Memory shakes Apple and Microsoft for the little guys

Earlier this year, Mono Technologies assembled and shipped nearly 1,000 units of its flagship product, a $600 router upgrade kit. Co-founder Tomaž Zaman, who started Mono in 2024, gained early popularity with network enthusiasts, who use the product to speed up their internet connections.

Then came the decline of memory, which has driven up the cost of manufacturing almost every electronic device in the world. Now, Zaman isn’t sure what to do, especially for the roughly 1,300 customers who put down $100 deposits for his next production run.

Mono cost of 8 gigabytes of DRAM type from Micron it went from $35 when it first developed the product to $300 today. At his three-person company, Zaman said he has not decided whether to continue with the second batch and raise the price by at least a third, or introduce a new model with 75% less memory.

“Even a router of our class, it’s ridiculously expensive when you get it at $900, $1,000,” Zaman told CNBC in an interview. “But we have to, even if we reduce it to the lowest level.”

Zaman’s experience is becoming common across the consumer electronics market, from iconic devices like iPads and Xbox consoles, to niche products that haven’t gotten past the testing phase. Costs are increasing due to global inflation caused by the rise of artificial intelligence, which has resulted in artificial intelligence sheet manufacturers being the same. Nvidia absorbing ever-increasing amounts of memory in their processors and advanced systems.

But while the tech giants like an apple again Microsoftboth of which announced price increases this week, have a heavy cash cushion, purchasing power and customers numbering in the millions or billions, the broadest segment of businesses facing the most difficult conditions. Most electronics companies have little margin to spare and cannot confidently raise prices in an economy already facing inflationary pressures.

GoProthe struggling camera maker, warned this month that it may go out of business after memory costs rose between 80% and 115% at the end of the first quarter. And speaker manufacturer assignments Sonos are down 23% this year as memory prices moderate.

Nabila Popal, an analyst at IDC, described the current situation as “an absolute problem” for companies such as small Android phone manufacturers or “local players that make devices under $100.”

“They won’t be able to get memory because the memory providers only answer the calls of the big players,” said Popal.

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

In its quarterly earnings report on Wednesday, Micron said its revenue more than quadrupled in the latest period, and its gross margin doubled to about 85% from 39% last year. Micron’s shares jumped 16% in the results and are now up nearly 800% over the past year, joining rivals SK Hynix and Samsung.

Micron said the average selling price of its dynamic RAM in the third quarter rose more than 260% from a year ago. Sumit Sadana, Micron’s chief business officer, said in an interview that the company has reached long-term supply agreements for consumer-focused smartphone and PC companies.

“We spend a lot of time thinking about how we manage the business and the supply and distribution of these rare figures across customers and categories and markets and geographies to make sure we’re thoughtful, responsible and fair in our approach,” Sadana said.

A day after Micron’s results, Apple raised the prices of a variety of iPads and Macs, in a statement that the company had “never seen a component price rise so much, this quickly.” Chief Executive Officer Tim Cook, in a Wall Street Journal interview published last week, said an increase is coming, calling the memory situation “a hundred-year flood.”

Hours after Apple’s announcement, Microsoft said the price of the Xbox Series S would increase by $100 to around $500. The company said in a blog post that consoles are often sold for less than they cost to make.

“Console storage and memory prices have increased more than 2.5x and we expect to double by the fall of 2027,” Microsoft said in the post. “The entire consumer electronics industry is struggling with existing components, but the effects are particularly severe for consoles.”

Wall Street has its worries, as both stocks fell this week and have underperformed the broader indexes this year. But risk levels are highest for companies that do not have close relationships with component suppliers and are subject to constant cost changes and availability fluctuations.

Industries from telecommunications and medical devices to retailers are concerned about the price hike, according to a letter from lobbyists sent to the Commerce Department earlier this month.

GoPro said in its warning to investors that it heard from memory suppliers in April about a “planned reduction in production of memory used in its products,” leading to a drop in projected sales. The company did not respond to a request for comment.

Elaine Ferguson, founder of W5 Technologies, wrestles with how to deal with the crippling RAM costs and lead times of the communications equipment her company makes for defense contractors.

Earlier this year, W5 placed an order for a server from a major manufacturer to include in a satellite communications simulator that the company plans to deliver in May. Ferguson said the price when he ordered it was $8,839, up from $5,373 in 2020.

Since that purchase, the price has doubled.

“We just ordered another one to sell,” Ferguson said. “Now it’s under $15,000 and the lead time is whenever we get it, we’re lucky to get it.”

Instead of receiving it in May, Ferguson said he doesn’t expect it until August. Ferguson said W5 offered a security contract client a used server currently being tested and a fee to drive its team to install it.

Meanwhile, at Mono Technologies, Zaman said he is working on the development and qualification of the company’s next model, although he is not sure when it will hit the market. He is also raising money, hoping to find investors to support a new and larger production plan.

“Production is very expensive,” he said.

WATCH: The AI ​​boom makes your technology more expensive