Can Policy Solve AI’s Chipflation?

Chipflation and the surging cost of memory chips represent a significant bottleneck for AI infrastructure, yet policy interventions are unlikely to provide immediate price relief. While governments utilize tools like direct subsidies, tax credits, and procurement guarantees to bolster domestic fabrication and packaging, these solutions require years to build and ramp capacity. Policymakers increasingly bifurcate the market into AI strategic memory—such as high-bandwidth memory (HBM) and advanced DRAM—and commodity memory for consumer electronics. For strategic memory, the focus remains on supply chain resilience and allied coordination rather than loosening export controls. Although Chinese producers are expanding in conventional DRAM, they face significant yield gaps and a "hard ceiling" due to restricted access to advanced lithography tools. Consequently, geopolitical de-risking and the technical complexity of scaling leading-edge memory ensure that chipflation will persist as a near-term challenge for the global technology sector.