-2018 period, when a NAND memory shortage caused by a surge in smartphone demand led to a significant increase in SSD prices. At that time, manufacturers also reoriented their capacity to satisfy the most profitable segment of the market.

Today’s surge in demand for AI solutions is larger in scale and more sustained. This means that the redistribution of production capacity may last longer, and the impact on prices may be more prolonged. Consumers who once could count on relatively stable prices for basic electronics are now facing the need to adapt to new market realities. It is important to understand that this trend is not a short-term phenomenon, but rather a reflection of deeper changes in the technological landscape.