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

[hovscorpion12]

I’m tempted to wait until October for the next Mac mini, but I’m quite sure that Apple will have risen the prices by then, so it’s now or never. I’ll get the M5 MacBook Air and hopefully it will last me many years.

I’m going go on a limb and say that’s a solid decision. I’m on the same boat as you with the M6 in October, but fearing the price increase, I took the chance now.

Unfortunately, we have no idea of what Apple’s pricing strategy would be.

 

[Flight Plan]

I am totally shocked that you responded to every person’s comment lol that’s commitment

LOL, yeah. For interesting topics, I like to read all the comments chronologically. Multi-responses like this actually save me a lot of time.

Your posts are so good in addressing many of the points I'd like to address as well that I feel you're saving me time 🙂.

About foundries: To me, Apple is the kind of company that likes to be in control of things. When outsourcing things works, such as in hardware assembly, they do it. But if it doesn't work or deteriorates, such as in PowerPC and then Intel CPU development (not manufacturing), they take over or at least pay for companies to have a branch working exclusively for them.

Apple is also a company that invests in things that don't have immediate returns.

Based on all that, I don't know what's keeping Apple or a conglomerate of companies to have one or more of the major memory producers build some production capacity for them.

You might remember the big "sapphire glass" company that Apple wanted ownership of some years ago; mostly for Apple Watch, I think. The hype was HUGE, and then suddenly there were financial irregularities with that company, and Apple didn't buy them. Who knows what happened; but Apple makes more watches and watch ultras than ever before. They sure aren't using paper mache to make the watch glass.

But yeah, it's interesting to see what (and how much) Apple likes to get into arrangements with component companies.

Shareholders would nuke the CEO if they did that. 😉

They might nuke the stock by selling it.

And THAT could hurt the CEO's employability.

If there's mass-selling in your company's stock, that's not just a bad thing for your stock options or whatever. It actually hurts your company's ability to do things that require money/stock.

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.

The US Postal Service is charged to operate at cost. And that's not merely "impractical", it has been the source of many problems for the USPS. And it's always the taxpayers (aka "the owners") to pay the price.

I don't think anyone doubts the capabilities of AI or its profound effects on the economy and society. But that doesn't mean it's not a bubble: the money going in to money-losing AI companies is astronomical and it's very difficult to see the money invested today ever being paid paid back in actual revenues and profits.

How to Recognize a Bubble:

#247 - Your cab driver (or Uber driver) is trading it.
#281 - Your apartment maintenance guy talks about how he's trading it...while he's under your sink removing your broken garbage disposal.
#316 - The people in your bible study group, who have never once contributed even a single nickel to the Wednesday evening "snack fund", are trading in that thing.
#423 - The top companies in that thing don't have any earnings, but you still see pictures of their CEOs on the covers of magazines or being interviewed on cable channels.

---------------------

On a serious note, there's a book that's really good, and I think everybody should read it. "Extraordinary Popular Delusions and the Madness of Crowds" was written by Charles Mackay in 1841, and it has stories of bubbles. lt's an interesting read, is available in book form or on Kindle.

It covers famous and not-so-famous historical events where people became caught up in the bubble of the day, what happened when that bubble popped, and how people reacted with hysteria, greed, obsessions, panic, and more. It's absolutely fascinating, and I think it would benefit everybody who trades stocks, bonds, NFTs, bitcoin, or does online betting of any kind.

It's also very interesting to see that we who live in the current era have a lot more similarities than differences with people who lived in the world 180 years ago.

Each new generation of AI models will be more efficient, each new generation of chips cheaper to purchase and run, and there's also no great "moat" surrounding AI: the technology is fairly well understood and accessible. Money invested today doesn't prevent tomorrow's new AI startups doing the same things at much lower cost.

Very good points. Parallels include improvements to the light bulb, automobile, and airplanes of those early days.

Very good point. The "bubble" isn't AI going away (as many people are frothing at the mouth for), but becoming a commodity. Something that goes into an OS or is a paid service if you need more than what can be provided locally by devices.

For sure. The "dot com bubble" burst in 2000. But the internet didn't go away. Today we have EVERYTHING using the internet, from garage door openers to washing machines.

And the housing bubble of 2008 didn't make houses go away. Or banks.

It would be fair to say the COVID pandemic was also a greater economic disruption than AI currently is.

We damaged our society far far more all by ourselves during Covid than any war ever could have.

That’s how companies keep raising prices and inflation happens. We have seen it too much lately. They want all the money. It’s for the shareholders, the good guys who make their pay happen! Haha.

Inflation is caused when governments raise the money supply, otherwise known as "printing more money". That is EXACTLY what happened during Covid. We still haven't recovered from that, and it may very well be impossible to do so at this point.

 

[bushman4]

Apple doesn’t have to operate at 43%to 48% profit margins continuously . They could absorb some of the pain and keep their loyal customers happy
Bottom Line: People will hold on to their iPhones longer

 

[Granville]

The classic "but we have $30 extra costs, so we HAVE TO raise the price with $200"

 

[seek3r]

The classic "but we have $30 extra costs, so we HAVE TO raise the price with $200"

You mean $154 in extra costs?

TechInsights estimates that Apple paid around $39 for the 12GB of DRAM in the iPhone 17 Pro, a cost that could climb to $145 in the ‌iPhone 18 Pro‌. The 256GB flash storage tier, which cost Apple about $13 in the ‌iPhone 17 Pro‌, could rise to $51.

Report: iPhone 18 Pro Could Start at $1,399 Amid Price Hikes

Apple this week confirmed that price increases are coming across its lineup due to rising memory chip costs, and now The Wall Street Journal has published its own analysis estimating the iPhone 18 Pro could start as high as $1,399. Speaking with The Wall Street Journal, Apple CEO Tim Cook...

www.macrumors.com

 

[Smartuser]

Apple doesn’t have to operate at 43%to 48% profit margins continuously . They could absorb some of the pain and keep their loyal customers happy
Bottom Line: People will hold on to their iPhones longer

This has been posted in a million variants. One of the reasons this company can do what others can't is that they make money.

Please remind me again of the wonderful major innovations by HP, ASUS and Dell over the last 20 years, which are all companies that presumably are making less profit. Also, are those companies eating the cost increases?

As posted before, pricing is an optimization problem, and I'm sure Apple won't make the customers pay 100% of the increases.

 

[Smartuser]

You might remember the big "sapphire glass" company that Apple wanted ownership of some years ago; mostly for Apple Watch, I think. The hype was HUGE, and then suddenly there were financial irregularities with that company, and Apple didn't buy them. Who knows what happened; but Apple makes more watches and watch ultras than ever before. They sure aren't using paper mache to make the watch glass.

But yeah, it's interesting to see what (and how much) Apple likes to get into arrangements with component companies.

I vaguely remember that glass story, I was never really interested in it too much because there was never a glass shortage IIRC, so it had little relevance. It was one of these stories that got hyped because the company was in Arizona or something.

About the current situation: I'm not an economist, but I think there's a danger that at some point the computer industry will see demand destruction for anything not related to data centers. After some time, people will simply reduce their consumption.

For this reason, I think that at least Apple would be the kind of company to have one of these companies making memory to build a facility for Apple that is controlled by Apple. Of course, this would cost some money, and it's possible that Apple has internal projects that indicate that it wouldn't be worth it because the situation (like so many others) will pass.

How to Recognize a Bubble:

#247 - Your cab driver (or Uber driver) is trading it.
#281 - Your apartment maintenance guy talks about how he's trading it...while he's under your sink removing your broken garbage disposal.
#316 - The people in your bible study group, who have never once contributed even a single nickel to the Wednesday evening "snack fund", are trading in that thing.
#423 - The top companies in that thing don't have any earnings, but you still see pictures of their CEOs on the covers of magazines or being interviewed on cable channels.

#987 - People who can't do basic math and don't know what an exponent is are talking about "exponential growth".
#988 - "Analysts" who extend recent growth endlessly into the future (see: Simpsons Disco Guy and hit disco records sale projection).

An exponent can be 1.000000000000001, or even less than one.

I fondly remember analysts' currency value predictions from decades ago. OMG, at this rate currency X will reach zero in three weeks! (One week later 🙂 OMG, at this rate currency X will be more valuable than all the atoms in the universe combined!

 

[capamac]

In my 20s I purchased or acquired for free a series of older computers that were several years old. I found some people were happy to give away older hardware. It's how I acquired hardware from about 1994 through 2007.

It was older gear but it worked fine, and the price was right :^)

One of my favorites in this time period was a used, free Mac IIci. I had acquired a few free 680x0 Macs by this time, and so I swapped RAM sticks so that the IIci got bumped to like 32 megabytes of RAM or so (forget the exact number.) 32 megs of RAM in IIci is a *lot* of RAM for a IIci. I finally stopped using that IIci ... maybe around 2000 or so. Can't recall. Switched to a free PowerMac 8100/100 afterward.

In 2007 I finally bought a brand new computer, a Compaq 1ghz AMD tower with 1 GB RAM at Walmart for $300-something.

But poking around Craigslist ... there's numerous dirt-cheap computers for sale that are still quite usable. You see used iMacs for sale in the $75 range all the time. Recent-ish (10 years old, max) PCs going for fourty bucks, etc. They're not the fastest ... but I'm sure you can still do lots of stuff on 'em.

 

[Abazigal]

For sure. The "dot com bubble" burst in 2000. But the internet didn't go away. Today we have EVERYTHING using the internet, from garage door openers to washing machines.

I have been thinking about this.

The thing about the internet was the economics it enabled - business models entailing zero marginal costs. An example is selling stuff online. With the internet (and a robust delivery network), you can reach out to anyone around the world, which in turn allows sellers to focus on niche product categories that would normally not have made any economic sense in a brick and mortar store. In short, the more you sell (or the more people you can reach out to), the cheaper it gets per unit of sales. We also have fast internet to thank for developments such as google, ride-hailing, music and video streaming, even self-driving cars.

The problem with AI is that it has terrible economics. The more you use, the more expensive it gets. So you are stuck with a ton of unused data centres that don't make sense to keep in operation. They are literally white elephants.

I feel like this AI bubble will be nothing like the dot-com bust of yesteryear. We will not be left with a ton of infrastructure that's cheap to operate and which leads to the next generation of innovation.

 

[LFO8]

It's also very interesting to see that we who live in the current era have a lot more similarities than differences with people who lived in the world 180 years ago.

Of course. Because human psychology remains the same over thousands, even hundreds of thousands of years.

 

[uburoibob]

All this for the primary reason of processing crypto currency. The cute face swap and writing in real English is just the lipstick on the Kracken.

 

[uburoibob]

So, does this cover the unified RAM that is integrated into the M-Series chips?

 

[paranoidgraylady]

I had to create an account because I didn’t see anyone else coming from my perspective (which is not very techy but I do read everything and try to grasp as much as possible). I’m older, now out of the sciences (not IT!), and have a small pet sitting biz in a small town in what I’d describe as a developing state in the US. I’m getting older, more paranoid and less “profitable” than Apple and the other Kings so my view is different but it’s realistic enough about the future and the economy etc but also the past and the mistakes and consequences.
MY POINTS (finally) are a few:
1: if Apple stopped hoarding our old and obsolete data for so long and making users pay for the space to store it on their own devices against their will and adding permanent and often crap apps they’ve abandoned, we would have plenty of space for functionally working AI apps and more.
2: they are making BILLIONS OF DOLLARS on our information from every app and button we touch all day everyday and that’s going to be tenfold the first day everyone has AI on their iPhone collectively. Probably within minutes. I would buy stocks with your new devices. Trust me. I’m not an expert but I have seen what’s happening and that’s not a bubble either. As someone already mentioned, they’re going to change us to get Siri to tell us what she’s learned from our own information. And not all of it is going to be smart or worth repeating.
3: isn’t anyone who’s excited about the app on their phone concerned at all about the fact that it will have access to EVERYTHING on your devices (and cloud and everything attached, linked or nearby), and it’s going to be shared with billions of data harvesting people who are buying and selling it to the next highest bidders until everyone has access to everything you should not be sharing for so many different reasons?!
One example from my previous professional experience- health data. It’s all out there now, first on social media and now detailed records about very specific issues that will (mark my words) affect every aspect of healthcare costs and coverage availability very soon.
This is just one catastrophic event that will be managed by the government the same way phone carriers don’t have to offer spam protection that actually works and utilizes are monopolies and churches are political and politicians are religious promoters and other huge errors in justice and order across the globe.
I am not arguing with anyone’s opinions here. I’m just stating my opinion and thoughts and wondering if anyone else has thoughts about this angle even with the enthusiasm of the progressing technology or in addition to the exorbitant costs of upgrading to new technologies to improve living in the future that is now?
Thank you!
Little old lady 👵🏼 out!

 

[Abazigal]

1: if Apple stopped hoarding our old and obsolete data for so long and making users pay for the space to store it on their own devices against their will and adding permanent and often crap apps they’ve abandoned, we would have plenty of space for functionally working AI apps and more.

The stuff that takes up the most space on your device tend to be photos and backups, both of which you have full control over. You can also delete apps you don't want, but they generally don't take up all that much space on your phone.

You also seem to be conflating ram with storage.

2: they are making BILLIONS OF DOLLARS on our information from every app and button we touch all day everyday and that’s going to be tenfold the first day everyone has AI on their iPhone collectively. Probably within minutes. I would buy stocks with your new devices. Trust me. I’m not an expert but I have seen what’s happening and that’s not a bubble either. As someone already mentioned, they’re going to change us to get Siri to tell us what she’s learned from our own information. And not all of it is going to be smart or worth repeating.

The only thing you need to get Siri AI working on your phone is a device that meets the required specs (ie: at least 8gb ram). I am not aware of Apple planning to charge a monthly fee to maintain this functionality.

3: isn’t anyone who’s excited about the app on their phone concerned at all about the fact that it will have access to EVERYTHING on your devices (and cloud and everything attached, linked or nearby), and it’s going to be shared with billions of data harvesting people who are buying and selling it to the next highest bidders until everyone has access to everything you should not be sharing for so many different reasons?!
One example from my previous professional experience- health data. It’s all out there now, first on social media and now detailed records about very specific issues that will (mark my words) affect every aspect of healthcare costs and coverage availability very soon.

Siri AI will also not be sharing this data with anything or anyone else. iOS devices give you the option of deciding which apps you want to share your data with. If your data is out there, it's because you gave the developer access to your data. Don't trust them? Then stick with Apple's stock apps.

Also, I would argue that this is what makes Apple uniquely positioned to offer such a service on their devices, and I can understand why they don't want to give third party AI services access to your device in the EU. Because Apple controls the hardware and software, Siri AI is able to integrate with your device and access data in a manner that other alternatives such as chatGPT or Gemini cannot (for example, Siri AI can read your messages and know more about you; Gemini lacks such capabilities).

I understand why Apple needs the access, I trust Apple enough to give them said access, which is more than can be said for any other third party alternative out there.

This is just one catastrophic event that will be managed by the government the same way phone carriers don’t have to offer spam protection that actually works and utilizes are monopolies and churches are political and politicians are religious promoters and other huge errors in justice and order across the globe.

I have no idea what this even means.

 

[BillyJoeJimBob]

It's almost like no one saw any of this coming ~10 years ago and decided that it would be a good idea to build their own fab plant to make their own proprietary chips, etc., and make sure they had access to their own sources of raw materials.

 

[paranoidgraylady]

Hi @Abazigal, I’m sure you’re right. I get RAM and storage confused a lot but I do have an understanding of the difference. This is definitely not my pool of knowledge but I love learning and tinkering around if I can’t break stuff. I have plenty of space because I do delete what I don’t need. 33 of the 44 GB I’m using are IOS platforms. The other 11GB are my stuff and I still need to get a bunch of junk off of my phone. But the space that’s being used for apps that are deleted or never used but can’t be deleted and still have data for whatever reason that I can’t access, delete or control is still stored on my phone and it’s not unique to me. (Attached pic).
I may be wrong, I thought someone mentioned a few times that the AI service was not going to be available for free or completely free without upgrading or subscription… plus the added memory and data storage it’s going to require on devices to work with all the other connected apps. I have a 14, so I don’t even qualify. I’m only interested in the whole process and how it’s going to affect, everything really.
Regarding privacy, this I know. I worked in clinical research medicine for 25 years as a human subjects protection scientist reviewing drug and device trials for medical and legal safety guidelines established by International, US Federal and DOD guidelines (3 sets because the government is all or nothing). I have read the privacy policies for Apple, Google and 100 other companies and they are all collecting data and sharing things with others and indemnifying themselves from any ramifications with very specific laws and verbiage. They may be a bit more sensitive to privacy laws than google and amazon and Facebook doesn’t even pretend to try, but they are collecting information and it’s going out of the building. It’s also worth billions.
This is directly related to the part about health information being stored and being collected from phones and devices, even when not used specifically or turned on, shared or when the app is deleted. This will come back to bite us on our collective private servers. I attached a screenshot from the privacy policy but the whole PDF is worth reading.
For reference, maps and health are deleted and both said 0 data in the app before I deleted them but showed data here that I can’t find or remove. They are not in cloud or elsewhere.

 

[thettareddast]

What an odd example... posting something on Craigslist as a private entity to sell on to a 3rd party because you are no longer using said item. Not to base a business on.. right?

You appear to me to be placing individuals on the same footing as international mega corporations or governments.. Obviously practice has shown that the same rules do not apply. And I brought food et al into it as I was speaking to the economy as a whole and the consequences for us of how big corps and governments treat that creation.

You keep bringing it back to Apple alone, but I am simply pointing out that they are just another (amongst many.. and some we do depend on for our basic living needs) that are doing the dance at our expense and throw up whatever justification for raising prices yet again. "Uh, we are soooo sorry to do this mr ... but we are gonna HAVE to raise prices to correct for inflation"

How many emails and letters like that over the past years? But eh.. you can choose to go without internet.. right? Media? Your phone service? Food? Where you live? You are free after all.

If you think power is 'heavily regulated' ... yeah by the power companies apparently.. and housing.. don't get me started most 'social' housing already owned by investment companies for whom.. you guessed it: "Number must go up".

The smallminded thinking is why you keep trying to cherrypick examples bad, and still miss the point entirely.

It does not matter the reason you sell an item on Craigslist or Apple sell a computer from their retail shop and whether you are big or small. The only thing that matters is that you, as a seller, have a right to maximize your economic interest (or whatever interest you choose), and are under no coercion to price it according to someone elses rubric.

Not only do you miss the broad points, you also are completely ignorant of actual detailed, factual points.

Internet, media, and phone are heavily regulated at both the federal and the state level, and sometimes local level, that concern consumer protection and service protection. Stringent scrutinity from antitrust divisions maade mergers of providers in the past extremely long-drawn and hard-fought.

If you are so convinced that big evil companies hold such dominion over the market place, what happened to the smartphone businesses of LG, HTC, Sony, Motorola, and Microsoft? They're too puny to operate? They're not smart enough or resourceful enough to flex their muscles and price as they wanted?

Food retailing in America is competitive beyond belief. There are some 50,000 supermarkets in the country (even excluding smaller grocers and convenient stores), each the size of 50,000 square feet, selling 50,000 individual products (SKUs). They open 7 days a week, carrying fresh produce and durable perishables from 50 countries of origin.... and for all of this service they get to keep a net income of 3 cents out of every dollar of goods sold. It is a ridiculous value.

The power industry is regulated by the Federal Energy Regulatory Commission, and the utility regulation at each state who oversee the electricity rates, the capacity planning, the quality of service, and profit allowed. Providers literally have to write cases to commissioners (elected or appointed by elected officials) to justify their prices.

If you don't understand how any of this works, contact your local commissions and ask for information. Or perhaps sit in on a local elementary school class when they start to teach about civics and government.

 

[artifex]

It's almost like no one saw any of this coming ~10 years ago and decided that it would be a good idea to build their own fab plant to make their own proprietary chips, etc., and make sure they had access to their own sources of raw materials.

In 2023, there was such a glut and downturn in business that memory manufacturers said they were going to decrease production to help prop the prices up.

 

[maxoakland]

At least I can end sentences in periods.

Also, I've been in these discussions. I could come up with a lot of things, and you'll shoot them all down.

you’re psychic?

You believe they should work at cost or at low margins, fine. There are a lot of companies who get low margins, I suggest you get their highly innovative products.

“If you don’t like it, leave” is not a valid argument

 

[maxoakland]

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.

It’s good to know there’s a relatively easy solution to fix some things. Undoing those W Bush tax cuts and all high income tax cuts after that would do a lot of good

 

[maxoakland]

Well, at least they aren't cheeky enough to try and sell an 8GB model.

But low end users are fine with 8GB RAM!!!!

 

[maxoakland]

Would you if you had a business?

Are you a business? Why are people fighting for the business to maximize profits Instead of fighting for their own interest to get cheaper products

Are we really so brainwashed that we do a corporations job convincing us higher prices are reasonable for them?

 

[maxoakland]

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.

You missed the point by a mile. Theyre saying Apple doesn’t need to keep their profit margins as high as they are because they have made so much profit with their overly high margins over the years

Now they could be doing us a solid for supporting their business during a hard time. They could easily afford it. But line must go up. That’s the only thing that matters to them

 

[Smartuser]

you’re psychic?

Long-term experience makes one recognize discussion patterns and whether continuing a debate is worth it, so it is a little bit like that, yes.

“If you don’t like it, leave” is not a valid argument

It absolutely is in a market with choices. I have left brands I didn't like and started buying others. It's not a solution when people complain about politics in their country, because moving to another country is an enormous effort and often not even viable or possible.

But low end users are fine with 8GB RAM!!!!

Terry Pratchett's quote about multiple exclamation marks holds.

Are you a business? Why are people fighting for the business to maximize profits Instead of fighting for their own interest to get cheaper products

Are we really so brainwashed that we do a corporations job convincing us higher prices are reasonable for them?

When intelligent people negotiate or reason, they take the other side's interests into account because everything else would be like emotional rants with multiple exclamation marks, missing question marks or periods at the end of sentences.

Sure, I'd love for Apple to give me everything for free or transfer all their money to my bank account, but that can't happen if they want to survive. They're also very welcome to not raise prices. But going for any of this isn't realistic, and it doesn't constitute fighting for my interest, it only constitutes pointless ranting and rambling.

 

[Dirk Pieters]

You missed the point by a mile. Theyre saying Apple doesn’t need to keep their profit margins as high as they are because they have made so much profit with their overly high margins over the years

Now they could be doing us a solid for supporting their business during a hard time. They could easily afford it. But line must go up. That’s the only thing that matters to them

That's what a business does.

Hate the game, not the player.