Tim Cook Says Apple Price Increases Are 'Unavoidable' Due to Memory Costs

[capamac]

It’s yes, right? Right?

Right. Mmm hmm. You bet.

 

[youdontsay]

I don't think unsustainable only means losing money (being in the red). It can mean decreasing profits to the point of having to make major negative changes to the company. If you expect any company to operate at cost, that's highly impractical.

True. I guess I was trying to highlight that it’s a choice and not something the my HAVE TO do. I’m not expecting them to operate at cost. But reducing profit margin is different than operating at cost. If you still make money, then any negative change to the company is also a choice you make to prioritize one thing over another one. Again I understand why they will do it I just don’t like the framing they use.

 

[ronno]

Yes, you got it. They started with the Apple I and since then, everything has only gotten worse with each new model.

You should read the post I was responding to.

 

[dblissmn]

Corporate profits in the US tended to be around five percent of total GDP, decade after decade . . . until the George W. Bush tax cuts, when they roughly doubled to 10 percent. Which also happens to be the point that the economy in this country really stopped delivering for ordinary people. Apple is no major exception (other than Michael Spindler finding a way to make Apple lose money at the peak of the 1990s boom) -- it's just that their margins are higher, stabilizing out around the 21 percent mark around 2013 through to around 2021, but then sharply rising again after the pandemic to around 26 percent. By any stretch, that is a monster profit margin. So I suspect most of this is Cook not wanting to have to tell his shareholders they're going to have to "make do" with "a mere" 21 percent again. After all, with the way corporate fiduciary rules in the US have been since the early 1980s, shareholders have been held on a pedestal and every other stakeholder deprecated.

 

[youdontsay]

"Unsustainable" does not automatically mean they'll "lose money". That is YOUR interpretation, and yours only.

True. I was just trying to highlight that using « unsustainable » is a framing that make them look like victims and that they HAVE TO act on it while in the end it’s all about a choice they are making. They might not be losing money, you’re right. But they sure are still making money haha. So in the end if their issue is that they don’t make enough money, that’s and issue they might prioritize over something else and acting on it is a choice. I just don’t like the implied « victim » framing of using « unsustainable ». But maybe that’s just me ^^

 

[livetofail]

Sure because memory pricing at apple were always fair and normal.

 

[spritle]

While not ideal, I can accept paying higher prices because Apple has bug-free software and stellar Apple Intelligence implementation.

 

[Sarafay]

AI on device could be a bit too demanding.

 

[ErneX]

Is that a myth then that Apple has super high margins on their products?

Consoles are not a good comp since they’re intentionally sold at a loss to bring people into the ecosystem. That’s why Microsoft and Sony monetize their online services, to offset the losses on the hardware.

Apple from what I know already markup their products considerably over their cost of manufacturing. I mean just take a look at how expensive it’s always been to upgrade your RAM on your Mac.

I mentioned the consoles just to point out everybody is being affected by the increased ram and storage prices. But there are many other examples of other electronic products.

Regarding their margins, the time it took them to announce they will need to increase prices due to this crisis is evidence of healthy margins. Many other hardware vendors have already increased prices multiple times while Apple did not. But now it’s their turn.

 

[Dirk Pieters]

The article forgot to mention how high the profit margin currently is. God forbid that would go down a notch.

Unfortunately that’s not how businesses work. For some reason there has to be constant growth. 🤷🏼‍♂️

 

[ErneX]

You can’t compare an Apple product with a PlayStation or Xbox. Apple has the highest profit margins in the industry. They have so much margin on the consumables (memory & storage) alone, they could literally make it free/sell it at their cost (which was way lower than industry’s cost before) and they would still make a healthy profit on the device itself.

The only reason why they’re not doing that is because the shareholders demand the same or higher profit margins. It’s not enough that the company makes money. No, it always has to make more money. It’s profoundly stupid.

I’m not comparing, I’m pointing out other examples I’m familiar with. Any electronic device that has memory or storage has increased in the past months or it’s no longer being sold or it’s about to increase. Apple actually managed to avoid having to do so for longer than most.

 

[il_teo77]

In other news, as memory becomes more and more expensive, Apple will not increase the amount of memory per device anytime soon. They will cap it at the current level, which will probably already translate in a massive price increase. The upside? iOS, Apple Intelligence, MacOS will have to become more and more efficient in handling the current memory instead of just telling the hardware guys to "increase the RAM". In turn this will translate into a longer support for older models... (I hope)

 

[Macalicious2011]

The upside? iOS, Apple Intelligence, MacOS will have to become more and more efficient in handling the current memory instead of just telling the hardware guys to "increase the RAM". In turn this will translate into a longer support for older models... (I hope)

The ambitions Apple intelligence will be scaled down. It was announced in 2024 when memory wasn’t constrained. Today wholesale prices have 3-5x for ddr5.

LLMs need memory and noc,after how efficient you are, you need ram for good models.

 

[ErneX]

No but they still offer cheaper devices, especially in Europe where for example Galaxy and Pixels can have up to 40% price difference vs iPhones. In US it is not so noticeable, but Apple has already lost EU market thanks to their market strategy where they never discount their phones and also because of stupid EU taxation

Mid range Android phones are getting memory and storage reductions:

RAM Crisis is Squeezing Mid-Range & Budget Phone Specs in 2026

The global RAM crisis is forcing smartphone makers to bring back plastic frames and hybrid SIM slots in 2026 and thus control costs.

www.androidheadlines.com

Called it. They KNEW about this and did NOTHING. They could have invested into a NEW chip plant with one of their mem suppliers and OWNED it, Securing their future Supply. Did they? Nope. They HAVE to look decades ahead to secure their product lines, Tim Cook Failed. The Next Five years of products are in jeopardy if they sit on their laurels. High prices across the board. RAM AND Memory is key to their products and what is gonna happen? low sales=Low profit. So IS Apple Gonna invest into new fab plants? Billion dollar question. Apple has money to waste on it.

Many memory manufacturers have disappeared for building capacity that by the time it went online was not cost effective anymore due to oversupply. It’s more complicated than what you think.

 

[il_teo77]

The ambitions Apple intelligence will be scaled down. It was announced in 2024 when memory wasn’t constrained. Today wholesale prices have 3-5x for ddr5.

LLMs need memory and noc,after how efficient you are, you need ram for good models.

Unless you pivot from transformer based LLMs to RNNs (Recurrent Neural Networks) which are much more memory efficient and which Apple has demonstrated can be trained 600 times faster than previously thought (https://machinelearning.apple.com/research/large-scale-rnns).

"
Why Recurrent Models Still Matter

The computational cost of the attention mechanism in a transformer grows quadratically with sequence length, whereas the computation required for a single forward pass through an RNN is the same regardless of how much context came before. This enables constant-time token generation during inference, making them particularly attractive for efficient deployment."


Edit: added excerpt from paper.

 

[Jovijoker]

In other words, if you were thinking of buying in the next 6 months, probably now is the time.

Or don't buy. You have choices!

 

[Regbial]

Gee well, maybe you should stop pushing AI so much... and this wouldn't be such a problem.. 🤯

 

[Macalicious2011]

Unless you pivot from transformer based LLMs to RNNs (Recurrent Neural Networks) which are much more memory efficient and which Apple has demonstrated can be trained 600 times faster than previously thought (https://machinelearning.apple.com/research/large-scale-rnns).

"
Why Recurrent Models Still Matter

The computational cost of the attention mechanism in a transformer grows quadratically with sequence length, whereas the computation required for a single forward pass through an RNN is the same regardless of how much context came before. This enables constant-time token generation during inference, making them particularly attractive for efficient deployment."


Edit: added excerpt from paper.

That's good! Hopefully we will see more use of RNN for local models because LLMs might not be financially viable for small devices.

 

[subjonas]

Nobody expects that.

Most people don't, but a few off the beaten path do. The person I responded to implied that operating at cost would be sustainable.

 

[Dirk Pieters]

How would increasing prices make the company earn money?

If a company is a reseller of product (like Apple is sort of a reseller for memory) and the price of that product goes up, then the reselling company has 2 choices: not raise prices and eat up the difference themselves or raise prices to keep similar profits.

So increasing the customer price when the product you are reselling becomes more expensive lets you make the same money as before. But yes: the customer gets the short straw.

like when you open a sandwich restaurant and you sell sandwiches for good prices, everyone will buy from you. BUT when you increase the prices, nobody is buying from you and will look for other restaurants

Except there aren't many companies who offer a similar product to what Apple does. It is nothing like something common as a sandwich.

I think that most alternatives are a step back. I would consider having to use a Windows machine or an Android phone a serious step back. Ymmv.

 

[Pezimak]

"Unfortunately, price increases are unavoidable," said Cook. "We're doing our best to mitigate the huge increases that are being passed to us, and we've been trying to shield our customers from the increases, but the situation has become unsustainable."

.................... Whilst Apple are also being one of THE Main arbiters causing these price increases in the first place by utilising Ai to serve millions of people. It is a win win for these American tech giants, they get you to pay them to use Ai services then get you to pay for the infrastructure impact too by increasing prices across the board.

I think the vast majority of people would rather go without Ai and have cheaper prices, but the US tech company strangle hold monopoly on the Ai market is just too tempting. People will say it is unavoidable, er yes it is, it is VERY avoidable, they just stop chasing the Ai rabbit hole. Sooner the Ai bubble bursts the better, Apple best be prepared to see a slow down in sales just like everyone else has who have raised their prices.

 

[Dirk Pieters]

I switched from iPhone to Samsung A17 this year. The A17 is a $175 smartphone, new. Apple doesn't have anything that competes at this price point.

That Samsung phone is probably powered by Android so it's basically a Trojan horse in your pocket sending everything you do and everywhere you go to Google, in order for that data to be sold to other companies.

You are right: Apple has no alternative for this. Thank God they don't.

 

[curnalpanic]

Meanwhile, my Micron stock gains should offset that for many years to come.

 

[tim-apple-silicon]

Because God forbid they dip into their profit margin

 

[Dirk Pieters]

"High margins allows Apple to invest heavily in R&D without relying on risks loans or taking on unfavourable investors."

Xerox PARC did about half of the R&D ... : )

And the BSD folks did the other half of the R&D. : )

And yet, without Apple, neither of those companies' tech would have resulted in what Apple did.

Xerox and BSD built tech. Apple turned that tech into a product that people want. The greatest tech ever invented, not turned into a product that people want, but sitting unused on a shelf is worthless. Look up the YouTube movie about the discussion between Jobs and the OpenDoc developer.