A.I.-Driven Chip Crunch Leads to New Rush of Lobbying in Washington
The artificial intelligence boom has created a shortage of a critical commodity called memory chips, and a new front for corporate lobbying in Washington.
Memory chips store data in items as varied as smartphones and cars, and they are being snapped up by A.I. companies for use in giant data centers. The price of these tiny components has quadrupled over the past year, creating a problem for the White House, which has struggled to convince Americans that it has inflation under control.
Now, a wide range of industries, including medical device makers, car manufacturers and consumer electronics companies like Apple, are asking for the government’s help to get the chips they need.
The companies and their lobbyists have suggested a mix of solutions, some conventional and others highly interventionist, like federal policy that would push memory chip makers to allocate more chips to their industries, according to interviews with 18 people, many of whom spoke on the condition of anonymity because they were not authorized to speak publicly about those discussions.
Some have suggested that selling chips to a broader set of customers should be a condition for receiving money from the 2022 CHIPS and Science Act, a program to fund semiconductor research and manufacturing in the United States, three of those people said. Others have asked the Trump administration to use a Korean War-era law called the Defense Production Act to require allocation to industries outside of A.I., five people said.
“We’re in what I would characterize as a 100-year flood on the memory pricing, with exponential increases in memory prices,” Tim Cook, Apple’s chief executive, said last month in an earnings call.
In a letter to Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in June, a group of trade associations warned of “risks to large parts of the economy” from an “urgent imbalance” in the memory chip market.
Memory chips are starting to add to inflation in the United States, said Diane Swonk, the chief economist for KPMG US, an accounting firm. Shoppers are already cutting back on buying video game consoles, and more expensive electronics will probably follow, she said.
“The A.I. boom is so strong that it is bidding up costs elsewhere,” Ms. Swonk said.
It is unclear if the White House or the Commerce Department will intervene. Though eager to keep prices down, they are reluctant to divert memory chips away from data centers that are helping the United States maintain an edge over China in A.I.
Kush Desai, a White House spokesman, said domestic semiconductor manufacturing was a top priority for President Trump, and his policies had secured hundreds of billions of dollars of investments in the sector.
Memory chip makers like Micron Technology, Samsung and SK Hynix are also seeking help to increase their production. Some of the companies are lobbying Congress for another infusion of funding, similar to the CHIPS Act. They have also asked the government to relax environmental regulations so they can build new U.S. facilities, three people said.
Micron has pledged more than $250 billion to the U.S. memory sector, the largest investment of its kind, said Manish Bhatia, an executive vice president at the company. He added that constructing chip factories in the United States took longer than anywhere else, and that the country needed to streamline permitting and cultivate its work force.
“This is something that’s going to take a concerted effort from the manufacturers as well as the suppliers as well as the government,” Mr. Bhatia said.
Other memory chip makers like Samsung and SK Hynix, which are based in South Korea, produce a majority of their chips in South Korea and China. Representatives for these companies and their customers have floated the idea of increasing production in their Chinese manufacturing facilities to respond to the shortage, two people said.
Both the Biden and Trump administrations have tried to encourage chip makers to expand in the United States. Micron, Samsung and SK Hynix have all committed hundreds of billions of dollars over the next few years to expand production in the United States and elsewhere. But the facilities are extremely expensive and take years to construct.
Shortages in the industry will continue for the next two years, said Dan Kim, a chief strategy officer at the research firm TechInsights who worked on chip strategy in the Biden administration. There is “almost no ceiling,” he said, to the price that A.I. companies will pay for memory chips. That’s not the case for other businesses.
“Yes, the prices of your iPhone are going up,” Mr. Kim said. “But it’s also possible the prices of your M.R.I. machines may go up, or worse than that, that M.R.I. machine may not get made.”
That said, chip makers don’t want the government to be too assertive. In July, SEMI, an industry trade association, argued against interventions that would influence how memory chips are priced or allocated. The group recommended using trade deals to increase production, cutting regulations and extending a tax credit meant to encourage domestic manufacturing.
SK Hynix said in a statement that it was “pushing to maximize production to fully meet surging demand, and would increase its capital expenditure by 50 percent this year.”
Apple declined to comment, and Samsung did not respond to a request for comment.
Apple, which has cited the memory chip shortage for recent price increases, is working with other consumer electronics companies to push for permission to buy memory chips from China, which faces certain restrictions, seven people said.
Apple was in talks in 2022 to buy memory chips from Yangtze Memory Technologies Corporation, or YMTC, but those efforts fizzled under pressure from U.S. lawmakers.
Many officials appear unsympathetic to Apple’s desire to buy Chinese chips, because the company has promised for years to move more of its supply chain to the United States but has made only small steps toward that goal, four people said. Other critics of the plan said that China was also experiencing a similar chip crunch, and had proved itself to be a risky supplier when it restricted its mineral exports last year.
Micron, which manufactures memory chips in the United States, Japan and Taiwan, has pushed for more restrictions on Chinese competitors, arguing that buying chips from China would hurt U.S. production, two people said.
Chris Miller, the author of “Chip War,” said buying more chips from China came with a big risk: The companies that did so could permanently lock in more market share and “open the door for longer-term dependency risks.”
The United States has cracked down on China’s semiconductor industry in recent years, believing it is helping to advance the Chinese military. In 2022, the Biden administration added YMTC to the U.S. “entity list,” which restricts access to American technology. U.S. officials have also considered adding another Chinese chip maker, ChangXin Memory Technologies, or CXMT, to the entity list. Both companies appear on a list that bans their chips from products that are sold to the government.
Apple’s renewed push to buy memory chips from China has prompted a backlash from lawmakers. In July, a bipartisan group of senators urged the company to commit to not using Chinese memory.
The same month, Representatives John Moolenaar, Republican of Michigan and chair of the House Select Committee on China, and George Whitesides, Democrat of California, sent a letter to Mr. Lutnick, urging the Commerce Department to add CXMT to the entity list and to prohibit American companies from buying from companies on the list.
“Dependence on Chinese memory manufacturers creates an unacceptable risk for U.S. national security, economic security and supply chain security,” they wrote.