Since AI tools became popular, there has been a crisis in the electronics industry – a shortage of memory chips. You see, data centres need memory to run AI models on their servers, and AI companies are willing to spend big sums on buying this memory. But the memory suppliers can’t meet this demand. And as economics tells us – more demand and less supply leads to higher prices. This has caused prices of RAM and NAND to skyrocket in recent months – something that has made the price of your smartphone go up too. Now, Microsoft has confirmed that your Xbox just got more expensive, things may not get better anytime soon.
On Thursday, Microsoft became the latest company to hike prices due to high memory costs. The tech giant raised the prices of its Xbox consoles just hours after Apple announced that it was raising prices for iPads and MacBooks.
From August 1, The Xbox Series S 512GB will cost $499.99 (roughly Rs 47,000), up from $399.99 (roughly Rs 37,600), while the 1TB version will set you back $599.99 (roughly Rs 56,400), up from $449.99 (roughly Rs 42,300).
The Xbox Series X is also getting costlier. The 1TB variant is now priced at $800 (roughly Rs 75,700), up from $649 (roughly Rs 61,400). The 1TB Digital model’s price has increased from $599 (roughly Rs 56,700) to $750 (roughly Rs 71,000). The Xbox Series X 2TB has been discontinued.
According to the company, storage and memory prices have risen by more than 2.5 times, and they could double again by 2027. Xbox says the gaming industry has been hit particularly hard by the ongoing component shortage.
Other companies including OnePlus, Realme, and Nothing, have also raised smartphone prices in recent weeks.
Memory prices to only increase?
But in its announcement, Microsoft seems to have given a hint to consumers that things are unlikely to get better. The company claimed that memory prices had already increased by over two times, and we may see the costs double again in just over a year. Microsoft’s blog post read, “Unfortunately, console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027.”
That is, according to Microsoft, not only have prices for memory and storage increased by over two and a half times, things may only get worse from here.
Microsoft’s post comes at a time when Micron, one of the three major memory suppliers, announced that it had signed 16 agreements for high-price memory that span the next five years.
Micron CEO Sanjay Mehrotra hinted that the memory situation was unlikely to get better in the short-term. He said, “Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand.”
Meanwhile, Apple CEO Tim Cook previously stated that memory suppliers would need to increase production for consumer devices to potentially ease the current situation. He said, “We definitely need memory pricing and supply to return to reasonable levels for consumer products. That’s the bottom line.”
Keep in mind that these agreements come with floor prices that have “a very robust gross margin for Micron.” Micron is currently valued at over $1.3 trillion. Samsung and SK Hynix – the other two large memory suppliers, also have similar market caps.
SK Hynix in particular dominates the high-bandwidth memory space – crucial for AI – with a 61 per cent market share.
Previously a report from Nikkei Asia stated that memory suppliers will not be able to increase capacity to fulfil demand till at least 2027.
