(Preview) The Roots of a Global Memory Shortage, Thick, Thin and Apple, Shopify is Fine, Actually

Summary

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Sharp Tech with Ben Thompson

Episode: (Preview) The Roots of a Global Memory Shortage, Thick, Thin and Apple, Shopify is Fine, Actually

Hosts: Andrew Sharp and Ben Thompson
Date: February 20, 2026

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Episode Overview

This episode centers on the ongoing global memory chip shortage — what’s driving it, how it ties to both consumer electronics and AI, and why resolving it isn't as simple as building more fabs. A listener’s question prompts Ben to dive deep into the economics and fundamental differences between logic and memory chips, the history that led to today's dynamics, and why the industry is stuck in a difficult cycle of massive investments and commodity pricing.

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Key Discussion Points & Insights

1. Personal Updates and Tone-setters (00:00–02:18)

• Personal anecdotes: Ben shares a personal story about his dog going blind suddenly due to a rare condition, giving listeners a sense of his current mood. Andrew mentions his upcoming vacation, setting a contrastive lighthearted tone.
• Community Engagement: Listeners with experience raising blind dogs are invited to share advice.

2. Setting the Topic: The Memory Shortage (02:18–03:53)

• Recent News:
  • Sony may delay the next PlayStation console to 2028–2029 due to memory constraints.
  • Nintendo is considering increasing the Switch 2’s price in 2026.
  • Samsung is renegotiating contracts quarterly.
  • Chinese phone makers are slashing production.
• Listener Question: Jonathan asks for a breakdown of the memory shortage, differences between logic/memory chips, and why capacity isn’t being built for “regular” memory while AI soaks up high-bandwidth memory.

3. Memory vs. Logic Chips: The Technical and Economic Divide (05:48–09:24)

• Investment Parity: Both advanced logic (CPUs) and memory fabs are extremely expensive (over $20 billion), requiring cutting-edge processes like EUV (Extreme Ultraviolet Lithography).
• Key Difference:
  • Logic (CPUs/GPUs): Highly complex design, lots of differentiation potential (e.g., custom instructions, integrated hardware-software).
  • Memory: Much more standardized — simpler chips, less design differentiation, more commoditized.
• Intel’s Strategic Shift (The Memory-to-Logic Pivot):
  • Historical anecdote: Intel, once a memory manufacturer, exited due to Japanese competition and focused on logic, where differentiation (and therefore profit) is possible. (Famous Andy Grove/Gordon Moore story)
  • Ben: “If we hadn’t grown up with Intel, identified as a memory manufacturer...we would get out of memory. And that’s — so Intel exited memory in the early 80s and focused just on logic.” (08:13)

4. Commodity Economics in Memory Chips (09:24–13:59)

• Standardization/Commoditization:
  • Memory is a commodity; prices are set by the marginal unit — buyers can switch suppliers easily, so no one can sustain pricing power unless they have a cost advantage.
  • Logic enjoys moats (like x86 CPU instruction sets and integrated hardware-software), but memory manufacturers cannot sufficiently differentiate.
• Cost Structure Explained:
  • In commodities, profit depends on having the lowest cost. If prices fall too low, producers cover only marginal cost (raw materials like silicon wafers) and risk never recouping their multi-billion dollar investments in advanced equipment.
  • Ben: “There’s two ways to make money...#1, a differentiated product you can charge more...#2, in a commodity market, your cost structure is lower.”
• Manufacturing Fabs Are Like Shipping: (Analogy)
  • Ships are a long-term investment, but the actual market price often falls to marginal operational cost (fuel, crew); the cost of the ship is sunk and recovered only if demand is consistent and high.
  • Ben: “That’s why companies will operate while losing money...still making money on a marginal basis, but not covering their upfront costs.” (13:59)

5. Why the Shortage and Why It's Hard to Fix (interwoven throughout)

• AI’s Memory Appetite: High-bandwidth memory (HBM), critical for AI, is consuming manufacturing attention due to much better margins.
• Risk in Changing Capacity: Switching fabs to “regular” memory or building new ones is expensive and risky given the boom-and-bust commodity cycle and uncertainty in demand.
• No Easy Fix: The constraint isn’t simply “add more fabs”; huge sunk costs, a slow return on investment, and fear of oversupply keep companies cautious.
• Market Impact: Consumers see laptop/game console shortages and rising prices, while manufacturers chase scarce high-end memory for AI.

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Notable Quotes & Memorable Moments

• Ben on the business model split:
  “There’s two ways to make money in business. Way number one is you have a differentiated product so you can charge more than it costs you to make...The other way is in a commodity market your cost structure is lower.” (12:15)

• On Intel’s historic pivot:
  “Andy Grove says to Gordon Moore...‘If we were outsiders, if we hadn’t grown up with Intel, if we didn’t identify as a memory manufacturer...we would get out of memory.’” (08:13)

• On sunk costs in chips and shipping:
  “So the issue is...that cost of the ship itself has already been paid. And so as long as the price you get...is higher than the marginal cost, you’re still going to be running that ship, even though on your books you’re bleeding money.” (13:58)

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Timestamps for Critical Segments

• 00:00–02:18 — Personal updates; setting the tone.
• 02:18–03:53 — Recent memory shortage news, listener question sets the agenda.
• 05:48–09:24 — Detailed breakdown: Memory vs. logic chips; Intel's pivotal shift.
• 09:24–13:59 — The economics of memory as a commodity; why manufacturing is so risky; shipping industry analogy.

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Additional Context & Listener Engagement

• Personal Touch: The hosts’ rapport is on full display—mixing technical explanation, historical stories, and asides about basketball fandom.
• Audience Call-to-Action: Email your dog advice or tech questions to the show.

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End of preview. Subscribe for more in-depth industry analysis and weekly shows at SharpTech FM.

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Transcript

[A]

Hello, and welcome to a free preview of Sharp Tech. Hello, and welcome back to another episode of Sharp Tech. I'm Andrew Sharp, and on the other line, Ben Thompson. Ben, how you doing?

[B]

Dismayed, Andrew. Dismayed at our wildly diverging trajectories.

[A]

I'm feeling good. It's good to be back. I'm going on vacation in a couple days. My life is good. How about you?

[B]

Well, exactly. You're going on vacation. We will not be recording next week because you'll be sitting on a beach. Yep. I spent the week visiting vet clinics because my dog, unfortunately has gone blind, which is very sad. It is like eight and a half years old. There's something called sards, which I hadn't heard about. It's like sudden, sudden acute retinal detachment syndrome. I might have got the SNA wrong, but apparently it happens sometimes. It's a small percentage of dogs, but they're just. Their eyes become basically disconnected. There's like, wildly varying theories about why it happens, but it happens very rapidly. And they are just suddenly blind for life.

[A]

Yeah. And it involved a couple hours and multiple visits to the vet this week. I hope Coco can adjust to this new reality. Apparently dogs can adapt without that much trouble.

[B]

Well, I mean, there's a bit where, like, in retrospect, I can kind of mark when it was deteriorating, but it wasn't gone, and then she's like, suddenly running into walls. So she still finds her way around the house pretty well. But the reason to bring it up is not only for everyone to feel bad for me, but if anyone has had a blind dog or dealt with this. Open to tips, open to things.

[A]

Write in email at SharkTech FM. We'd love to hear from you, but yes, no podcast next week.

[B]

So, yeah, you're going to be sitting at a beach and I'm going to be, you know, feeling sad about my dog grinding through.

[A]

Yeah, well, look, at least it's warmer where you are than it was about a month ago because I was there. It was 20 degrees below zero. You had.

[B]

It was actually 27 degrees below zero. It was 63 degrees yesterday, which was a 90 degree swing in a matter of like three weeks.

[A]

Unbelievable. You know, so things are looking up out there in Wisconsin for now. As for the show, we are going to begin with memory, and a global memory shortage that is underway. Bloomberg reported on Sunday that Sony is now considering pushing back the debut of its next PlayStation console to 2028 or 2029. Nintendo is considering raising the price of the Switch 2 in 2026. Samsung is now reviewing memory contracts on a quarterly basis. Various Chinese phone companies are slashing production because of memory issues. So I want to talk about all that and how it relates to AI, but I want to start with a note we got from Jonathan. Jonathan said, goats help me understand. I love speaker two.

[B]

Being a goat.

[A]

You are definitely the third chair on goat all things considered. Jonathan says, goats, hey look, you know

[B]

I've always talked about on my tombstone will probably be like author or trategory. But I'm equally proud of sort of the entire ecosystem of paid newsletters, the substance stack world, all those sorts of things. But what I'm truly proud of is when Sports Illustrated slashed their whole staff open floor podcast was ended. I was on the horn with you and Ben barely knew you guys at that point saying this must continue. You are going to do a paid podcast. I'm going to help you do it. And so yes, on my no tech Ben Twitter profile it does still say the patrons patron, patron, patron.

[A]

Look, you've been there from the very beginning. That first zoom call. I'll always remember that. This is of course a reference to greatest of all talk, my NBA podcast. That's for the 80% of the sharp tech audience that isn't a basketball fan. Jonathan is though, and he says goats help me understand the dynamics between memory and chips. My normie understanding is chip fabs require tens of billions of dollars of investment and three to five years to manufacture. The high fixed costs and long lead times create tenuous economics. If the fab is not full, the company could lose billions. So how does this compare to memory? Why are we experiencing a memory shortage again? My normie understanding is the memory is the memory. Manufacturers are prioritizing high bandwidth memory for AI data centers. I'm assuming high bandwidth memory is more expensive with better margins compared to quote unquote regular memory that goes into phones, laps, laptops and PlayStations. I'm also guessing the big tech companies will pay through the nose to acquire as much high bandwidth memory as possible. So what is stopping someone from building capacity to serve the low end market of non high bandwidth use cases? Is it just as expensive and risky to build new memory capacity? Have the regular memory fabs been converted to high bandwidth memory fabs? When will I be able to afford a new laptop? When will the next generation of video game consoles come out? Who will win the NBA championship? I didn't read that last part of the email until just now. I got to go with the T wolves Jonathan, but oh I would love that before we get to what you wrote. I just, I appreciated what Jonathan wrote because I had the exact same questions. I've been hearing about the memory shortage for like 18 months now because it's actually been a bigger problem in China. How did this happen? And how will it possibly be addressed over the next four or five years?

[B]

Yeah, when I was reading this email I'm like, I probably should have. Like I've referenced just the memory issue in passing for also for like months and months and months. And so it's clearly a thing that's happening. But I realized that I probably should have done a more all up sort of piece around it than sort of just mentioning it in passing. And I think this email is illustrative because there's certain things to understand how it works that will actually answer a lot of these questions and I've been derelict in doing that.

[A]

Well, here we go. That's what the five.

[B]

I'm going to do my best here to sort of get at what's going on. Okay, so memory and logic, they both require being on the leading edge. So advanced memory fabs today also use EUV as an example. In fact, I think I should have checked this. I think that some memory manufacturers might have been using euv. No, I think maybe TSMC was first. But like the point being is like they are just as advanced as a logic sort of fab is and they're just as expensive. We're talking in the like the 20 plus billion dollar range to build a new fab. Okay, so a lot of those issues apply here. What makes memory fundamentally different than logic is a logic. It's kind of funny. It's like the difference between a. I guess this is not funny. It makes total sense. It's just a CPU and a memory chip. They're all chips. Okay. The difference is a CPU is a very complicated chip with a bunch of different things because it's a central processing unit. It's almost like the CPU should have been GPU as a general purpose processing unit.

[A]

The CPU is doing everything you can possibly do on a computer.

[B]

That's right. And even a GPU has many more functions than a memory chip might do. And so what that means is to do logic well you need the capability of designing all these different things and then making a chip that does all these sorts of different things. And so there's lots of fact. So you go back like the memory story people are probably in tech the most familiar with is sort of the story of intel leaving memory and to go into logic. So back in the day memory was where everything was, that was the most important thing. That's where people made the most money. Intel was in memory sort of the start. Along the way they started making logic chips. And what happened was they were losing their shirt on memory to primarily Japanese suppliers. And meanwhile they're making a lot of money in logic. So there's this very famous story of Andy Grove and Gordon Moore. Intel's like practically going bankrupt and they're like the story, you know, Andy Grove says to Gordon Moore or whatever, if we were outsiders, if we hadn't grown up with intel, if we didn't identify as a memory manufacturer, as that being our core business, why would. We got fired and people came in, what would they do? They're like, we would get out of memory. And that's. So intel exited memory in the early 80s and focused just on logic, where if you think about it, it's not just about manufacturing, it's also about the design component. And intel was an integrated device manufacturer, which means they did both the design and they manufactured it. And it's that design bit that increased the value of the chips that they made because they could do these sorts of things. And then they focused on that and obviously were fabulously profitable and made all this money and locked in their position as being the dominant provider first for, you know, first for Windows and then for servers, sort of broadly with AMD sort of nipping at their heels all the time.

[A]

They did that because the Japanese manufacturers, for instance, couldn't match the design capabilities that intel had. And so it's not just design capabilities, pricing power.

[B]

There's a software angle which is like, does this software work with this specific chip? So they had the x86 instruction set which they, going back to IBM, forced them to share it with AMD to be a second supplier. That's why AMD has always been there along with Intel. That was a condition of IBM using the intel chip in the first PC is that they had to second source. So they had to share the x86 spec with AMD, give them a license to it. There is a whole string of litigation about like, to what extent do they have to share? Do they try to cut them off adding custom instruction sets, but it's differentiating hardware with software at a very low level. But that was the moat. The reason why it was so profitable to be in logic for intel is only they could make x86 chips. Again with the. There's lots of complexities here, but the point being is there was a higher order of differentiation what makes memory different and the reason why they're getting their clock cleaned by the Japanese in the late 70s and early 80s is memory is standardized. All it is, it's a much more basic chip now. It's basic in the fact that speed still matters, bandwidth still matters, all these things matter. So it benefits greatly from being on the leading edge. But it is a commodity market, by and large. Now we'll get into the details why it's not fully a commodity market, but it is basically relative to logic, it's a commodity market. In a commodity market, the price is set by the marginal unit of memory. So everyone pays the same price based on like basically the last memory chip that's created and how much they can sell it for. Because you could just go, you could just switch easily and go use someone else. In a commodity market, your profits are dictated by your cost structure, right? So if you have. So like we talked about with Amazon, with aws, one of the reasons they did so well in the CPU denominated cloud era is because they did all this work to basically have a lower cost of serving than Microsoft or than Google. So if you have a unit of compute in the cloud, Amazon provides that unit of compute more cheaply than Microsoft or Google does. So if you have someone that's just picking purely based on price, then Amazon makes more money because their cost structure is lower, right? So below the marginal cost. So that's not. Again, that's not a perfect example either because there's tons of software that goes in the cloud, you try to lock people in and all those sorts of pieces. But basically there's two ways to make money in business way. Number one is you have a differentiated product so you can charge more than it costs you to make, and then you make a lot of money.

[A]

Better product and better cost structure is the two best.

[B]

The other way is in a commodity market your cost structure is lower and the cost is dictated by the. So if you have three providers, one provider, they're forced down to basically their marginal cost and for a marginal cost. And this is why fabs are so hard, because the marginal cost is zero, basically. Okay, so you have to buy this EUV machines, you have to buy all this other equipment, all of which is depreciation, that's going to hit your balance sheet. But you are forced, the price is dictated to you by the market. Now you're not going to, you have to buy silicon wafers, that's your main input cost. So you're not going to price below the cost to buy Silicon wafers. At that point, you might as well shut down the line. But you will produce as long as you're making more than it costs you, your inputs. But that means you're also going bankrupt the same time because you spent all this money that you're not covering your fixed costs for to buy all the equipment.

[A]

It takes so much longer to profit enough to cover the upfront investment.

[B]

Yeah. A really interesting industry that I by chance happen to know a lot about, thanks to people that I knew in Taiwan, is shipping. And shipping is actually a good analogy for this. So if you think about what is the price of freight if you have a ship, it's basically the cost of fuel and crew, and then there's dock fees and all those sorts of things. So if you have a bunch of ships in the market and if there's more supply for shipping than there is sort of demand for stuff to put on there, the price is going to fall to that level to the cost of fuel, the cost of crew and your fees. You sort of at various ports or whatever it might be. That doesn't include the cost of the ship itself.

[A]

Right.

[B]

So the issue is, is that that cost of the ship itself has already been paid. And so as long as the price you get that you can charge is higher than the marginal cost, the marginal cost of the operational cost to actually deliver a container, you're still going to be running that ship, even though on your books you're bleeding money because this depreciation for that ship is hitting the balance sheet. And so that's why companies will operate while losing money, because they're still making money on a marginal basis. They're just not covering their upfront costs. And this is our shipping company. That's why it's tricky to buy ships, because you're buying them for 30 years. And so that's what happened during COVID for example.

[A]

All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the Show Notes or you can also go to SharpTech FM. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Strike and the Structecary plus bundle. Check it out and if you got feedback, please email us at. Email sharptech fm.