Editor’s Note: This is the second installment in AJP’s Chipflation series, examining how explosive AI demand and South Korea’s dominance in memory chips are reshaping the global technology supply chain — from Silicon Valley data centers to everyday consumer electronics.
SEOUL, February 27 (AJP) - Chipflation is, at its core, a story about economic rents.
When demand concentrates on a scarce, indispensable input, the suppliers of that input capture returns well above competitive norms.
In the current AI cycle, high-bandwidth memory has become precisely such a bottleneck. The result is a redistribution of profits along the semiconductor value chain — and South Korea sits at the point of rent capture.
The latest financial disclosures from Dell Technologies illustrate the scale. The company reported a $43 billion AI server backlog, more than double the previous quarter. Nvidia, meanwhile, generated $62.3 billion in quarterly data center revenue.
The architecture is increasingly clear: Nvidia designs the AI processors, Dell assembles the servers, and Korean firms supply the high-density memory modules without which those systems cannot function.
In such an ecosystem, pricing power migrates upstream.
Rent extraction as export engine
The macroeconomic implications are visible in South Korea’s trade data. Customs figures for the first 20 days of February show semiconductor exports surging 134.2 percent year-on-year to $15.1 billion.
This surge is not simply a volume expansion. It reflects rent extraction driven by scarcity.
HBM3E and HBM4 modules now command prices six to ten times higher than standard DDR5 memory. Enterprise SSD prices have risen nearly 40 percent over the past six months. These are not incremental adjustments; they are structural repricings of critical components.
Unlike past memory cycles — dominated by volatile consumer PC demand — today’s AI infrastructure buildout provides longer-term visibility. Massive pre-orders from hyperscalers and enterprise server vendors create forward revenue certainty. In some AI memory segments, industry estimates suggest operating margins exceeding 40 percent.
For Samsung Electronics and SK hynix, this marks a transformation from commodity suppliers subject to cyclical oversupply to rent-earning bottleneck providers.
At the national level, the impact is profound. With automobiles and steel facing softer global demand, semiconductors have become the principal engine of export growth. The sector now accounts for a record share of South Korea’s trade surplus.
Yet rent concentration carries risk. When one sector disproportionately underwrites national growth, exposure to investment cycles intensifies. Should AI capital expenditure moderate, the same rent dynamics currently lifting the economy could reverse.
The downstream squeeze
Economic rents do not vanish. They are financed somewhere.
In this case, downstream device manufacturers — and eventually consumers — bear the cost.
A new report from Gartner projects that combined DRAM and SSD prices will surge 130 percent by the end of 2026. As memory becomes a larger share of bill-of-materials costs, PC and smartphone makers must either absorb margin compression or raise retail prices.
Most are choosing the latter.
Gartner forecasts that average selling prices will rise 17 percent for PCs and 13 percent for smartphones this year. Shipments are projected to decline 10.4 percent and 8.4 percent, respectively.
"The shipments of PCs and smartphones this year are projected to hit their lowest levels in over a decade," said Ranjit Atwal, Senior Director Analyst at Gartner. "Price increases are narrowing the range of products available to consumers and forcing them to extend the life of existing devices, fundamentally shifting upgrade cycles."
In effect, AI servers — backed by corporate capital budgets — are crowding out consumer devices in the competition for scarce high-performance memory.
The pressure is most acute at the lower end of the market.
Memory accounted for roughly 16 percent of a PC’s production cost in 2025. Gartner expects that share to rise to 23 percent by 2026. For manufacturers operating on thin margins, absorbing such increases is unsustainable.
The sub-$500 laptop segment, Gartner warns, could largely disappear by 2028 as vendors prioritize profitability over shipment volume.
"PC manufacturers must prioritize maintaining profitability over shipment volume, instead of sacrificing margins to capture price-sensitive demand," said Atwal. He added that companies "need to take proactive measures before the full impact of component price hikes hits in the second quarter."
The likely outcome is a prolonged “device freeze.” Consumers extend replacement cycles. Entry-level offerings narrow. Technology diffusion slows among price-sensitive buyers.
Latest cycle differs from prior semiconductor booms not merely in scale but in structure.
AI infrastructure represents capital expenditure by hyperscalers and corporations capable of paying premium prices for performance gains. Consumer electronics represent discretionary spending constrained by household budgets.
When supply tightens, the higher-value application captures the rent.
For Korea, the immediate effect is positive. The country supplies one of the most critical inputs in the global AI expansion. Memory has become the strategic choke point — and choke points generate rents.
But history chart in semiconductors shows, scarcity is self-correcting. Today’s rent concentration finances tomorrow’s capacity — and with it, eventual oversupply.
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