Apple CEO: Component cost surge makes price hikes unavoidable

Apple CEO Tim Cook has signaled that price increases for its products are becoming inevitable due to escalating component costs, particularly in the memory and storage sectors. Cook described the current situation as unsustainable, stating, "Unfortunately, price increases are unavoidable." He explained that while Apple has strived to mitigate these rising costs and protect customers, the situation has reached a point where it can no longer be absorbed.

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Unfortunately, price increases are unavoidable.

The primary driver behind these cost pressures is the explosive demand for AI server chips, such as High Bandwidth Memory (HBM). This has led to a significant limitation in the supply of DRAM and NAND flash memory, which are crucial for mobile and PC devices. Global memory chip manufacturers are prioritizing production for high-margin AI server chips, consequently pushing consumer-grade memory chips to the back of the supply chain.

Cook likened the current memory supply shortage to a "flood of the century," noting that he has not witnessed such a situation in his over 40 years in the industry. He urged memory chip makers to ensure that prices and supply for consumer products return to reasonable levels. This scarcity is particularly challenging for Apple, as its upcoming "Apple Intelligence" on-device AI features require increased DRAM capacity in future devices.

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We have done our best to mitigate the enormous price increases being passed on to us and have tried to protect our customers from price increases, but the current situation is no longer sustainable.

Industry analysts predict that Apple will need to significantly raise prices to maintain its current profit margins. TechInsights estimates that the iPhone 18 Pro's launch price could increase by approximately $270 (around 410,000 Korean won) compared to its predecessor to preserve Apple's profit margins. Signs of this price adjustment are already evident, with Apple removing the lowest storage option for the Mac Mini, effectively increasing its starting price by $200.

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Consumers are lacking supply when they want devices, and memory companies are making enormous price increases.

The anticipated price hikes are expected to be most prominent with the iPhone 18 series, slated for release in September. The potential inclusion of a foldable iPhone model could further drive up costs. This situation marks the first major test for new CEO John Ternus, who will take over from Cook in September, as he navigates these pricing challenges and potential market backlash.

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Memory prices and supply must return to reasonable levels for consumer products.