Apple CEO Tim Cook has announced that price increases for Apple products are 'unavoidable' due to a surge in the cost of memory and storage chips, as reported by The Wall Street Journal [1]. Cook stated that while Apple has attempted to absorb these rising costs, the company can no longer fully shield customers from higher prices, describing the situation as 'unsustainable' [1]. He did not specify when the price hikes would occur or which products would be affected [1].
The spike in chip prices is attributed to artificial intelligence (AI) companies purchasing large quantities of memory and storage chips, which has tightened supply and driven up costs [1]. Cook highlighted DRAM chips as a particular concern, noting that more of these chips are being used for AI servers, resulting in less supply for consumer devices [1]. According to research firm TechInsights, Apple would need to add approximately $270 to the next iPhone Pro model to maintain its profit margins [1].
Apple's next major product launch is expected in September, likely featuring the iPhone 18 lineup [1]. Cook mentioned that Apple may use its cash reserves to help expand chip supply but clarified that the company does not plan to build its own memory factories [1]. He described the current situation as a 'hundred-year flood,' emphasizing the unprecedented nature of the chip cost increases in his 40-year career [1].
Apple Inc. (AAPL) shares last traded at $295.95, down $3.29 or 1.10% [1]. Additionally, Apple previously announced that Tim Cook will step down as CEO on September 1, transitioning to executive chairman, with John Ternus, senior vice president of hardware engineering, set to succeed him [1].
CONCLUSION
Apple is facing significant cost pressures from soaring chip prices, leading to unavoidable price hikes for its products. The market reacted negatively, with AAPL shares declining by 1.10%. The company is exploring ways to mitigate the impact but does not plan to manufacture its own memory chips.