The Knowledge
AI data center boom is leaving consumer electronics short of chips − even though they don’t use the same kinds
Vidya Mani, University of Virginia; Cornell University
The boom in data center construction is taking up much of the supply of high-tech components, especially processor and memory chips. This demand is squeezing consumer device makers, which are having trouble acquiring enough chips.
This is happening even though data center servers and smartphones use different types of chips. The key distinction between consumer electronics and data centers is what they need chips to be optimized for. Smartphones and PCs require low power use, thermal efficiency and tight integration. Data centers that run AI systems such as large language models, or LLMs, require maximum compute power, memory bandwidth and storage throughput.
To meet these needs, consumer devices tend to rely on systems-on-a-chip – chips that combine processing and storage – with dynamic random access memory, or DRAM, and NAND, a type of nonvolatile memory. In contrast, AI servers rely on graphics processing units, or GPUs, or other accelerator processors combined with high-bandwidth memory chips.
I study global supply chains and how businesses respond to market constraints within these supply chains. The reason for the consumer electronics supply crunch has to do with the nature of the chip market: its concentration and high costs and how it responds to boom-and-bust cycles.
AI is not replacing consumer electronics; it is reorganizing the chip market around new priorities for specific chip characteristics. Data centers are pulling capital and scarce memory capacity toward the production of accelerator processors and high-bandwidth memory and the data handling and electronics equipment that surround them. https://www.youtube.com/embed/IkRXpFIRUl4?wmode=transparent&start=0 Chipmaking explained.
A winner-takes-most industry
Chip manufacturing behaves less like a competitive commodity market and more like a layered oligopoly. Scale matters because the leading firms can reinvest in research, improve yields, secure equipment and deepen customer relationships. In the case of graphics processor chips, designers such as NVIDIA, which has 85% market share, depend on advanced semiconductor foundries such as TSMC, which has more than 70% market share, to manufacture chips using extreme ultraviolet lithography machines from ASML, a monopoly.
A small number of producers both design and manufacture memory chips. Currently, three companies – Samsung, Micron and SK Hynix – hold a majority market share in the memory chips market. Long development cycles, extremely high fixed costs and the need for technological leadership reinforce concentration over time.
Consumer electronics firms such as Apple, along with other technology firms such as Amazon, Google, Microsoft and Xiaomi, increasingly design their own processor chips, because these chips shape the user experience, AI performance, power efficiency and system-level differentiation. Manufacturing memory chips, by contrast, is extraordinarily capital-intensive; requires high precision, efficiency and production line utilization; and is dominated by a few incumbent suppliers.
Since 2000, the memory chip industry has moved through repeated cycles of overcapacity and undersupply: the post-dot-com collapse, the 2007-09 glut, the tighter 2010s after consolidation, the severe 2022-23 downturn, and the AI-driven tightness of 2024-25. This has led to high levels of concentration in the industry and chipmakers that are hesitant to add capacity. Producers often operate chip fabrication plants, or fabs, at or near capacity due to high fixed costs. The risk of having expensive facilities go underused keeps chipmakers from bringing new fabs online in lockstep with demand increases.
Consolidation has reduced the number of major suppliers, who now increasingly direct investment toward higher-margin products rather than broadly adding capacity. That shift is important for understanding why AI demand is tightening chip supplies even as demand for consumer electronics continues to grow. https://www.youtube.com/embed/1JkzrR-hznE?wmode=transparent&start=0 The most advanced computer chips are made with a machine manufactured by one Dutch company.
How the AI data center boom redirects capacity
The AI boom has changed memory demand from a broad consumer cycle into a more segmented market centered on high-bandwidth memory chips. In 2023, Micron cut capital spending and the company’s fabs operated below levels needed to justify their cost. By 2026, however, Micron was reporting strong AI demand, record data center DRAM revenue and rapidly rising high-bandwidth memory sales.
This shift matters because the market for supplying memory cannot respond quickly. Opening new fabs requires years of planning, large capital commitments and investments in advanced process equipment and skills. Memory chip manufacturers are likely to remain cautious about expanding capacity even as their profitability improves, with 2026 spending focused more on technology upgrades and high-value products than on large increases in chip supply.
In practical terms, AI is not simply lifting all memory demand equally; it is redirecting scarce capacity toward massive, or hyperscale, data centers and server markets first.
Can consumer electronics catch up?
Consumer electronics can catch up, assuming the manufacturers can weather the cost increases from tariffs and geopolitical pressures. One way they could is by making investments to enable small AI language models to run on consumer devices, a move analysts expect the companies to attempt.
Apple shifted a growing share of U.S.-bound iPhone production out of China to India and moved much of its iPad, Mac, Apple Watch and AirPods assembly for the U.S. market to Vietnam to lower the company’s tariff burden. Yet relocation does not eliminate cost pressure. Manufacturing iPhones in India still costs roughly 5% to 8% more than in China, and in some cases closer to 10%, because supplier ecosystems, logistics and production efficiency remain stronger in China.
Rising geopolitical tensions between the United States and China led to supply constraints and export controls on critical minerals and chip components, raising input costs for consumer electronics manufacturers. This led to higher total import costs and reduced margins for firms unable to pass costs fully to consumers, leading to further consolidation in supply.
Consumer devices do not need to replicate data center infrastructure to offer AI on their products. Their opportunity lies in running small language models on-device for summarization, rewriting, search, assistance and lightweight reasoning. Doing so, however, creates a distinct hardware requirement. Phones and laptops need to incorporate multiple functions on the same chip, combining processing capability with fast local memory and enough storage to keep on-device AI responsive. Apple’s current device requirements for the company’s AI, Apple Intelligence, also show that older phones often lack the compute power and memory needed for useful on-device AI.
To adopt AI, device makers need to redesign their products with higher-end chips – both processors and memory – that can piggyback on the AI model-oriented growth in the chips market driven by the data center boom. Such a shift by the device makers could also provide a useful backstop for the memory chipmakers in case the projected AI and data center growth does not materialize in the medium to long term, a boom-and-bust cycle that memory chipmakers have had to endure many times in the past.
What this means for the wider economy
The AI and data center boom is redistributing capital, supplier attention and pricing power across the broader economy. Sectors with limited purchasing leverage are especially vulnerable when chip supplies tighten. For example, medical technology accounts for less than 1% of the overall chip market, leaving essential equipment manufacturers exposed during shortages.
In contrast, sectors linked to power delivery and digital infrastructure may benefit from the boom because they try to keep up with demand for cloud services and electrification. The International Energy Agency estimates that data centers consumed about 415 TWh of electricity in 2024 and notes that AI is accelerating the deployment of high-performance servers, which implies stronger demand for the grid, storage, cooling and networking equipment around them.
For the consumer electronics industry, the strategic task is not to try to match the AI data centers chip for chip but to build differentiated, energy-efficient, on-device AI services while managing higher supply chain and tariff risks.
And for consumers looking to buy phones, games and laptops, because of high demand from data centers, the next few years are likely to bring higher prices, shortages and delayed product releases.
Vidya Mani, Associate Professor of Business Administration, University of Virginia; Cornell University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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The Long Track Back
LA Metro Approves $71 Million Bus Engine Program and Advances Antelope Valley Line Safety Work
LA Metro will replace engines in as many as 680 natural-gas buses while advancing safety improvements at two Antelope Valley Line crossings in Sylmar.
Two newly confirmed Board actions will keep hundreds of Metro buses in service while moving two Sylmar rail crossings toward construction.
LOS ANGELES — October 28, 2026 — The Los Angeles County Metropolitan Transportation Authority has approved two major investments affecting bus reliability and regional rail safety: a nearly $71 million engine-replacement program for as many as 680 buses and a $27.6 million construction budget for two Antelope Valley Line crossings in Sylmar.
The Metro Board approved both actions on October 22.
Hundreds of natural-gas buses will receive new engines
Metro awarded Cummins Sales and Service a five-year, single-source contract worth up to $70.99 million for 680 near-zero-emission natural-gas engines. The engines will be installed in El Dorado National 40-foot buses and New Flyer 60-foot articulated buses during fiscal years 2027 through 2031.
The engines will operate on renewable compressed natural gas and replace older engines as part of Metro’s midlife bus-refurbishment program. Metro mechanics will perform the installations.
According to the Board report, replacing high-mileage engines should reduce engine-related road calls and improve the reliability of buses that remain in daily service. Metro estimates that the replacements will reduce nitrogen-oxide emissions by 90 percent and greenhouse-gas emissions by 9 percent compared with the engines being removed.
The decision also provides more context for Metro’s transition to electric buses. In September, the agency approved the purchase of 220 battery-electric buses, with deliveries expected to begin in 2028. The new Cummins contract shows that Metro will continue investing in its existing natural-gas fleet while electric buses and the charging infrastructure needed to support them are introduced.
Metro has not changed its zero-emission goal through this action. The engine replacements are intended to keep current buses dependable during the transition and do not obligate the agency to order all 680 engines.
Two Sylmar rail crossings move toward construction
In a separate action, the Board established a $27.62 million life-of-project budget for improvements at the Astoria Street pedestrian crossing and the Polk Street roadway crossing along the Metrolink Antelope Valley Line.
The crossings are part of Segment 4 of Metro’s Brighton-to-Roxford Double Track Project. Although the broader project remains in different stages of design, the Astoria and Polk plans are sufficiently advanced to proceed as separate construction packages.
Planned improvements include coordinated traffic signals, pedestrian gates and additional roadway gates. Polk Street will receive a four-quadrant gate system intended to make it harder for motorists to enter or drive around the crossing when a train approaches. Both locations will also be prepared for possible future quiet-zone operations.
The work supports Metro’s larger effort to improve safety, reliability and capacity on the Antelope Valley Line. Advancing the two crossings now also protects state Transit and Intercity Rail Capital Program funding that must be spent and submitted for reimbursement by June 30, 2027.
Metro will conduct community outreach and execute the construction contracts following the Board’s approval. A specific construction-start date has not yet been announced.
Primary sources
● Metro Board Report 2026-0644: Near-Zero Natural Gas-Fueled Engines
● Metro Board Report 2026-0640: Astoria and Polk Crossing Improvements
This story is part of The Long Track Back, STM Daily News’ continuing coverage of Los Angeles transit projects, service and regional mobility.
Daily News
Major Construction Begins on Metro’s East San Fernando Valley Light Rail Line
LA Metro has moved the East San Fernando Valley Light Rail Transit Project into major construction. The 6.7-mile Van Nuys Boulevard line will add 11 stations, connect with the G Line and regional rail services, and is now targeted for completion in early 2032.
After years of utility relocation and planning, LA Metro is moving into major construction on a new rail line along Van Nuys Boulevard. The milestone also comes with a revised early-2032 completion target.
LA Metro has officially marked the beginning of major construction on the East San Fernando Valley Light Rail Transit Project, moving one of the region’s most important rail projects from preparatory work into full-scale construction.
Metro held a groundbreaking ceremony on October 19, 2026, for the 6.7-mile line, which will run along Van Nuys Boulevard from the G Line busway north to San Fernando Road in Pacoima. The project will add 11 light-rail stations serving Van Nuys, Panorama City, Arleta and Pacoima.
This was not the project’s first groundbreaking. Metro held an earlier ceremony in December 2022 when crews began relocating utility infrastructure. The new milestone is more consequential for riders: the major-construction phase covers the guideway, stations, traction-power substations, rail systems and a maintenance and storage facility.
From utility work to a new rail corridor
The project has spent several years in utility relocation, property acquisition, design and other early work. Metro’s current construction timeline shows major work continuing from 2026 through 2032, with phased traffic changes and K-rail installations expected along Van Nuys Boulevard.
When completed, trains are expected to operate every seven to 10 minutes during peak periods. The line will connect directly with the G Line and provide access to the Van Nuys Metrolink and Amtrak station. It is also expected to become an important transfer point for the future Sepulveda Transit Corridor and a planned Metrolink station in Pacoima.
The corridor already has a substantial transit market. Metro reported that bus Lines 233 and 761, which serve Van Nuys Boulevard, recorded nearly 20,000 boardings in September 2026. The agency also says approximately 19 percent of households in the project area lack access to a car, compared with about 8 percent countywide.
Those figures help explain why this project matters beyond its construction footprint. It is intended to give residents in some of the Valley’s most transit-dependent communities more reliable access to jobs, schools, healthcare and the wider regional transit network.
The opening target has moved to 2032
Metro’s current project page lists an estimated completion date of early 2032. That is later than the 2031 opening forecast the agency publicized when it celebrated an $893-million federal grant in September 2024. Earlier plans were more optimistic still: when utility work began in 2022, Metro said the first segment could open between 2028 and 2030.
The project’s financial scale has also grown clearer. In May 2026, the Metro Board established a life-of-project budget of approximately $3.999 billion and authorized the next phase of its progressive design-build contract with San Fernando Transit Constructors, a joint venture of Skanska and Stacy and Witbeck.
That authorization increased the construction contract’s value to roughly $2.431 billion. Funding for the larger project combines federal, state and local sources, including revenue from Los Angeles County’s Measure M transportation sales tax.
Rail returns to Van Nuys Boulevard
The East San Fernando Valley line will restore passenger rail to Van Nuys Boulevard for the first time since Pacific Electric ended streetcar service there in 1952. It will also become the first major new Metro rail project in the San Fernando Valley since the subway reached North Hollywood in 2000.
The historical parallel is significant. Van Nuys Boulevard once developed around electric railway service before the region shifted heavily toward automobiles and buses. Metro is now rebuilding rail in the same broad corridor, but as part of a modern network designed to connect local riders with bus rapid transit, regional rail and future high-capacity projects.
The current project ends in Pacoima. Metro continues to study a separate 2.5-mile northern extension that would reach the Sylmar/San Fernando Metrolink station. That extension is not included in the segment now entering major construction.
For riders, the October groundbreaking does not mean trains are imminent. Several years of disruptive and technically complex work remain, and the schedule has already moved beyond earlier forecasts. Still, it represents a tangible transition: the East San Fernando Valley line is no longer primarily a planning exercise or utility-relocation program. Metro has begun building the infrastructure that will carry trains.
That makes this a major step in Los Angeles County’s long effort to restore frequent rail transit to communities that lost it generations ago—and another chapter in The Long Track Back.
Primary sources
- LA Metro: Major construction will soon be underway
- LA Metro project page: East San Fernando Valley Light Rail Transit
- LA Metro Board meeting, May 28, 2026 — project budget and contract authorization
- LA Metro: $893 million federal grant announcement, September 6, 2024
- LA Metro: Advanced utility-work groundbreaking, December 2, 2022
This article is part of The Long Track Back, STM Daily News’ continuing coverage of how Los Angeles is rebuilding and expanding a passenger-rail network after decades of automobile-centered grow
For generations, the Santa Monica Pier sign has marked the start of a day at the beach. Now, the familiar blue neon landmark is preparing for a journey of its own.
Santa Monica scheduled removal of the 1941 sign for October 20–22, with shipment to Las Vegas anticipated October 26. The timetable is subject to change, according to the city’s October 19 announcement.
The temporary removal accompanies replacement of the aging bridge connecting Ocean Avenue to the pier. It also creates an opportunity to preserve the historic sign.
YESCO will restore it at its Las Vegas facility. The company’s experience includes work on the “Welcome to Fabulous Las Vegas” sign.
Crews will repair neon tubing, treat rust, repaint components and address structural needs while retaining historic features. The sign will remain in secure storage during bridge construction.
Once the project is finished, it will return above the new bridge at a slightly greater height for visibility and vehicle clearance. The city’s latest announcement targets project completion by 2028, ahead of the Los Angeles Olympics and Paralympics.
Meanwhile, visitors can photograph a lighted, half-scale replica near Pier Burger.
For anyone who associates that glowing arch with Southern California memories, its absence will be noticeable. The restoration is intended to ensure future generations can make memories beneath it, too.
Source: City of Santa Monica — October 19, 2026 announcement
Related Links
- City of Santa Monica: Official sign restoration announcement — October 19, 2026. Primary source for removal dates, shipment to Las Vegas, YESCO’s restoration work and the sign’s planned return.
- Santa Monica Daily Press: Sign restoration during bridge rebuild — October 20, 2026. Additional local reporting on the project and visitor access.
- LAist: Sign removal and how to watch — Reporting on the removal schedule and public viewing opportunities.
Follow more Southern California stories at STM Daily News.
