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News: Memflation has gained attention because rising memory chip prices are increasing the prices of electronic goods and adding pressure on retail inflation.
About Memflation
- Memflation (a combination of “memory” and “inflation”) refers to the rapid and structural rise in the prices of semiconductor memory chips, such as DRAM (Dynamic Random-Access Memory) and NAND flash memory.
- Coined by: Memflation was coined by market research firm Gartner.
- The Root Cause:
- AI Infrastructure Boom: Rapid growth of AI systems, data centres, and high-performance computing has sharply increased demand for advanced memory chips.
- Shift in Manufacturing Capacity: Semiconductor companies are diverting production capacity from conventional memory chips to high-margin AI-related memory products.
- Supply Shortage of Memory Chips: Reduced production of DRAM and NAND memory chips has created shortages in consumer electronics markets.
- Slow Capacity Expansion: Semiconductor manufacturing expansion is costly and time-consuming, delaying the restoration of adequate supply.
- Global Impact:
- Higher Hardware Costs: Rising memory prices are increasing the cost of laptops, servers, and other hardware products.
- Supply Chain Disruptions: Semiconductor shortages are causing supply chain disruptions and shipment delays.
- Delayed Technology Demand: Industry experts warn that non-AI technology demand may remain weak until around 2028.
- Impact on India:
- Costlier Electronic Devices: Rising memory chip prices are increasing the prices of smartphones and other electronic goods.
- Pressure on Smartphone Segment: Supply shortages are affecting budget smartphone segments and raising manufacturing costs.
- Import Dependence Risk: India’s dependence on imported semiconductor components increases its vulnerability to global disruptions.
- Challenge to Manufacturing Goals: Persistent shortages may affect goals under Make in India, the Production Linked Incentive (PLI) Scheme, and the India Semiconductor Mission (ISM).
- Higher Inflation Risk: Continued increases in electronics prices may add further pressure on retail inflation in India.
