Rising memory chip prices fueled by massive AI investments are squeezing Apple's supply chain and profit margins, with analysts warning that consumers may soon pay more for iPhones.
Apple CEO Tim Cook highlighted the issue during the company's earnings call last week, noting significant increases in memory pricing and constraints in chip supplies. Despite record iPhone sales and profits, the comments contributed to pressure on Apple's stock.
Analysts say suppliers are gaining leverage as AI giants like OpenAI, Google, Meta, and Microsoft pour hundreds of billions into building data centers, outbidding Apple for shared components such as DRAM (for fast app performance) and NAND flash memory (for storage).
Estimates indicate DRAM prices could quadruple from 2023 levels by year-end, while NAND could more than triple.
For the base-model iPhone 18 expected this fall, memory costs alone could rise by about $57 compared to the current iPhone 17, according to Howard—a substantial hit for a device retailing around $799.
"Apple is getting squeezed for sure," said Sravan Kundojjala of SemiAnalysis.Apple has long dominated its suppliers, but the shift is eroding that power. Suppliers, previously focused on meeting Apple's demands, now prioritize higher-margin AI contracts, forcing the iPhone maker into a tougher negotiating position.
While Apple has so far absorbed much of the impact, ongoing shortages and price surges could lead to reduced margins or higher consumer prices in the coming year.