BT Warns of Smartphone Price Rises Due to Chip Shortages from AI Boom

The Impact of AI on Chip Supply Chains

BT has warned that the cost of smartphones could rise as technology companies buy up semiconductor chips due to the boom in artificial intelligence, putting pressure on supply chains.

Chip Shortages and Price Increases

The telecoms company’s chief executive, Allison Kirkby, said she was anticipating shortages as tech firms bought large quantities of memory chips to power the datacentres relied on by AI. Kirkby added that price increases would mainly hit smartphone handsets, but could also affect the cost of routers.

The Data Analysis

• Memory chips are essential for almost every modern item of electronics and are also used in other important components such as graphics cards.
• The largest manufacturers of laptops and phones, including Microsoft, Samsung and Dell, have already begun to put up prices in response to the chip shortages and have pulled cheaper models from the market.
• Sony has also hiked the price of its PlayStation 5 consoles, including a $100 (£75) increase in the US, while Nintendo has confirmed a price rise for its Switch 2.

The Impact Analysis

A global investment spree in AI has led to a huge expansion of server farms, enormous banks of computers filled with high-end memory chips. These requirements are not only consuming the world’s current supply of chips, but also production capacity for the coming years, creating shortages and driving up the cost of electronics.

The Prediction

Kirkby said she had not yet seen price increases from premium handset manufacturers, but expected companies such as Apple to pass higher costs on to customers. BT plans to cut costs by a further £700m over the next four years and reported flat full-year earnings and falling revenues.