Apple price increases tied to AI-driven memory crunch
Apple has raised prices on several devices as executives and analysts point to AI data centers’ demand for memory chips.
By James Whitfield · Staff Writer
3 min read
Apple has raised prices on several products, adding to a broader run-up in tech hardware costs tied to the AI boom. The increases matter for buyers because analysts cited by The Verge say memory suppliers are steering capacity toward AI data centers, pushing up component prices for consumer devices.
Apple CEO Tim Cook recently said price increases were “unavoidable” and described the company’s pricing as “unsustainable,” according to The Verge and The Wall Street Journal. The Verge reported that Cook placed the blame on demand from the AI industry.
The reported changes include a $300 increase for the 16-inch MacBook Pro, a move from $599 to $749 for the 11-inch iPad Air, and a $30 increase for the HomePod Mini to $129, according to The Verge. Apple is not the only company citing memory costs: The Verge reported that Xbox pricing has risen by nearly 25 percent on some models and that Nothing canceled a phone launch.
Memory demand shifts toward AI servers
Tim Derdenger, an associate professor of marketing and strategy at Carnegie Mellon University’s Tepper School of Business, told The Verge the price increases reflect “basic economics.” Derdenger said memory makers have moved production toward high-bandwidth memory used in AI data centers and away from consumer DDR5 memory, driving RAM prices higher.
Srikanth Jagabathula, a professor of technology, operations and statistics at NYU Stern School of Business, told The Verge that suppliers are favoring data center customers because the same chip can earn more inside an AI server than in a consumer device. The Verge reported that OpenAI, Google and Microsoft have spent heavily on AI infrastructure and have helped create an imbalance in demand for RAM and storage.
OpenAI CEO Sam Altman has acknowledged that the AI market shows signs of a bubble, according to The Verge. Jagabathula told the publication that the memory shortage may last into the next few years and said a lasting cost increase makes it difficult for companies to keep absorbing the added expense.
Apple’s margins draw scrutiny
The price increases come while Apple has reported record earnings for at least four consecutive quarters, according to Apple’s own quarterly results cited by The Verge. The publication also noted that Apple’s hardware margins are widely viewed as higher than the broader industry’s.
Forbes estimates cited by The Verge put Apple markups between 30 percent and 40 percent, depending on the product. TechInsights and The Wall Street Journal estimated that the iPhone 17 Pro margin may be as high as 47 percent, while TheStreet has reported that smartphone margins typically fall between 15 percent and 25 percent.
Ari Lightman, a professor of digital media and marketing at Carnegie Mellon University’s Heinz College, told The Verge that it is difficult to reconcile Apple’s public financial performance with Cook’s description of pricing as unsustainable. Lightman said the increases were “without a doubt” connected to satisfying shareholders who expect continued growth.
Lightman also pointed to pressure on Apple from its position in the AI race, uncertainty tied to a possible CEO transition to John Ternus, and the absence of a major new product category, according to The Verge. He said investors can pressure the company on those issues, making margin and profit growth a central part of Apple’s pitch to large institutional investors.
This story draws on original reporting from The Verge.