There's definitely going to be a difference in opinion about what kind of profits should be considered "sustainable". But as fun as it is to be an armchair CFO, in the end, without access to a company's books and all the inside information, we can only speculate.
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Tim Cook Says Apple Price Increases Are 'Unavoidable' Due to Memory Costs
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podycust
macrumors 6502a
The bean counter Tim say he wants more money!! What a shocker
Reason077
macrumors 601
Well, at least they aren't cheeky enough to try and sell an 8GB model.
Dirk Pieters
macrumors 6502a
Not really. Bean counter Tim is confronted with a price hike outside his control for a product that he buys and uses in his devices.
And bean counter Tim has decided he's not going to eat up the profit margins for that price hike himself. He is going to forward that price hike to his customers, like every other company does.
Sometimes you're confronted with a **** show reality outside your control. I'm 100% guaranteed that no CEO wants this, because the customer ends up as the one being shafted.
Dirk Pieters
macrumors 6502a
Would you if you had a business?
and when component costs will decrease, Apple will lower its costs ?
Apple is raising its prices to offset the high cost of memory and storage, CEO Tim Cook told The Wall Street Journal. Apple is no longer able to absorb the increased prices and will need to pass some of the cost on to consumers.
"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."
Cook did not say which products will get price increases or how much pricing will go up. The iPhone 18 Pro and iPhone 18 Pro Max coming in September could be more expensive than the iPhone 17 Pro and iPhone 17 Pro Max. Prices on iPads and Macs could go up in the near future.
Apple already raised the price of the Mac mini from $599 to $799 by eliminating its lowest-tier model. Apple has also eliminated several higher-tier Mac mini and Mac Studio options.
Growing demand for memory and storage chips from AI companies has led to chip shortages and higher costs. The Wall Street Journal suggests Apple will need to increase device costs "substantially" to maintain its current profit margins given the cost of memory chips and SSDs. Research firm TechInsights claims Apple will need to make the iPhone 18 Pro around $270 more expensive to keep its existing profit margin.
Apple is struggling more with memory chips, but storage chips are also an issue. "There's less supply at a time when consumers want devices and the memory guys are passing along huge price increases," Cook told The Wall Street Journal. Cook said Apple will use its cash to increase memory supply, but he did not give details on what that means.
Apple does not plan to create its own memory and storage factories. "We can't do everything," Cook said. "We know what we're good at."
While memory chip makers like Samsung, SK Hynix, and Micron are increasing production capacity, much of that added capacity will prioritize server chips. Demand for consumer-device chips is expected to continue to outpace supply. At the same time, Apple needs to increase the DRAM in its devices to support new AI features. Cook likened the memory shortages to a hundred-year flood. "I've never seen anything like it in any area in over 40 years," he said.
Apple is one of the largest purchasers of memory and storage worldwide, but it is likely reluctant to make the same deals AI companies do. Those deals involve signing multi-year agreements with a large cash prepayment.
Multiple companies have already raised their prices, including Samsung, Microsoft, Sony, and Dell.
Article Link: Tim Cook Says Apple Price Increases Are 'Unavoidable' Due to Memory Costs
emulator
macrumors 65816
The irony, for years, they've been asking $200 for 256gb ssd or 8GB ram when it was just a few $.
and when components costs will go down, Apple will drecrease its prices... Logic.
Abazigal
Contributor
Except in this case, people like your sandwiches so much that even when prices increase, they willingly pay more for your food rather than shop elsewhere. That is when you know you have a sufficiently differentiated product and can afford to not get into a pricing war with your other competitors.
Reason077
macrumors 601
Yeah. I'll probably wait for the 18 as that should be a significant upgrade with its 12GB RAM, and I'm still very content with my 13. Although if I spotted an amazing deal on a refurb 17 or something I might be tempted...
TechRunner
macrumors 68030
My Apple devices are all less than two years old so I'm prepared to ride out this current shortage in the market for a few years if need be.
'We need to maintain profit margins' Says the company who charged $999 for a monitor stand, $19 for a polishing cloth, $230 for a knitted sock to put your phone in, $699 for the pro wheels kit and $69,99 for the Apple water bottle
LFO8
macrumors 6502
Which is the #1 reason for any business to increase prices. Number must never ever go down.. that’s for us customers.. the plebs
WTF?
Their profit margin on phones is over 40%
macduke
Suspended
Absolutely the F not. Guess I'm skipping my iPhone Upgrade Program re-up this year and holding onto this 17 Pro. Now that the telephoto is upgraded, I don't see a strong reason to spend $270 more on the next version.
Just imagine how expensive the iPhone Ultra is going to be now! And don't forget the MacBook Ultra or whatever. Not a great time to be coming out with ultra high-end products!
I'm glad now that I spec'd my M3 Max with 64GB memory back in 2023. Should outlast the AI bubble. I don't see this improving until after the bubble. Why? No company wants to build and scale up entire factories to increase memory production when they know this is a bubble that won't last and their margins are insanely good right now.
Would it not make sense that if Cook is saying Apple will use its cash to increase memory supply, that they will do precisely what these AI companies do to secure deals? They have even more cash, and Apple has been known in the past to buy many years of supply to attain higher margins. But I suppose it depends on what the deal is this time. If the average cost is too high, you don't want to extend your orders beyond the time horizon of the AI bubble popping when prices come crashing back down to earth. But at the same time, you don't want to increase prices on customers too much or you hurt sales.
This was my instant read as well. There isn't much point in saying this in June unless they are actually raising prices ahead of a new product launch cycle. The way they've been scaling back low end to increase margins and high end to reduce memory sales so they can spread that memory out to multiple mid-range devices to keep sales up is telling that they are coming to the end of their long-term contracts for memory and are needing to renegotiate or more likely have just finished negotiations and are putting this out now to soften the blow, especially on Ternus.
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The worst thing about AI is that the more people use it, the more people have to use it. For instance, I got by doing my web and software dev work just fine until some critical threshold was passed earlier this year and everyone and their mom started beating my proposals because they're using AI. So I'm forced into using AI to keep up or I can't support my family. I'm literally stuck between paying my mortgage and feeding my kids and using technology that is destroying the environment and will ultimately destroy my current career path. So during this lull I'm using it to pivot my career into robotics.
1ppl3
Suspended
Nvidia, Hynix , Crucial , Samsung - remember those cartel companies. They b2b Ram business model… - basically circle and after it they want YOU to buy useless AI hardware which will doesn’t work without subscription…. So also you will need to do subscription and also train AI models depending on software distribution… They are collecting humans knowledge and selling back to you wich is already was free and shared … Insane bubble. Also understand one simple rule: Never never never business will pay any tariffs - it’s all will go to the end user.
PS: that’s funny my autocorrect changed world “LLM’s” to “Aliens”
To better understand
PS: that’s funny my autocorrect changed world “LLM’s” to “Aliens”
To better understand
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TracerAnalog
macrumors 65816
Flagship phones are very expensive these days, no matter the brand or ecosystem. Cheap phones are good enough these days for most things and people should only buy what their wallet allows them, without getting fixated on any brand...
Having said that, I sometimes have to help friends with their cheaper or older phones and the difference with flagships phones is definitely noticeable. Also: switching between ecosystems is not that easy in my experience and can create quite some challenges. This obviously depends on how much someone has invested in a particular ecosystem... that's how companies try to retain their customers.
This also provides cover for Apple to recoup margin lost to tariff increases, when it hasn't been politically wise to do so overtly.
I think in practice, instead of huge retail price increases, we're going to see fewer special deals like when Amazon had bulk sales of Mac Minis for $500 and Micro Center countered with some at $439, etc. Those were no-margin deals for the retailers then, and now they're going to be squeezed even further when new shipments come in.
If they wanted to, say, shrink the Mini's case for lower BOM, they probably could, but so far just haven't because they like these lines to stay physically the same for the accessory ecosystem.
I think in practice, instead of huge retail price increases, we're going to see fewer special deals like when Amazon had bulk sales of Mac Minis for $500 and Micro Center countered with some at $439, etc. Those were no-margin deals for the retailers then, and now they're going to be squeezed even further when new shipments come in.
If they wanted to, say, shrink the Mini's case for lower BOM, they probably could, but so far just haven't because they like these lines to stay physically the same for the accessory ecosystem.
d.pedro
macrumors member
Nothing wrong with businesses being businesses.
What’s wrong with most “neoliberal” apologists is that any means used to achieve the ultimate goal of enrichment won’t normally take into account the consumers’ needs, rights and in most cases ( like Apple) these companies are constantly violating trade, commercial and environmental laws across the world. For money, like you said. Is it worth it? Nah! I’m happy with an analog phone and watch:smartphones and gadgets can’t change time or twist space, therefore I rest my case.
vegetassj4
macrumors 68020
That is the problem most people have with Ai, that and when they mix it with Quantum computers and what the outcome will be! It will destroy jobs and be used for very nefarious purposes.
Nvidia's Jensen is as out of touch and arrogant as you can get, he literally said he expects people to have a 10,000 dollar supercomputer in their homes in the future, all running local Ai agents to do tasks, of course the idiot never actually mentions how anyone will pay for it as Ai will have taken over there jobs and careers. Another one of his ideas is to have Ai servers outside your homes in the gardens and it will use YOUR internet and electricity but serve anyone in the world who wants to use Ai. His goals is basically to shove Ai hardware into every corner of the globe he can with very little regard to it's impact.
And he is promoting the sales of Ai hardware to Ai agents because their simply aren't enough humans in the world that can hit his obscene sales targets.
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Dirk Pieters
macrumors 6502a
I'm on an iPhone 14 Pro but an old phone never bothered me. Got an M4 Air 32gb/1tb last year which is going to last me at least 5 years.
Dirk Pieters
macrumors 6502a
And you probably need none of these things.
So the (insane, true) prices of these things don't affect you in any way. That polishing cloth could be $999 and your bank account would be exactly the same if you didn't buy it.
These prices are worth a giggle and then you can just move right along.