From Washington: In a development that will reverberate across the Pacific, the global technology research firm Gartner has issued one of its starkest warnings yet for the consumer technology sector. Soaring memory costs are projected to drive worldwide PC shipments to decline 10.4% and smartphone shipments to drop 8.4% in 2026, compared to 2025 levels. The scale of that contraction should give pause to anyone in government, business, or households who assumed the post-pandemic technology supercycle had set a reliable new floor.
The numbers behind this forecast are striking in their severity. Gartner estimates a 130% surge in combined DRAM and solid-state drive (SSD) prices by the end of 2026, which will increase PC prices by 17% and smartphone prices by 13%, compared to 2025 levels. For Australian households already contending with stubborn cost-of-living pressures, that kind of price shock on everyday technology is not trivial. It is the sort of pass-through inflation that rarely shows up in headline CPI data fast enough to inform monetary policy, but is felt acutely at the checkout.
Gartner senior director analyst Ranjit Atwal put the situation plainly. "This is the steepest contraction in device shipments witnessed in over a decade," he said, adding that "higher prices will narrow the range of devices available, prompting buyers to hold on to devices for longer, fundamentally altering upgrade cycles." The behavioural shift is already embedded in Gartner's modelling: rising costs are expected to increase PC lifetime by 15% for business buyers and 20% for consumers by the end of 2026.
The structural cause of this crunch sits firmly in the AI investment boom. The voracious demand for high-bandwidth memory (HBM) from hyperscalers such as Microsoft, Google, Meta, and Amazon has forced the three biggest memory manufacturers, Samsung Electronics, SK Hynix, and Micron Technology, to pivot their limited cleanroom space and capital expenditure towards higher-margin enterprise-grade components. Every wafer allocated to an HBM stack for an Nvidia GPU is a wafer denied to the LPDDR5X module of a mid-range smartphone or the SSD of a consumer laptop. This is, as the International Data Corporation (IDC) described it, not merely a cyclical mismatch but potentially a permanent, strategic reallocation of global silicon wafer capacity.
The downstream consequences extend well beyond unit volumes. Memory costs are forecast to account for 23% of a PC's total bill of materials in 2026, up from 16% in 2025. This increase limits vendors' ability to absorb additional costs, making low-margin entry-level laptops increasingly unviable. Gartner expects the sub-$500 PC segment to disappear by 2028. That is not a minor market segment: it is where price-sensitive students, small businesses, and low-income households typically shop. Its effective extinction would represent a genuine narrowing of digital access.
From a centre-right perspective, the instinct is to read this as markets correcting for the spectacular capital misallocation of the post-pandemic device boom, with AI infrastructure investment now revealing itself as the dominant commercial priority for the world's largest technology firms. That reading has merit. Private capital is flowing rationally toward the highest returns, and governments have no obvious lever to redirect chipmaker priorities in the short term without the kind of heavy-handed industrial policy that tends to produce distortions of its own.
Yet the fairest counterargument deserves proper weight. Critics of unchecked AI infrastructure spending point out that this signals the end of an era of cheap, abundant memory and storage, at least in the medium term, and that 2026 is shaping up to be a year in which technology becomes more expensive, driven by supply constraints rather than demand growth. That inversion, where AI enriches enterprise and immiserates the consumer, is a legitimate policy concern. Progressive voices arguing for digital equity programmes or targeted subsidies for essential computing access are not wrong to raise it, even if the mechanism of government intervention remains contested.
The pressure on vendors is already translating into concrete market moves. Lenovo has warned partners that pricing for some commercial client devices will change in March due to the ongoing global memory chip shortage, with certain orders potentially needing to be repriced depending on shipment timing. PC makers Lenovo and Dell Technologies have warned that they would likely increase their device prices in 2026, after current memory procurement contracts expire and they have to source more inventory. Atwal has advised the industry bluntly: PC vendors should be prepared to accept a unit volume decline to sustain profitability, rather than eroding margins to chase price-sensitive buyers, and "face a critical window in the first half of 2026 to optimize pricing and protect margins before component inflation compresses profitability from the second quarter onwards."
For Australian businesses and IT procurement teams, the message is similarly direct. Organisations that deferred hardware refresh cycles through 2024 and 2025, betting on continued price stability, now face the prospect of renewing those fleets at materially higher cost. Gartner forecasts that the average PC lifespan will increase by about 15% for enterprise buyers and 20% for consumers, as organisations and individuals delay replacements in response to higher prices. While this could soften short-term demand for new hardware, it may also create security and management challenges for IT teams forced to support ageing fleets of devices.
There is also the question of what this memory squeeze does to Australia's own ambitions around AI adoption. Higher prices for AI-enabled PCs are projected to delay their anticipated 50% market penetration until 2028. Organisations banking on a rapid rollout of AI-capable endpoints to drive productivity gains may need to revise those timelines. The AI revolution, it turns out, is constrained not only by software and skills, but by the very silicon it runs on.
What emerges from the Gartner forecast is not a reason for panic, but a prompt for realistic planning. The severity and duration of the shortage will be determined by how quickly production capacity can expand and how effectively demand rebalances across segments. New fabrication plants are in development across the United States, Japan, and Singapore, but the lead times involved mean meaningful supply relief is unlikely before 2027 or 2028. In the interim, consumers and businesses alike face a straightforward trade-off: pay more, wait longer, or make do with what they have. That is not a comfortable set of choices, but it is an honest one. The technology sector, long accustomed to deflation, is learning what every other commodity industry already knows: supply chains have politics, and AI has become the world's most demanding customer.