A leading semiconductor industry association has cautioned the U.S. administration against intervening in the global memory chip shortage through measures affecting prices or production capacity. The group warns such actions could worsen the historic supply crunch fueled by the artificial intelligence boom.

SEMI, the industry body, has sent a letter to senior Trump administration officials urging the government to avoid policies that distort market pricing or capacity decisions. The letter, dated July 1, argues that targeted interventions could prolong demand downturns and exacerbate supply constraints.

The organization, whose members include the world's top three memory chip makers—Micron Technology, SK Hynix, and Samsung Electronics—advocates for allowing chipmakers to continue signing long-term supply agreements with customers. It also calls for extending tax incentives aimed at encouraging domestic production expansion.

The letter states that while targeted policies can help build domestic supply chain resilience, any intervention that distorts pricing or capacity decisions risks extending periods of weak demand. It notes the current market situation is being addressed through investments in U.S. manufacturing and a growing number of long-term purchase agreements.

Industries from automotive to consumer electronics are facing unprecedented pressure from the memory chip shortage. Demand for chips used in high-end processors powering AI data centers has hit record levels, while supply struggles to keep pace.

This shortage is creating complex policy challenges beyond the question of whether U.S. companies can purchase from specific Chinese suppliers. The SEMI letter, while not directly naming Chinese suppliers, adds to broader concerns within the U.S. government that the chip shortage is becoming a political issue.

On one hand, investors are celebrating soaring share prices for memory manufacturers. On the other, policymakers are closely watching the impact on consumers, with companies like Apple and Microsoft raising prices on popular products, amplifying cost-of-living pressures.

To mitigate the impact of rising electronics costs, SEMI proposes a different solution than that sought by Apple, which is reportedly seeking permission to source memory components from two Chinese firms. The industry group urges the government to work with Congress to implement consumer tax credits or rebates to offset price increases for devices like phones and laptops.

The letter's recipients include Treasury Secretary Scott Bessent—who was recently lobbied by Apple's outgoing CEO Tim Cook on the Chinese chip issue—as well as the Secretaries of Defense, Commerce, and State.

SEMI expressed overall appreciation for government support of the chip sector. Royal Kastens, the group's Vice President of Global Public Policy and Advocacy, stated that SEMI and its member companies are grateful for the administration's efforts to bolster memory capacity and advance AI and data center infrastructure to maintain U.S. technological leadership.

The political dimension of the shortage is evident, with at least one U.S. lawmaker expressing interest in market intervention. In April, Ohio Republican Senator Bernie Moreno wrote to Commerce Secretary Howard Lutnick, warning that the memory chip shortage could impact the auto industry similarly to the supply disruptions and price spikes seen during the COVID-19 pandemic. He encouraged Lutnick to prioritize meeting domestic demand for memory components.

SEMI cites industry data in its letter, projecting memory capacity to grow at approximately 19% annually. However, the explosive demand from AI infrastructure is expected to far outstrip these supply additions, limiting chip availability for products ranging from laptops and cars to home appliances.

Although major memory manufacturers have expansion plans, building new capacity takes years. The current supply-demand mismatch continues to drive prices higher.