Fridges, washing machines, air conditioners, electric batteries, smartphones, laptops, televisions, earphones, and… pen-drives — over the last few months, each of these items have seen their prices rise from one month to the next, to varying degrees, all because of one minuscule component that is common to them all: memory chips. Together, these nine items make up just 1% of India’s entire Consumer Price Index (CPI) basket of goods and services. But they are increasingly exerting upward pressure on headline retail inflation and may continue to do so for years.
The global investment boom in artificial intelligence (AI) has led to key chip suppliers such as TSMC, Samsung, and SK Hynix experiencing unprecedented growth over the last year. What it has also done is pushed these manufacturers to make 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. And electronics manufacturers are now passing on these higher chip prices to consumers so much so that it’s even reflecting in the country’s headline retail inflation data.
Memory inflation
In May, the price index for laptops, computers, and tablets was up month-on-month for the seventh month in a row; for mobiles, it was six months; for fridges, washing machines, and TVs, it was four months; and three months in a row for ACs, electric batteries, and headphones and earphones.
But the largest and longest sequential price rise has been for pen drives and hard disks. Pure memory storage devices, the price index of this category has risen sequentially in 15 of the last 16 months — the period covered by the new CPI series with 2023-24 as the base year.
The largest and longest sequential price rise has been for pen drives and hard disks.
The inflation impact of the price increases announced by phone and other electronic goods manufacturers has not been very high. But month-on-month increases in the price indices of refrigerators, washing machines, ACs, phones, PCs, and TVs are either already at 1% or approaching it; the figure for pen-drives and hard disks is nearing 3%.
Policymakers across the world are already taking note of this new source of inflation. Last month, economists from the Federal Reserve — the world’s most important central bank — wrote of the “unprecedented contribution” to core inflation by the rapid price increases seen in the “Computer Software and Accessories” category of the US’s Personal Consumption Expenditures price index.
Core inflation measures the change in prices of non-food, non-fuel items, whose prices can be volatile.
A structural shortage
In India, the contribution to inflation of the nine items mentioned above has been rather small partially because they only make up 1% of the entire CPI basket; compare that with the three TOP vegetables (tomato, onion, potato) that account for nearly 2% of the CPI. Moreover, electronics manufacturers don’t pass on higher input prices as quickly and substantially as farmers. Why? Because manufacturers already have a substantial profit margin built into the final price. However, the price increases announced so far are already hurting sales.
According to global technology market research firm Counterpoint Research, global smartphone shipments are expected to shrink 14% in 2026 to 1.08 billion units — the lowest since 2013 — with low-end phones getting hit the hardest.
“LPDDR4 (most widely used memory in mobile devices) supply is expected to decline more than 40% in 2026 as fabs reallocate capacity toward AI-driven HBM (High Bandwidth Memory) and server DRAM, making it increasingly uneconomical to supply entry-level products,” Counterpoint Research said on June 1. “Certain sub-$150 price tiers face effective permanent ejection from the market.”
Warnings from analysts at the financial services group Nomura are even more grim. In a June 7 note, they said that “demand will overwhelm supply for at least 3-5 years” and the shortage is structural as well as “self-reinforcing — buyers are locking in multi-year deals and pre-funding capacity”.
The India problem
As it turns out, not all buyers may be locking in long-term deals.
Sumit Sadana, executive vice-president and chief business officer at Micron, told a media outlet last month that the US chip manufacturer’s Indian customers were not grasping the gravity of the situation. Not only did Micron need “reliable signals” from Indian chip customers about their long-term demand, it needed a “commitment” to such demand in the current circumstances. However, this commitment is often missing from Indian buyers.
The prospects for consumer electronics prices — and retail inflation — for Indians are not bright, then. The Reserve Bank of India currently expects CPI inflation to average 5.9% in the final three months of 2026, only marginally lower than the upper bound of its mandated target range of 2-6%. By then, the contribution to inflation from these electronics goods may be much higher. And if the supply shortage is as acute as experts warn, 2026 will only be the start of the problem.
Nine items have seen their prices rise from one month to the next because of one minuscule component common to them all: memory chips. Photo: Unsplash 
The largest and longest sequential price rise has been for pen drives and hard disks.
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