Apple is navigating a volatile supply chain as memory costs continue to climb, due to the AI server boom.
According to analyst Ming-Chi Kuo, the company is dealing with 2026 Q1 price hikes for Low-Power Double Data Rate memory (LPDDR) that align with recent reports, though NAND flash increases have been slightly lower than expected. Efficient LPDDR memory is used in mobile devices like the iPhone, iPad, MacBooks and more.
To manage this, Apple has shifted its strategy, says Kuo. Memory pricing is now being negotiated on a quarterly basis rather than every six months. Kuo warns that another increase is expected in the second quarter, with the quarter-over-quarter hike looking similar to the current one.
Apple Using Market Leverage
Despite these rising costs, Apple is using its dominant position to secure components that other brands cannot. While many competitors are struggling to find guaranteed supply even at higher prices, Apple’s ability to lock in deals demonstrates its significant leverage.
“For most non-AI brands, even if you’re willing to pay up, there’s no guarantee you’ll get the supply,” Kuo noted. “The fact that Apple can lock in a deal like this shows just how much leverage they have.”
Apple’s strategy appears to involve absorbing these higher costs and accepting a hit to iPhone gross margins in the short term. The goal is to use the market chaos to secure chips, grab market share, and eventually recoup the costs through its services business.
The Outlook for iPhone 18
For the upcoming iPhone 18 models planned for the second half of 2026, Apple’s current plan is to avoid raising retail prices. Kuo indicates the company wants to keep starting prices flat to help with marketing efforts. As it stands, the entry iPhone 17 today starts at $1,129 in Canada. We haven’t seen huge price increases for the base model in years, despite discrepancies in exchange rates. For the iPhone 17, we actually saw a price drop with the new entry 256GB storage, since 128GB was axed.
However, the supply chain remains strained. Apple has realized that the ongoing AI server boom is squeezing the rest of the supply chain, potentially leading to shortages of other components beyond just memory and T-glass.
Investors are expected to focus on these cost pressures during Apple’s earnings call this week (Thursday). Kuo suggests that Apple’s outlook could have a significant impact on stocks across various industries.
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