Will Apple Have To Increase iPhone Prices?
Apple raised Mac and iPad prices by up to $300 as AI chip demand from Nvidia and Google creates an unprecedented global memory shortage.
AAPL captures 90% of global smartphone profits, making a forced iPhone 18 price hike a high-stakes gamble on consumer tolerance.
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In June, Apple (NASDAQ: AAPL) raised prices on two of its modest-selling products. The price of the Apple MacBook Air with 512 gigabytes of storage surged to $1,299 from $1,099. The MacBook Pro with 1 terabyte of storage jumped to $1,999 from $1,699. The iPad Air with 128 gigabytes of storage rose from $599 to $749. Reuters found the changes on the Apple website.
Rising memory prices caused the increases. In fact, demand may be unprecedented. According to CNBC, "This year, there won't be enough memory to meet worldwide demand because powerful AI chips made by the likes of Nvidia, AMD and Google need so much of it."
If forecasts for data center growth are close to accurate, the largest tech companies will spend close to $1 trillion on data centers next year. It is not imaginable that there will be enough "memory" to go around.
Apple clearly made a strategic move about which products would get price increases and which would not.
In the most recent quarter, Apple's total revenue was $109.5 billion. Of that, $10.4 billion was Mac revenue. iPad revenue was $6.2 billion. The iPhone continues to be the engine of Apple's revenue; it was $54.3 billion in the quarter.
One unanswered question is whether the price increases on Apple's less popular products are enough to absorb rising memory costs. Otherwise, unless it wants a margin squeeze, the only place it can turn is the iPhone. And, if the pattern continues, memory prices will only get higher.
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By many measures, Apple has the most expensive smartphones in the world. And its smartphone profits are 90% of the industry's total. Apple's bottom line is at stake.
Apple faces forces that could collide. It will probably launch the new iPhone 18 in the next two months. Presumably, it will have AI upgrades to Apple Intelligence and Siri based on its Gemini partnership with Google. If Apple needs to raise iPhone prices at approximately the same time to offset memory prices, iPhone demand may take a hit.
Will consumers accept a $100 increase in the iPhone, or even one of $200? Investors may only have to wait a few weeks to find out.
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