Memory crunch shaking Apple and Microsoft existential for small guys

Earlier this year, Mono Technologies It assembled and shipped nearly 1,000 units of its flagship product, a $600 router development kit. Co-founder Tomaz Zaman, who founded Mono in 2024, gained early traction among networking enthusiasts who used the product to speed up their internet connections.

Then came the memory crisis, which increased the cost of producing nearly every electronic device on the planet. Now Zaman isn’t sure what to do, especially with 1,300 potential customers putting down $100 deposits for the next production.

What Mono costs for an 8 gigabyte type of DRAM Micron When we first developed the product, it went from $35 to $300 today. Zaman said his three-person company has not decided whether to go for a second batch and raise the price by at least a third or introduce a new model with 75% less memory.

“Even if it’s a router in our class, if you make $900 to $1,000, that’s bad value,” Zaman said in an interview with CNBC. “But we have to do it, or we will minimize it.”

Zaman’s experience is prevalent in the consumer electronics market, from iconic devices like iPads and Xbox consoles to niche products that have yet to make it past the testing phase. Costs are rising due to global supply shortages caused by the AI ​​boom, which is prompting AI chip manufacturers to Nvidia consuming increasing amounts of memory for their processors and advanced systems.

But while tech giants love it Apple And MicrosoftA much broader swath of businesses face potentially serious trouble, as both announced price increases this week have massive cash backlogs, supply chain leverage and customers numbering in the millions or billions. Most consumer electronics companies have little margin to spare and cannot safely raise prices in an economy already grappling with inflationary pressures.

goproCompetitive manufacturer of action cameras, warned It could go bankrupt this month after memory costs rose between 80% and 115% by the end of the first quarter. And the speaker maker’s shares sonos down 23% this year due to pressure on memory prices margins.

Nabila Popal, an analyst at IDC, called the current situation an “absolute existential crisis” for companies such as smaller Android phone makers or “local players producing sub-$100 devices.”

“They won’t be able to get the memory because memory suppliers are only responding to calls from big players,” Popal said.

The other side of the story was also on display this week.

Quarterly In its earnings report on Wednesday, Micron said its revenue had more than quadrupled recently and its gross margin nearly doubled to nearly 85%, from 39% a year earlier. Micron shares were up 16% on the results and are now up nearly 800% in the past year, joining rivals SK Hynix and Samsung.

A day after Micron’s results, Apple raised prices on a wide range of iPads and Macs, issuing a statement saying the company had “never seen component price increases this fast, this fast.” CEO Tim Cook in the Wall Street Journal report He described the memory situation as a “hundred-year flood,” saying increases were coming in a report published last week.

A few hours after Apple’s announcement, Microsoft said the price of the Xbox Series S would increase by $100, to around $500. The company said: blog post Consoles are often sold for less than their production cost.

“Console storage and memory prices have increased more than 2.5x, and we expect them to double by fall 2027,” Microsoft said in the post. “The entire consumer electronics industry is struggling with the current component crisis, but the effects are particularly hard on consoles.”

Wall Street has concerns as both stocks fell this week and have underperformed broad indexes this year. But panic levels are much higher in companies that do not have close ties to component suppliers and are subject to constant cost changes and availability fluctuations.

Various industries, from telecommunications and medical devices to retailers anxious about price increases, according to a letter lobbyists sent to the Commerce Department earlier this month.

In its warning to investors, GoPro said it received information from memory suppliers in April about “planned reductions in the production of memory used in its products,” resulting in lower projected sales volumes. The company did not respond to a request for comment.

Elaine Ferguson, co-founder of W5 Technologies, is grappling with how to deal with crippling RAM costs and lead times for the communications equipment her company produces for defense contractors.

Earlier this year, W5 placed an order from a major manufacturer for a server to be included in its satellite communications simulator, which the company plans to deliver in May. Ferguson said when he placed the order, the price had risen from $5,373 in 2020 to $8,839.

The price has almost doubled since this purchase.

“We ordered a new one for another sale,” Ferguson said. “It’s just under $15,000 right now, and the lead time is, we’re lucky to get it whenever we can.”

Instead of receiving the money in May, Ferguson said he is no longer waiting until August. Ferguson said W5 offered its defense contractor customer a used server currently being tested and payment to fly its team in for installation.

Meanwhile, at Mono Technologies, Zaman said the company is working on the development and qualification of its next model but is unsure when that model will hit the market. It is also fundraising, hoping to find investors to support a new, larger production line.

“Product manufacturing is very expensive,” he said.

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