‘Quenching thirst with poison’: Chip War author warns China is no solution to chipflation

Chris Miller, author of Chip War, says using China to curb soaring memory-chip prices would amount to “quenching thirst with poison.” He warns that the immediate relief could leave buyers dependent on a strategically important industry controlled in part by Beijing-linked entities.

The surge in memory demand follows the rapid expansion of artificial intelligence and data centers. Miller estimates that memory purchases will account for 0.7% of global gross domestic product this year, more than six times the average share over the past two decades. Total semiconductor spending could reach 1.25% of the global economy, with more than half directed to memory companies. Next year, it could exceed 1.5%.

AI-chip spending is expected to be about five times higher than three years ago. Nvidia’s market value has reached $5.24 trillion, while the company has raised prices. Its suppliers, including Taiwan Semiconductor Manufacturing Co. and ASML, also plan price increases. Memory companies have seen especially strong margins, with Micron and SK Hynix both reporting gross margins above 80%.

Samsung and SK Hynix plan to build new plants in South Korea, while Micron is expanding production in Taiwan and the United States. The companies are committing tens of billions of dollars this year and plan to invest trillions over the next decade. Higher memory costs have already pushed Apple to raise MacBook and iPad prices, while automakers including General Motors have also blamed memory costs for price increases.

The Trump administration is seeking ways to contain prices, including possibly buying more chips from China’s ChangXin Memory Technologies, the world’s fourth-largest DRAM maker. About half of CXMT is controlled by entities linked to the Chinese government, Miller says, allowing it to expand capacity without prioritizing profits. CXMT mainly produces standard memory rather than the high-bandwidth memory used to train AI systems, but Miller warns that progress into more advanced areas could reshape the industry.