Apple is starting to lose some of its long-held leverage over suppliers as AI companies snap up chips, memory and other components, according to people familiar with the matter, reports the WSJ.
Suppliers that once prioritized Apple orders are now charging more, driven by surging demand from AI firms building massive data centres. Analysts say the shift is putting pressure on Apple’s profit margins and could eventually affect consumers.
Apple CEO Tim Cook flagged the issue on a recent earnings call, saying the company is seeing chip supply constraints and sharply rising memory prices. Apple shares were flat after the call, despite strong iPhone sales and record profits.
People familiar with Apple’s supply chain say memory chips are a key problem. The same DRAM and NAND components used in iPhones are also critical for AI servers, and demand from AI companies is overwhelming supply.
Mike Howard of TechInsights said memory price increases are happening at an unprecedented pace. By the end of this year, DRAM prices are expected to be about four times higher than in 2023, while NAND prices could more than triple, according to TechInsights estimates. Howard estimates Apple could pay roughly $57 US more for memory in its next base-model iPhone compared with the current model. On a phone that sells for around $799 US, that would eat into margins.
Competition is also intensifying at chip foundries. Nvidia has overtaken Apple as the largest customer of Taiwan Semiconductor Manufacturing (TSMC), according to Nvidia CEO Jensen Huang.
Apple had held that position for years, people familiar with the supply chain said.
AI spending from companies like OpenAI, Alphabet, Meta and Microsoft has given suppliers leverage, as those buyers are willing to lock in supply and pay upfront, people familiar with negotiations said.
Analyst Ming-chi Kuo said Apple is not expected to raise prices on its next iPhones despite higher costs, meaning the company may need to absorb much of the pressure itself. At some point, Apple will have to raise iPhone prices. Consumers are not going to like that.
