Source: Radio New Zealand
The AI boom is creating a shortage of key elements for phones, computers, even cars and dishwashers. 123RF
New Zealand consumers are being warned laptops, smart phones and even fridges are going to cost more as the price of key components jump by 400 percent.
Since the AI boom, manufacturers had pivoted away from making hardware like RAM and hard drives for general consumers – instead focusing on creating the more lucrative equipment for AI and data centers.
It was creating a shortage of key elements for phones, computers, even cars and dishwashers, prompting supply chain problems – driving up prices.
And according to experts, there was no signs of those prices slowing down for years.
In other words, if you need a new laptop or smartphone, do it now before the hikes continue.
Compulsion Tech’s managing director Ben Maxwell said the situation took a rapid turn late last year.
Compulsion Tech’s managing director Ben Maxwell. RNZ / Charlotte Cook
“The prices have just been crazy … I’ve never seen anything like it.
“Initially we sort of saw memory prices jump about 100 percent just within a few weeks and that was early Q4 last year. It almost continued with weekly price increases or sometimes even every few days.”
It became hard for Maxwell to get his hands on stock.
“There was no consideration of it even smoothing out or going down, it just kept creeping up for both RAM and solid-state drives.”
RAM was the flashy, fast memory that a computer processor accessed, while solid-state drives were the storage or hardrive for your technology. Both were two of the most important parts of computers.
“A 32 gig RAM kit used to sort of cost around $150. It’s now $750 for that same kit.
“It’s about 400 percent more expensive than it was in Q4 of last year.”
Maxwell said it was a similar increase for solid-state-drives.
“So just in those two parts alone and your standard computer, that’s 1000 bucks in extra price rise.”
But the increased price tag did not necessarily mean you were getting the best of the best either.
“You might have been able to buy a laptop last year for say $2000 … probably could have had two terabytes of storage, and 32 gigabytes of RAM.
“Now that same sort of model of laptop might cost two and a half grand or more, but it will actually also come with half the storage.”
Maxwell said it was a huge case of “shrinkflation”.
He said his business bulk bought components last year to try and slow the increases for its customers.
An alert on Compulsion Tech’s website warns customers of increasing prices. Screenshot / Compulsion Tech
Why is it happening?
Chief executive and futurist at Gorilla Technology Paul Spain had been keeping an eye on this for a while.
“What we’re seeing is a situation where there’s constraints on the amount of components available for the general public, and businesses, because there’s just been so much demand for technology to go into the new AI data centers.”
But it was not as simple as a supply and demand problem.
Chief executive at Gorilla Technology Paul Spain. © Jason Hosking
“What’s actually used in the AI data centres is different from what we tend to use in our smartphones and our computers.
“They’ve allocated their production resource to be more focused on what’s needed in those AI data centres than what is needed in our everyday consumer and business devices.”
Spain said one of the biggest producers of tech for consumers, Micron, had withdrawn from the consumer market altogether to focus on production for AI data centres.
Which meant what RAM and SSDs were available for consumers came at a premium – giving the term ‘RAMageddon’ huge traction.
Spain said it was not a short term problem.
“We’re told it could be a number of years before this issue is resolved if the demand on AI data centres keeps up, because it takes quite some time to build or increase capacity at these manufacturing facilities.”
The shortages were moving into other components like gaming and graphics cards.
What should consumers do?
Consumer New Zealand’s product test journalist Nick Gelling said it was time to buy.
Consumer New Zealand’s product test journalist Nick Gelling. Supplied / Consumer NZ
“It’s kind of we’re at the stage now where if you think that you will need to buy some tech in the next year or so you should really consider replacing it now, before the prices rise further.
“We just don’t know where this is going to go.”
He said consumers were already facing a likelihood they would be forced to pay more money for products that were worse than older models.
Maxwell agreed.
“It’s going to be a pretty hard sell if a customer’s been saving up to buy a computer that, say, was three grand in November, and then they’re finally coming around to buy it in January and February, and now that same machine is four or four and a half grand … significantly more expensive with less specs.”
He said consumers were holding off purchasing because of the huge pricing leaps.
“It’s actually having a much wider effect than just the core computer market … you’re not buying a computer anymore, so less keyboards and mice and monitors and accessories to go with are being sold.”
Paul Spain said it would also impact businesses trying to manage the equipment they needed and families who were trying to get the right devices for school and study.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
