Noureldein GhanemWashington, DC — In September 1995, Sony released its flagship home console, the PlayStation, in the US at $299.99, undercutting the Sega Saturn, which launched the same year at $399.99.
By 2020, the standard PlayStation 5 cost $499.99. That jump was easy enough to explain: technology moves, economies shift.
What's harder to explain is where the price stands now. The same console generation retails today for $649.99, after two hikes in barely eight months, from $499.99 to $549.99 in August 2025, then to $649.99 that April.
A price increase this steep, this late in a console's life cycle, breaks with an industry built on mid-generation cuts, not hikes
The PS5 is just the most visible symptom. Laptops, smartphones, tablets, smart TVs and connected vehicles are all being squeezed by the same force: chipflation, a memory-price surge driven by the AI boom.
A vanished subsidy
Chipflation describes the rising cost of memory chips and semiconductors. But behind the term sits a supply chain most consumers never see, one governed by contracts, allocations and, occasionally, spot markets, not a shop shelf.
Large manufacturers forecast memory needs years in advance and lock in supply agreements. When demand spikes or supply tightens, prices move, sometimes sharply.
Ram Bala, associate professor of AI and analytics at the Leavey School of Business, Santa Clara University, says Morgan Stanley coined "chipflation" to describe the reversal of a 50-year trend in which memory prices halved roughly every five years.
"That steady deflation was the quiet subsidy behind the consumer electronics business model: every year you got more storage and more RAM at the same price. That subsidy is now gone," Bala tells TRT World.
"The magnitudes are historic. In the second quarter of 2026, DRAM contract prices rose 58 percent to 63 percent quarter over quarter and NAND Flash 70 percent to 75 percent, the largest increases in a decade, with the supply gap the widest since 2011."
A 32GB DDR5 memory kit that sold for $100 to $200 in October 2025 now starts at $350, if it's available at all.
AI boom at the centre
Expanding chip production capacity takes years and billions of dollars, so even a sharp demand increase reverberates across the entire supply chain, and AI data centres have created enormous demand for high-bandwidth memory (HBM).
"This is not general inflation, and it is not tariffs. It is a capacity allocation decision made inside three companies," Bala says, referring to Samsung, SK Hynix and Micron, which together control 90 percent to 95 percent of global DRAM production and have redirected capacity toward HBM for AI accelerators.
HBM consumes three to four times the wafer capacity of standard DRAM per gigabyte, meaning every unit shipped to an AI data centre removes roughly three units of conventional DRAM from everyone else's supply.
HP said in February that memory now accounts for 35 percent of its PC materials, up from 15 percent to 18 percent just one quarter earlier.
"No manufacturer can absorb a swing that large," Bala says.
Shrinkflation
Firms are responding two ways: raising prices and cutting costs.
"Price: Lenovo, Dell, HP, Acer and ASUS have all warned clients of 15 percent to 20 percent increases and contract resets. Xiaomi and Redmi have told customers to expect increases of 20 percent to 30 percent," Bala says.
Some manufacturers are quietly stripping features instead, downgraded screens, cut corners, without touching the price tag. "Call it shrinkflation for electronics," Bala says.
Others are reshuffling product lines: Samsung, Microsoft and Dell have raised prices on select models while cutting availability of cheaper ones, postponing launches and suspending discounts on older stock.
Consoles: the cleanest illustration
Game consoles show the pattern most starkly, Bala says, "because three companies that rarely move together all moved in the same direction, and mid-cycle price cuts are the industry norm."
Sony's Digital Edition PS5 rose from $399.99 to $499.99 in August 2025, then to $599.99 this April. The PS5 Pro has climbed from its $699.99 launch price to $899.99.
Nintendo told customers in May that the Switch 2, launched in 2025 at $449.99, would rise to $499.99 from 1 September, citing "various changes in market conditions, which are expected to extend over the medium to long term."
Microsoft has raised the price of its Xbox Series X three times since its $499.99 launch in 2020, most recently to $799.99 as of this August. In a June statement, Xbox pointed directly to memory costs: "The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles."
The pressure extends well beyond consoles.
"On the PC side: Dell's COO called the cost escalation unprecedented, and Lenovo told customers all current quotations and prices would expire on 1 January 2026," Bala says.
"Raspberry Pi's CEO described the situation as painful in a December blog post announcing higher prices."
Wider fallout
The effects reach markets far more price-sensitive than the US. GSMA said in March that the memory-price surge was making it increasingly difficult to hit the $30-$40 range needed for mass-market 4G smartphones in Africa.
Counterpoint reported Mexico's smartphone market fell 9 percent year-on-year in January and February, with rising memory costs cited among the causes.
Bala expects "demand destruction" over the next 12 to 18 months: IDC forecasts a 13.9 percent decline in global smartphone shipments and an 11.3 percent drop in PCs.
"Replacement cycles stretch, and the refurbished market grows," he says, adding that J.P. Morgan estimates every 10 percent rise in hardware costs adds roughly 0.1 percent to core inflation measures, with 0.2 to 0.4 percentage points tied specifically to the memory shock.
Relief will take longer. New fabrication capacity takes 18 to 24 months to build, with meaningful volume not expected before 2028, when Samsung's P5 fab in Pyeongtaek targets mass production.
Estimates of how long the squeeze lasts vary widely: SK Hynix's CEO told Reuters in July it could persist "beyond 2030," while a former Samsung chip chief has suggested prices could fall as early as the second half of next year.
"There is no consensus on the long term," Bala says. Consumers, meanwhile, face higher prices, longer upgrade cycles and less memory for their money well into 2027.
