In an interview with the Wall Street Journal, Apple CEO Tim Cook said rising memory prices would force Apple to pass those costs on to consumers. In other words, already expensive Apple products are about to get a little more expensive in the coming months.
Apple generally tries to protect consumers from rising component costs by finding other ways to reduce manufacturing costs. The industry-wide memory shortage, however, presents a unique scenario that ultimately forced Apple’s hand. “We are doing our best to mitigate the huge increases imposed on us and we are trying to protect our customers from these increases,” Cook said, “but the situation has become untenable.”
The reason for increasing memory costs is directly linked to the AI boom. Companies like OpenAI need thousands of GPUs requiring specialized memory. And because AI companies are willing to pay a lot of money and sometimes make upfront cash payments, manufacturers naturally prioritize this type of memory over the type of memory chips found in consumer products like laptops and smartphones. This impacts resources that can be used for traditional memory chip production, which in turn reduces supply and drives up prices.
The WSJ specifies in particular that Apple’s price increases could be substantial. According to a study by a technology company cited by the Journal, Apple would have to increase the cost of an iPhone by $270 in order to maintain its current profit margins. This is clearly a huge leap, especially since Apple has more or less kept iPhone prices stable in recent years.
The timing for Apple is far from ideal
There’s never a good time to raise prices, but this particular moment arguably puts Apple in a bit of a conundrum. This fall, Apple reportedly unveiled its highly anticipated foldable iPhone, a device that some say could be called the iPhone Ultra. And while nothing is set in stone yet, credible reports have indicated that the entry-level version of the device could cost $1,999. And when you factor in additional storage tiers, a 2TB iPhone Ultra could be on track to hit $3,000.
Suffice it to say that the iPhone Ultra is a premium device and will be priced accordingly. However, if Apple is forced to price it even higher due to soaring memory costs, the device might simply be too expensive for many potential buyers. The last thing Apple wants to do is release one of its most anticipated products, only to see sales stagnate due to sticker shock. Apple already experienced this phenomenon when it released the ridiculously expensive Apple Vision Pro, which had a starting price of $3,500.
As it stands, Cook has not disclosed any details on the timeline of Apple’s price increases. He also did not specify which products could see their prices increase. But given the scale of the memory shortage, it could be difficult for Apple to leave its traditional iPhone pricing system untouched. Speaking about the uniqueness of the situation, Cook told the Journal, “This is a 100-year flood,” adding that he “hasn’t seen anything like this in any area in over 40 years.”
