Why the cost of a new laptop might go up this year

The artificial intelligence boom means that your next PC or smartphone could be more expensive.

Companies are reallocating manufacturing capacity from the DRAM and NAND memory chips used in consumer electronics toward the type of memory used to power AI data centers, according to a December report from International Data Corporation, a market research company. 

PC prices could go up by 4% to 6% and smartphone prices could rise between 3% to 5% based on IDC’s “moderate downside” forecast, while more pessimistic projections from the firm indicate that both PC and smartphone prices could go up by 6% to 8%. 

“There are only a handful of memory producers, and those memory producers are allocating more of the memory that they produce to AI data centers,” said Tom Mainelli, head of the device and consumer research group at IDC. 

These price increases could cause smaller vendors to go out of business, force businesses to downgrade the quality of their computers and deter both companies and consumers from buying new PCs, according to experts that Marketplace spoke to. 

We haven’t seen consumer prices rise just yet, but the major PC manufacturers have warned that they’re likely, Mainelli said. 

During an earnings call late last year, Dell Technologies Chief Operating Officer Jeff Clarke said costs are going up for all products and that he expects this trend to eventually result in higher consumer prices. “I don’t see how this will certainly not make its way into the customer base. We’ll do everything we can to mitigate that,” he said.

Hewlett Packard CEO Enrique Lores said the company has a memory stockpile, which he expects will “mitigate the impact of” cost increases, but by May, rising memory costs could force the company to reduce memory configurations and raise prices. 

A ding to small companies 

PCs have relatively slim margins, so if chip prices rise, vendors don’t have a lot of room to absorb those prices, Mainelli said. 

The larger PC vendors like Dell, HP, Lenovo and Apple will have better economies of scale and be in a better position to negotiate and pay cheaper prices than mom-and-pop companies, he explained. 

“Large-device vendors are likely to get larger. We’ll probably see some small and regional players really struggle and potentially leave the market,” Mainelli said. 

You and your company may hold onto your current PC 

While consumers have seen the price of basic necessities like groceries go up, PC prices have actually gone down over time. Devices like computers and smart phone assistants have declined 78% over the past 20 years, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index. 

If vendors want to keep prices stable, they may opt for cheaper screens, less storage and less powerful processors, Mainelli said. 

Meanwhile, companies (which mostly use PCs) and consumers may stretch out the life cycle of their computers if prices go up, Mainelli said.

When the pandemic struck, people received government stimulus checks and were spending less money on activities like travel and eating out, so they purchased new computers. Those PCs are now five or six years old, which means consumers should be buying new ones, but rising prices could deter them, Mainelli said. 

While smartphones are also expected to go up in price, people tend to pay them in installments, so the price is spread out over time and is less notable, Mainelli said. 

A modern-day Gold rush?

This isn’t the first time chipmakers and PC vendors have encountered supply constraints. 

“The memory business has been one of booms and busts. There are only a handful of companies that have the capital to invest,” Mainelli said. 

The cycle consists of companies reaching a point where they’re producing more memory than technology industry can use, then entering a boom cycle where new products come and require more memory, Mainelli said. 

But with the AI boom, there seems to be an almost “insatiable appetite” for more memory this time around — especially more expensive memory, Mainelli said. This could potentially be a problem going into 2027, he said. 

Memory vendors are familiar with the cyclical nature of the business, so they’re trying not to overinvest, but they also want to take advantage of demand “in what may be a once-in-a-lifetime Gold Rush,” said Avi Greengart, president and lead analyst at the market research firm Techsponential.

The high-bandwidth memory required for AI centers is more profitable compared to the memory required for laptops and smartphones, Greengart, said. 

“This is a temporary supply shock, but it's real, and it's hard to know how long it will last,” Greengart said.