‘Chipflation’: Electronics see years of price hikes replicated in 6 months 

Image generated by AI

Take mobile handsets. Compared to a 4% rise from January 2026 to July 2026, the same period in 2025 had seen its CPI price index decline by 0.7%. Or take air conditioners. While they normally do see higher prices in the summer, the extent of the increase this year has been 4.8% compared to 1.1% between January-July 2025.

AI-generated chart with data from Ministry of Statistics and Programme Implementation

Go back further and 2026’s price hikes become even more striking.

Since January 2026, the CPI index of TVs is up 3.5%. If one counts back from December 2025, matching this magnitude of increase took 54 months, or four-and-a-half years. The numbers are similarly large for other consumer electronics: 46 for ACs, 45 for fridges, 41 for mobile phones, 32 for washing machines, and 31 for computers and laptops.

The increase in price indices over 2026 of the aforementioned six consumer electronics is calculated as per the new CPI series which has 2024 as the base year. For the period prior to 2026, price index changes are computed using the old CPI series which had 2012 as the base year. Only consumer electronic items present in both the old and new CPI baskets have been compared.

‘Chipflation’

Back in June, analysts at American investment bank Morgan Stanley had coined the term ‘chipflation’ to describe how “AI’s appetite for memory chips is boosting the cost of everything from data centers to smartphones, with consequences that may reach far beyond the tech industry.”

The global AI boom has led to key chipmakers such as TSMC, Samsung, and SK Hynix making the more in-demand and advanced chips used in data centres sprouting up all over the world. 

What is being sacrificed are DRAM (Dynamic Random Access Memory) and other chips used in everyday electronics goods such as refrigerators, washing machines, ACs, smartphones, laptops, TVs, and earphones.

The result of the supply shortage of the chips essential to consumer electronics is a massive rise in their prices, with JPMorgan Global Research estimating DRAM prices will have risen more than 400% from the start of 2024 to the end of 2026. This is in stark contrast to the Moore’s Law driven cost reduction seen over the second half of the 20th century and the first 20 or so years of the 21st century: DRAM prices fell 90% every five years over this period.

“New memory capacity takes years to build, qualify and ramp up. Supply relief is a process, not a switch. And that creates a two-tier market. Large AI and cloud buyers can sign long-term agreements, prepay and secure priority access. Traditional buyers, including PC makers, smartphone makers and industrial hardware companies, must compete for what remains,” Shawn Kim, Head of Morgan Stanley’s Europe and Asia Technology Team, said in a podcast in June.

Eyes on promotions

According to Kim, the shortfall in memory chips in 2027 is equivalent to what is needed to make 134 million phones. Already, in the April-June quarter, global smartphone exports were down 11% – their second-lowest level since 2013 – as per Counterpoint Research.

In India, smartphone sales fell for three weeks in a row after online promotional events in July.

“…rising device prices are making consumers increasingly value-conscious and more dependent on promotional offers,” said Prachir Singh, Senior Analyst at Counterpoint Research, who added that this trend has become more visible over the past few months.

India, of course, is not the only country facing ‘chipflation’.

In the US, for instance, the Producer Price Index for ‘electronic components and accessories’ in July was up 28% from a year ago.

“AI has turned memory from the cheapest part of the digital economy into one of its most contested resources. These tiny chips most people never think of may now decide what gets built or delayed, and how much we all end up paying,” noted Morgan Stanley’s Kim.