How the memory crunch may already be creating “chipflation”

For the average consumer, implications of the memory shortage may already be felt in the form of “chipflation,” or inflation of the cost of memory for chips in common electronics — from phones and computers to smartwatches and TVs. In many cases, manufacturers pass through these elevated costs in the form of raised prices.

Data suggests that while some of these costs have already been passed through to consumers by consumer technology companies, other costs are still on the rise. “The Consumer Price Index (CPI) for software and accessories and Producer Price Index (PPI) for storage devices have both risen 23% since the end of 2024, with the import price index for computers, peripherals and parts up 37%,” noted Abiel Reinhart, an economist at J.P. Morgan.

There are wider knock-on effects for inflation as well. “Every 10% increase in hardware costs is estimated to raise core CPI and PCE inflation by around 0.1%, with a 0.2–0.4% lift to inflation attributed to the shock in memory prices,” said Reinhart.

How the memory chip shortage affects cybersecurity and critical infrastructure

Beyond higher memory costs and more upside risks to inflation, the memory shortage also places pressure on existing vulnerabilities in cybersecurity.

“Major cloud providers, or hyperscalers, are consuming most of the available semiconductors, leaving security hardware manufacturers, those making firewalls, intrusion detection systems and secure routers struggling with limited supply and rising costs,” said Jahangir Aziz, co-head of Economics Research at J.P. Morgan. “This bottleneck is delaying the deployment of critical containment mechanisms and slowing upgrade cycles, especially for organizations that depend on on-premises hardware for their security controls.”

In an analysis comparing the relative vulnerabilities of information technology (IT) and operational technology (OT) to cyberattack, Aziz highlighted OT’s heavy reliance on physical hardware and segmentation architectures, which are highly impacted by the memory supply crunch. “In the event of a widespread cyberattack, it is highly unlikely that demand could be met within six to 12 months, and prices would almost certainly soar well above current levels,” Aziz said. “Given current supply constraints, a nationwide cyberattack in the U.S. would unleash an estimated $145 billion in additional chip demand on a market already operating at full capacity.”

While these are speculative scenarios, they underscore the importance memory chips have in maintaining existing infrastructure — an issue that could be addressed through global coordination and appropriate oversight.

“Regulation is essential to ensure firms invest in resilience beyond market incentives and account for AI’s lifecycle costs, including cybersecurity risks,” said Aziz. “Measures such as mandatory certification, expanded liability, cyber-risk insurance and targeted levies on high-risk AI can help. But without global coordination, jurisdictions that neglect regulation may gain unfair advantages.”