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

[Happy_John]

It is not inevitable. Apple’s products defy Wright’s Law. Instead of getting cheaper, they’ve gotten more expensive since they were introduced nearly 20 years ago. Even with greater capability and a RAM and storage shortage, there is no way we should be paying these outrageous prices that we have been.

No, when you factor in inflation, and take a proper timeline ( Apple did not introduce their first product 20 years ago, they been around a lot longer than that.

Macintoshes, both 68k and PPC, were very often “new car money” for a professional desktop setup, and an iPhone 17e has massively more power and capacity than those machines did.

Technology is far, far cheaper now than it was in 1980. That’s not to say the current demand by “big AI” for chips, whether GPUs, NANDs, memory, or even spinning disks, isn’t screwing the consumer, but Wright’s Law does very much still apply.

What obscures that is the overconsumption of new and faster iterations year on year.

 

[hieranonymous]

Cook said Apple will use its cash to increase memory supply, but he did not give details on what that means.​

…

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.​

I think it’s kind of obvious they’re gonna start using some of their cash pile to secure supply via prepayments, no?

 

[turbineseaplane]

I'll be riding my 15" MBA M5 with 24/1TB for quite a while it looks like.

 

[now i see it]

A company can’t reach its goal of hitting a 500 trillion dollar valuation by reducing its margins

 

[Happy_John]

It is not just the base capital cost. You also need to hire the expertise to run it. And that can easily run into the billions per year. And most of that talent is foreign and the current Administration is generally against immigration (though maybe Apple could get them all those Trump Gold Visas. 😛 ).

And of course you can't build a fab in a day. And I expect the equipment that goes into it has long lead-times. And once you have that fab, it is designed around a certain process and capacity. If what you need changes, then at best you spend billions making changes and at worse you spend tens of billions starting over.

Better for Apple to do what they are doing now, investing in existing Intel and TSMC fabs based in the US and helping them fund new US-based fabs on newer processes (I don't see TSMC ever letting their absolute latest processes leave Taiwan). That way, you have first-access to the product. This is what Apple did with TSMC in Taiwan to help them scale to the levels they are now.




Reports state Apple's latest DRAM contracts are twice as expensive because they are out-bidding every other smartphone OEM, so either those "cheap" Android smartphones will not be so cheap, or they just won't be available due to lack of DRAM to put into them.

If it were financially advantageous for Apple to go into the actual chip-making business, rather than chip design and outsourcing manufacturing, they would have done so.

It’s crosssed my mind more than once though, that intel have a lot of fabs/foundries worldwide, and now a chunk of Intel is government-owned, so it mightn’t be the most ridiculous idea for Intel to pivot and allocate some of their chip production to memory and NANDs. It would involve change, but surely it would cost less time and money than building a fab and production lines from scratch.

 

[Yourbigpalal83]

Well their goes that dream of getting the iphone fold/ultra for around 2000 dollars.

 

[Flight Plan]

Well, pass the cost then. People come and go… to Android. It has never been easier than now to find simple, cheap and functional smartphone that works just like any iPhone.

Tim forgot that the market is oversaturated these days with boring slates. And customer loyalty/ecosystem is no longer that relevant

You have no idea how markets work.

I completely understand that they are absorbing a huge part of the cost and need to pass some of it on to customers. That’s fair.

But I’m also a strong believer in the meaning of words.

“Unsustainable” means that, if they don’t pass it on to customers, the company will lose money. To which I say: suuuuuuuuure.

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

Apple is a business.

...

As a consumer we can choose to not buy as much when the prices go up. I still use an iPhone 13 and very happy with it. When I need to upgrade I can delay by another year. Complaining about a company trying to make more money is like complaining about water being wet.

Very well said.

Except they (Android makers) are facing the same memory constraints. My guess is that Tim Cook is providing cover for John Ternus to avoid making him look like the “bad guy” at his first major product announcement as CEO.

I agree with you both that Android will be just as badly affected AND that this is cover for Ternus. And I don't have a problem with either one.

I’ve been trying to tell my work this and they ignore me saying there’s “not room in the budget” while they spend millions a month on AI credits.

Start pushing now for an M6 Mac. I think that's the one worth waiting for, and it's maybe only 6 to 12 months away.

Cook is really taking one for John Ternus here, pre-announcing price hikes so the new CEO doesn’t have that be the biggest takeaway from his first launch event in September.

Strategy. Half of the job of being a senior leader in ANY company, is understanding strategy. The other half is EMPLOYING strategy. The overtime is dealing with all the little things.

Or when the AI bubble pops and that might happen sooner.

We've seen some "pre-popping" behaviors already. The interesting thing about "bubbles" is that a bubble doesn't necessarily mean that that whole thing will crash to the ground. More often than not, it's the FROTH that will subside. And that means hundreds or thousands of little peon companies that don't have revenues or earnings to show for all their bluster. The big dogs will probably still be around.

Countries like Canada could help with this by restricting the availability of rare earth metals and other natural resources so none can be used for AI data centers. The minute it is found that any resources are used in AI chip manufacturing, the flow of such resources is cut off immediately.

Why would ANY materials supplier do any such thing?

There is actually a simple solution: everyone stops using LLM's. Then AI companies will collapse and the memory and storage situation will improve in no time.

Why would ANY user or developer of LLMs do such a thing? They won't! LLMs don't answer all questions or provide all solutions, nor will they ever. But they serve a purpose. I suspect we'll have LLMs for many years/decades now, even to the point that they become mere commodities.

Wonder if the increase will be just for new products or existing products as well? Debating on whether to upgrade my iPad Pro now or wait for M6.

My iPad Pro is an M4 and it's just fine. But I have the same conundrum as you with my M1 MacBook Pro. I've decided to wait for the M6 and then kit it out with cores and memory as far and wide as I can.

And those profits and margins are what will allow Apple to not increase prices as much as they otherwise would. Yes, Apple could continue to eat all the price increases, but public businesses also have to think about shareholder return. You and I don't want to pay more, but shareholders (including me) benefit.

Including me too. Well, I don't think I currently have a whole lot of APPL stock, but I surely hold it in my professionally managed accounts and my ETFs. Apple always needs to do the right thing for shareholders as a top-five priority, at least.

Apple really is in a bind here. RAM and storage costs (plus everything else -- CPU, etc.) are crazy now. Apple didn't get to where it is by never passing on its price increases to customers.

Now THAT is a great point. Apple isn't successful because it eats price increases. It's successful because it knows how to handle business. And sometimes, "handling business" means passing on price increases.

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

The best investments continue to GROW their profit margins. If they don't, they suffer in the stock market, and THAT will subsequently impact their future work, and not in a good way.

😂😂😂 Oh Apple …. A trillion dollar company can’t give up a few millions in profits … mmm just an incentive to keep products longer before upgrading. Honestly you’re helping us save money in the long term.

It's a lot more complicated than just "giving up a few millions in profits". A lot more complicated. One fact of life that any wealthy person will tell you is that there are a LOT MORE things to spend money on than there is money in your pocket. This is true not just for individual people, either. It's true for companies, and it's true for governments.

The most successful of any of those (people, companies, governments) will be those who CONTROL THEIR COSTS. With an iron fist, if necessary.

Or, Apple can shave a percent off their profit margins.

It's not that simple.

Let's all thank the AI tech bros for screwing the consumer tech market (and many other things I'd get in trouble for listing here) so that they can fast-path us to dystopia as they continue to pass billions back and forth to each other.

Your jealousy and envy will not help you be successful. Not in business, and not in your personal life, either. Let. It. Go.

Let it go. And focus on the things YOU need to be doing. That will get you much farther in life than any anger you continue to hold for another person or a company.

 

[123jmail]

Industry wide, no surprise. The market will adjust.

 

[kiranmk2]

AI isn't a bubble. There are several bubble-like companies in the AI space - most likely OpenAI, that is spending money they simply don't have and are now starting to see pushback from customers on the pricing of tokens. Companies like Microsoft, Amazon, Meta, Google and the like actually have the cash reserves and other sources of income to actually keep paying for the hardware.

Lots of people may decry AI and say it just makes pointless slop videos or insipid music / art, but these were always the gimmicks, real AI is powering businesses to become much more efficient, automating routine tasks, allowing faster data analysis and the like. As more and more companies embrace AI, there will need to be more and more servers to cope, even if all slop generating tools vanished tomorrow.

I think price rises are going to be very large, but I'm confident they will come down as the price of these components falls. Why is this? Because maintaining high prices isn't sustainable for maintaining profit. Sony have disclosed that since the recent component cost-related price rises of the Playstation 5, sales have fallen by over 50%. I predict this will happen to Apple too. Put the price of an iPhone up from $800 to $1000 or an iPhone Pro from $1100 to $1300 in order to maintain margins and you are going to see a drop off in sales, which will result in a decrease in profit. It might not result in a 50% sales drop, but I can see a 10-20% drop as more people put off upgrading for a year or so more. What

I'm interested to see is what happens with the iPhone Fold and MacBook Ultra which seem to be launching at the exact wrong moment for expensive/premium new products that will sit above existing models. I can see the Fold starting at $2500 or higher and the MacBook Ultra starting at $4000 or higher - even with the Apple fanboy crowd, these prices will hit demand.

 

[Smartuser]

Well their goes that dream of getting the iphone fold/ultra for around 2000 dollars.

There their, in they're rooms.

 

[MacBookJohn]

Meanwhile in China, the devices are going down in cost stop trying to manipulate us all Tim Cook if memory cost was so bad why are you deleting your cost of your phones in China and the rest of the world? Basically, you just want more money from the consumer.

 

[ClaraStahlbaum]

What a lame excuse to raise prices. They are one of the world's largest companies. They can afford to absorb prices, we don't need all this AI bullcrap either.

 

[splifingate]

Why doesn't Apple spend some of those billions and build a chip fab? Always relying on 3rd party.

AI tells me that it costs between 15 to $50 billion. Even on the high end, that's peanuts for a multi trillion dollar company. And they could make stuff for others if they have capacity.

AMD set the precedent when they funded and out-sourced their production to TSMC . . . the precedent being that they didn't have to internally absorb the cost of such Adventure.

Very telling; very prescient; very astute 🙂

AAPL is doing great on the Long Game.

 

[Smartuser]

Heh, “unavoidable”? What’s wrong shrinking their ridiculous 50% profit margin to 30% just for a couple of years? If anything, Apple IS in that position to delay price hike as long as they please. But nope, ain’t gonna lose on profit margin so $100-$1000 price hike there is in September.

I think you're onto something. Why ever raise prices at all, for anything by any company. Simply reduce your ridiculous profit margins or get rid of profit in general, since money is the root of all evil. Keep prices constant on the level of 1935!

 

[Smartuser]

What a lame excuse to raise prices. They are one of the world's largest companies. They can afford to absorb prices, we don't need all this AI bullcrap either.

Why don't you start a company that serves to absorb all prices?

 

[MicroLab]

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

People aren’t ready for the old AAPL multiple taking effect on the new RAM and NAND prices. They were charging 10x under the old cheap pricing. Going from 512gb-1TB will be a $500 upcharge soon.

 

[Jezrix]

Yet Apple gives gold trophies and donations to the administration. Seems unfair to raise prices, just saying,

 

[capamac]

There is actually a simple solution: everyone stops using LLM's. Then AI companies will collapse and the memory and storage situation will improve in no time.

If Ed Zitron is correct, all the big “AI” companies are primed for catastrophic failure.

 

[MNJohn]

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

Perhaps Cook wouldn’t be so pressed to control component cost if he hadn’t pissed away so much money on the Vision Pro. Please escort Cook out of the building ASAP.

 

[hajime]

Then don’t add AI and less RAM could be needed.

When is the Back To School? After prices increase?

 

[Yr Blues]

Apple should build a memory plant.

 

[thadoggfather]

I'll be riding my 15" MBA M5 with 24/1TB for quite a while it looks like.

This is the GOAT SKU

 

[turbineseaplane]

This is the GOAT SKU

Got it preowned with 7 battery cycles for $900

 

[Charlie Bonesx]

If Ed Zitron is correct, all the big “AI” companies are primed for catastrophic failure.

Well if some guy on YouTube said it….

 

[jole]

Well, pass the cost then. People come and go… to Android. It has never been easier than now to find simple, cheap and functional smartphone that works just like any iPhone.

Tim forgot that the market is oversaturated these days with boring slates. And customer loyalty/ecosystem is no longer that relevant

You think Android phone manufacturers have access to cheaper RAM than Apple?