From price hikes to working with chip brokers, Framework's CEO tells us how he's navigating the memory shortage

• PC maker Framework has raised prices multiple times as the memory shortage drags on.
• CEO Nirav Patel told Business Insider about his strategy as he navigates rising chip costs and supply crunches.
• "The price is what it is, unfortunately," Patel said. He said his goal was to stay in production.

The memory crisis is making it more expensive to build consumer electronics. So, without the supply-chain leverage of a tech giant, how does a startup making computers survive?

We put the question to Nirav Patel, the CEO of Framework, a small PC company with a cult following that sells modular computers. Its business also relies on memory chips, which are facing a global shortage.

As AI companies grow their compute needs, hyperscalers are demanding more memory chips from the three primary producers: Samsung, Micron, and SK Hynix. That's caused prices to increase and supply to be tied up in long-term contracts that can put smaller electronics companies at the back of the line.

In a Q&A, Framework's CEO walked Business Insider through how the company is navigating the challenge, from raising prices to trying to be as transparent as possible around the issue while maintaining a sense of scrappiness. This interview has been edited for length and clarity.

How'd you get to Framework?

Patel: I started out as part of the founding team at Oculus. We were standing up and defining an entirely new product category. Consumer VR had at that point never really been a thing before.

The idea behind Framework was jumping to the absolute opposite end of consumer electronics, going to the most mature product categories. It was so mature that the innovation has been squeezed out of it entirely.

After we got acquired by Facebook a couple of years into Oculus, we all had five-year handcuffs. It was clear that staying at Facebook was not going to be the right move. It was a massive swing from being able to iterate really rapidly to being part of a giant bureaucracy.

How big is the company now?

Patel: We're a 75-person company now across the US and Taiwan. We've raised three rounds of funding over the course of the last six years. The last round was, at this point, over two years ago, and we've been operating in a financially self-sufficient mode since then.

Let's dig into memory. When did you start noticing the shortage?

Patel: We started getting early indications of this pretty early last year. Our suppliers were flagging to us, "It looks like there's something coming on the horizon in terms of supply-demand mismatch." The speed and slope of that ascent were pretty unexpected for everyone.

In October, we started to get much clearer indications from our suppliers: "Hey, supply is going to be a problem. Get your orders in."

This is a startup, so we can't do things like stockpile memory and storage. We're not at a scale where that makes sense. We obviously made sure to stay in very close contact with our suppliers, and to do things like test that we can get compatibility with as many different memory storage options as possible.

Is there any way to avoid high prices?

Patel: The price is what it is, unfortunately. It's no longer about maintaining the pricing you want. It's about: Can I get access to the supply to be able to continue to manufacture products?

We have been able to stay in production on all of our products. A big part of that goes back to the scale that we're operating at. We are big enough to have direct contact and direct relationships with memory suppliers like Micron.

On the other hand, we're small enough that we get to be a bit more flexible and creative than some of the bigger companies. If a broker comes to us and says, "We found 5,000 memory modules in a warehouse, do you want them?", we can say, "Yeah."

Do bigger consumer electronics companies have it easier?

Patel: They do. If you're a Dell, HP, Lenovo, or Apple, you've got these very substantial long-term relationships already in place. You are going to be near the front of the line when it comes to getting access to any allocation.

Tell me about leadership. How do you lead a team while this is happening?

Patel: A big part of this for us is transparency, both internally and externally. Within company town halls, we maintain complete transparency around what our financial situation is and what our supply position is. We give people the confidence that they're going to be aware if anything is going to become a problem.

How do you think employees are feeling?

Patel: There's a mentality of: We have an aligned mission and we have the right people to attack it together. It is motivating to see people come together as a team and address big problems. There's a lot of creative problem-solving happening.

All that teamwork, camaraderie, and collaboration mean, especially in a startup, that you can navigate challenging situations.

Let's talk about price increases for your products. Take me behind the first one; how do you make the initial choice?

Patel: The big thing for us was looking at the speed of the increase in pricing from our suppliers, and knowing we've reached a threshold we can't absorb.

When we were selling memory directly as modules in the Framework marketplace, we were the cheapest source of memory anywhere on the market. People were coming in and just buying memory from us, and not buying our computers. One very early move we made was pulling the standalone memory off our marketplace.

We're also reselling memory at the price we're purchasing it at. We don't want to make money on memory in this environment. What we want to do is make sure people can still get access to computers.

You've had a couple of price hikes now. Why not do it all in one?

Patel: We're not forecasting out into the future and preemptively increasing pricing. What we're doing is, roughly monthly, looking at the running average of purchase prices of memory and using that to set the price for the next month.

Have your sales taken a hit as a result?

Patel: I can't give exact numbers, but we do see noticeable decreases in specific products when we increase prices. It's just supply and demand.

As long as your computer is still working, you have some flexibility to wait a bit longer to decide. We expect, in the short term, people are going to slow down buying new computers to replace the current ones. As we average this out over the course of years, we're still going to see that demand is pretty steady.

Are you frustrated with suppliers?

Patel: You have to look at capitalism as a machine and accept it for what it is; otherwise, you're going to constantly be frustrated trying to build a business. We understand why prices are increasing. It is the unfortunate reality of how this works.

When do you hope it will die down?

Patel: Everyone's got different viewpoints on this. Towards the end of 2027 into 2028, we know that there will be some substantial increases in memory manufacturing capacity from big suppliers.

We don't know what demand will look like. It could be the case that the AI data center bubble pops, and suddenly there's a massive excess of supply, which would be great for consumers. It could be the case that demand increases, and it could be even longer.

I'd say early 2028 is our best guess at when things are going to start to go back to normal.