The end of the cheap laptop, the bargain phone and affordable games consoles may be on the horizon. Not because new models are more hi-tech, but because the cost of computer components has shot up.

Recently, the biggest manufacturers of laptops and phones, including Microsoft, Samsung and Dell, started putting up prices and pulling cheaper models – which is going to make finding budget phones and laptops under £400 much harder.

The root cause is a shortage of memory chips which the tech press has dubbed “RAMageddon”. But it isn’t a conflict or lack of materials causing the shortage, it is the growth of artificial intelligence (AI) and the datacentres the technology relies on.

Memory chips are crucial to just about every modern piece of electronics and are also used in other important components such as graphics cards, creating a knock-on effect.

The analyst firm TrendForce estimates prices for mainstream laptops typically costing about $900 (£667) might increase by as much as 40% in 2026 owing to the memory chip shortage and rising cost of other parts.

Huge investments into AI have led to a huge expansion of server farms, enormous banks of computers filled with large amounts of high-end memory chips. That has sucked up not only the world’s current supply, but its production capacity for several years, creating a dramatic shortage of memory and driving up the cost of other electronics.

If that wasn’t bad enough, the supply of flash storage chips used in SSDs (solid state drives) has been constrained as manufacturers have switched to producing higher-margin memory chips for AI. The supply of lower-end processors has also taken a hit as manufacturers have switched production to high-end chips to meet the demand for AI-related work.

Since the margins on cheaper laptops, phones and other electronics are smaller, they are likely to be the ones facing the largest increases in price. Some analysts say memory accounts for 30% of the cost of a budget smartphone and 23% of an entry-level laptop, which means many budget models may no longer be viable to make.

“This sharp increase removes vendors’ ability to absorb costs, making low-margin entry-level laptops non-viable. Ultimately, we expect the sub-$500 (£370) entry-level PC segment will disappear by 2028,” said Ranjit Atwal, senior director analyst at research firm Gartner.

Rising prices

Some electronics manufacturers saw the chip shortages happening and stockpiled crucial components in an effort to ride out the price increases. Others have handled rising costs by phasing out lower-spec machines, in effect increasing the starting price.

Apple, for instance, increased the starting cost of its popular MacBook Air laptop by £100 while doubling its minimum storage. Microsoft phased out lower-end models of its Surface computers while also adding £170-£200, depending on model, to the starting price. Dell, Lenovo, Framework and other PC manufacturers have also raised prices.

Sony raised the price of the PS5 by £90 on 2 April and is reportedly considering delaying its successor, while Microsoft increased the price of an Xbox last year by £20 to £50 (depending on model). Meta added £30 to the cost of its Quest 3S VR headset on 19 April and Samsung recently upped the price of some smartphone models, such as the 512GB S25 Edge, by £50. Multiple other smartphone manufacturers have warned of price rises this year.

How to avoid RAMageddon

Datacentre builders and AI companies have signed agreements with suppliers to buy chips for at least the next few years, with as little as 60% of the demand for the likely to be met, according to some estimates.

The main memory makers, Samsung, SK Hynix and Micron, are building additional manufacturing capacity but most won’t be up and running until 2027 at the earliest. SK Hynix expects the current shortage to continue until 2030.

That means the price pressure on memory supplies is not going to ease any time soon.

If you plan to replace something it may be wise to do it sooner rather than later.

It is also worth looking at older models that may still be on sale, which were manufactured before the increased memory costs began to bite. However, be aware that they may be artificially increased in price as retailers attempt to take advantage of the situation.

Refurbished electronics are a good, cheaper option that’s better for the planet. Their prices may also increase due to rising residual value, but likely not to the extent of new devices. Or you could try to repair yours rather than replace it.