A global shortage of NAND Flash memory is currently squeezing the hardware industry. According to the latest monthly market update from TrendForce, surging artificial intelligence demand has caused a supply deficit of 4% to 5% throughout this year. However, analysts predict this tight market will finally ease up in the second half of next year.
Chip suppliers are relying almost entirely on hardware upgrades rather than building new factories. Companies in South Korea, the United States, and Japan are focusing on upgrading their current manufacturing lines. This leaves space constraints tight. At the same time, manufacturers in China are rapidly building out their capacity. Local Chinese suppliers are expected to control nearly 19% of global flash memory output very soon.
Enterprise servers are consuming a massive portion of the available chip supply. Shipments of new server platforms from Intel and AMD are accelerating, pushing total server growth up by 17% this year. The rise of agentic artificial intelligence applications is keeping this demand high. Suppliers are also locking in long term supply agreements to keep parts moving. This steady demand is expected to keep system production running smoothly well into next year.
The story is very different for personal gadgets. Smartphone production is projected to plunge by 15% to 20% this year. High prices are scaring away buyers. Laptop shipments are also taking a hit with an expected 10% decline. Expensive processors and memory parts are forcing computer brands to keep retail prices high, which kills consumer interest.
Right now, server orders make up over 40% of all flash memory demand. Phones and laptops account for another 40%. Because consumer buying is so weak, memory makers are keeping their own warehouse inventories low. TrendForce estimates this delicate balance will result in another year of tight supply. Things should finally normalize during the final 6 months of next year as manufacturing output catches up.
