AI Memory Crunch Hits Broadband Rollouts • The Register

The AI boom is creating unexpected ripple effects far beyond datacenters and high-end workstations, with broadband infrastructure now feeling the squeeze. A new analysis from Counterpoint Research reveals that memory prices for routers and set-top boxes have skyrocketed nearly sevenfold over the past year, creating a perfect storm of supply constraints and rising costs that could impact how quickly telcos can deploy new broadband services.

The Memory Price Explosion

According to Counterpoint's findings, the cost of memory used in consumer hardware has surged more than 600 percent in just twelve months. This dramatic increase isn't uniform across all device categories - while smartphone memory prices jumped approximately 3x over nine months, broadband equipment using "consumer memory" saw prices climb almost 7x.

"Routers are hit the hardest, especially for OEMs with an unsecured supply and weaker negotiating power," the research firm noted. This asymmetric impact reflects the fundamental economics of semiconductor manufacturing, where chipmakers are quietly steering production toward higher-margin AI infrastructure components.

The Economics of Unglamorous Hardware

The impact on broadband equipment is particularly striking because routers and TV boxes have traditionally been commodity items - the sort of hardware telcos distributed freely or at minimal cost. That's changing rapidly.

In some low to mid-range models, memory alone now accounts for more than 20 percent of total manufacturing costs, up from approximately 3 percent just a year ago. This represents a fundamental shift in the economics of broadband infrastructure, where previously negligible components are now becoming major cost drivers.

Self-Inflicted Wounds

Interestingly, the industry's current predicament contains an element of self-inflicted pressure. Telcos have spent the past couple of years adding AI-style capabilities to home gateways, which means newer devices require significantly more memory than their predecessors.

This strategic decision to make routers "smarter" has inadvertently pushed them into direct competition with hyperscale datacenters for the same memory components. As Counterpoint points out, "Unfortunately, that pushes them into the same component market as hyperscale datacenters – and they don't tend to win those bidding wars."

Broader Industry Impact

The memory crunch isn't confined to broadband equipment. The PC market is already experiencing similar pressures, with vendors warning of price increases and softer shipment volumes as suppliers prioritize chips for AI servers over everyday hardware.

Cisco has already announced price hikes to cover memory cost increases, suggesting that even major networking equipment manufacturers are feeling the pressure. The company's assessment that customers "don't much care" about these increases may prove optimistic if the trend continues.

Timeline and Consequences

Counterpoint estimates that tight memory supply will persist through at least mid-2026, even if prices stop climbing as aggressively as they have recently. This timeline suggests that the current situation isn't a temporary blip but a structural shift in semiconductor economics.

The consequences could extend beyond hardware margins. Broadband rollout plans may face delays or higher procurement costs as telcos struggle to secure adequate memory supplies at reasonable prices. For consumers, this could manifest as pricier routers, slower upgrades to newer connectivity technologies, or both.

The AI Paradox

Perhaps most ironically, AI - often touted as the future of computing and connectivity - is simultaneously making the fundamental business of getting people online more expensive than anyone anticipated. The technology that promises to revolutionize how we connect may be creating short-term bottlenecks in the very infrastructure that enables those connections.

This situation highlights a broader truth about technological transitions: the path to the future is rarely smooth, and sometimes the technologies that promise the greatest benefits can create unexpected challenges in the systems that support them. For the broadband industry, the challenge will be navigating this memory crunch while continuing to deliver the connectivity that powers our increasingly digital world.

The memory price surge affecting broadband equipment is part of a larger trend where AI infrastructure demands are reshaping semiconductor economics across multiple sectors. As telcos and equipment manufacturers adapt to this new reality, the cost and availability of basic connectivity hardware may become increasingly important factors in the global digital divide.