In summary:
- Macworld reports that Apple faces rising RAM costs due to AI server demand and limited chip capacity, forcing the company to explore various mitigation strategies.
- Despite Apple’s strong 49.3 percent gross margin, CEO Tim Cook expects memory costs to increasingly impact the business beyond the June quarter.
- Potential solutions include product price increases, reduced RAM configurations, or continued supply shortages as incoming CEO John Ternus navigates this challenge.
Sure, Apple just released its most affordable MacBook ever, but you probably shouldn’t expect a big wave of affordable Apple products anytime soon. To hear CEO (for now) Tim Cook tell it, the company is facing the same exorbitant RAM prices as everyone else as AI server demand gobbles up the entire planet’s chip capacity.
Apple’s ultra-efficient architecture makes it better-suited for phones, tablets, and laptops with limited RAM, but that can only go so far. And even that limited RAM is going up in price.
During its investor conference call after announcing record revenue for the March-ending quarter, Cook said for the last quarter and the current (June-ending) quarter, the impact of high memory prices is “partly offset by carry-in inventory.” In other words, all the chips Apple’s already got on hand. But beyond the June quarter, memory costs will “drive an increasing impact on our business.”
We will look at a range of options with memory costs increasing…
Tim Cook
What are they going to do about it? It’s impossible to say without resorting to plain guesswork. Cook again said Apple is looking at “a range of options” and noted that Mac mini and Mac Studio will likely remain in short supply for a few more months. What exactly those “range of options” are is anyone’s guess.
- Will Apple raise prices, either on whole products or on RAM upgrades?
- Will Apple ship products with less RAM, forgoing expected RAM increases?
- Will some products just remain in short supply, affecting total sales figures?
- Will Apple keep hardware prices steady and make up the margin on Services and new revenue streams such as ads in Maps?
The answer to each of these is… maybe. Apple is second-to-none in the consumer tech industry at managing supply, prices, and keeping an absolutely crazy-high profit margin. This quarter, the company had a gross margin of 49.3 percent, and that’s with the impact of tariffs. For the next quarter, despite the chip challenges, Apple expects a margin of around 48 percent.
Apple doesn’t give guidance beyond the next quarter, though. And that’s the point at which the carry-in inventory dries up, and the RAM price hikes are really going to hit. It looks like Tim Cook might be leaving John Ternus with the an “incredible roadmap” when he takes over as CEO on September 1, but he’s also inheriting a ticking time bomb of chip prices for a company that is already oft-criticized for the relative price of its products.
It will be managing this chip crisis, and not the launch of the iPhone Ultra or smart glasses, that will be the first real test of John Ternus’ tenure as CEO.
Author: Jason Cross, Senior Editor, Macworld
Jason has written about technology for more than 25 years - first in the gaming press, then focusing on enthusiast PCs and general technology. He enjoys learning how complicated technology works and explaining it in a way anyone can understand.