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Apple Technology

The AI Boom Is Coming for Apple's Profit Margins (msn.com) 47

Posted by msmash from the closer-look dept.
Apple's long-standing dominance over its electronics supply chain is eroding as AI companies outbid the iPhone maker for critical components like chips, memory and specialized glass fiber, giving suppliers the leverage to demand that Apple pay more. CEO Tim Cook acknowledged the pressure during a Thursday earnings call, noting constraints in chip supplies and significant increases in memory prices.

Nvidia has overtaken Apple as TSMC's largest customer, CEO Jensen Huang said on a podcast; Apple had held that position by a wide margin for years. DRAM prices are set to quadruple from 2023 levels by year-end and NAND prices will more than triple, according to TechInsights.

The firm estimates Apple could pay $57 more for memory in the base iPhone 18 due this fall compared to the base iPhone 17 currently on sale -- a significant hit on a device that retails for $799.
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The AI Boom Is Coming for Apple's Profit Margins More

The AI Boom Is Coming for Apple's Profit Margins

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  • Death of Apple predicted! (Score:4, Insightful)

    by kwerle ( 39371 ) <kurt@CircleW.org> on Monday February 02, 2026 @03:16PM (#65964696) Homepage Journal

    News at 11. Again. I mean... really, this time for sure.

  • How can they compete when the challengers are not required to actually make a profit?

    • Re: (Score:3)

      by shilly ( 142940 )

      Wait it out, I guess. Supply will ramp up in response to heightened demand, some of the AI players will fall away, but we’re a long way off consumers deciding they don’t want a new phone every so often. It may end up with overcapacity in the supply chain meaning Apple gets to squeeze suppliers harder a few years down the line. I’m sure all the participants are busy running a ton of sensitivity analyses on different scenarios as they try to play this out.

      • Re: (Score:2)

        by 0123456 ( 636235 )

        Supply won't ramp up when the suppliers know it's a bubble.

        • Micron is certainly ramping up. https://www.thestreet.com/tech... [thestreet.com] Both DRAM and NAND. It is a moderately long term expansion(2030).

          • Re: (Score:2)

            by 0123456 ( 636235 )

            Over the next ten years with the first wafers nearly three years away.

          • Re: (Score:2)

            by tlhIngan ( 30335 )

            Micron is certainly ramping up. https://www.thestreet.com/tech [thestreet.com]... Both DRAM and NAND. It is a moderately long term expansion(2030).

            That's natural expansion from natural predicted demand. No one is accelerating their building of supply for the near-term AI boom. The only memory fab coming online in 2026 is one that was planned for years earlier before the AI bubble boom.

            2030 is basically way in the future to not make a dent in demand now.

            • As everyone here knows, you can't throw up a fab overnight. The long term plans indicate the memory guys expect more demand long term. They are doing what they can now to capture the current frenzy. SK for example opens M15X next month and accelerated opening of the plant in Yongin by 3 months starting in 2/27 now. https://www.reuters.com/world/... [reuters.com] Micron is accelerating where they can and the NY plant plans indicate a major expansion in memory production long term.

        • Re: (Score:2)

          by DarkOx ( 621550 )

          TSMC has bigger problem than the guys cranking out RAM and NAND.

          There is going to be growth in demand at some profitable price level for those thing AI or no AI.

          The demand for leading edge process logic on the other hand, probably flattens quite a lot without an AI bubble to drive it, and I suspect can't justify a lot of new plant beyond what TSMC already has in its own right.

          They are in tough place. Build and if the AI bubble pops get left bag holding, don't build and if the AI Bubble holds invite a real c

    • Re: (Score:2)

      by Ed_1024 ( 744566 )
      I would expect that Apple has forward contracts with most suppliers that will wash out eventually, so if memory prices stay high in the medium to long term margins may fall and/or sale prices rise to compensate. There is also the issue for the suppliers in that do they really want to gouge one of their biggest customers who a) actually sells billions of physical products with memory in them and b) has loads of money and is happy to pay in advance or even bankroll production lines? Most of the major memory m
  • What's the "specialized glass fiber" for?

  • yeah, and it will be virtually free (Score:5, Insightful)

    by ebunga ( 95613 ) on Monday February 02, 2026 @03:48PM (#65964778)

    The AI companies already booked and paid for the fabs, and once they go belly up, that already-paid-for service will start churning out apple silicon instead of no-longer-needed junk for companies that no longer exist for customers that never existed. Meanwhile, apple will still be charging thousands of dollars for something that cost them nothing.

    • Re: (Score:2)

      by Syberz ( 1170343 )
      Bingo, Apple may run into some challenges for a few years (by "challenges" I mean slightly lower profits) and once the AI bubble bursts, there will be plenty of silicon available for everyone again.

  • Consider: (1) Apple is doing on-chip integrated memory. So they're not competing for separate DRAM chips. They would compete for flash components. (2) Apple negotiates long-term, 'preferred treatment' contracts with its suppliers. It's quite likely the contracts for this year's iPhone production run are set, and possibly next year's too. (I don't know and I don't think Apple says what their supply chain lead times are.) (3) Anyone competing in the market for memory chips would be in the same situati

    • Re: (Score:2)

      by znrt ( 2424692 )

      the article is your regular slop but "cut into apple's profit margin" is hardly a doom call, specially when apple has been long enjoying a dominant position over suppliers and the ability to dictate prices while still selling at a premium. if their margin isn't huge for sure it isn't because of supply costs.

      this could ofc mean that their product will become even more overpriced for customers, and probably will, but i bet most won't care or even be premium happy with it. the price of iphones started to soar

      • Apple records a massive increase in iPhone sales, particularly in China, and record results in high-margin Services. So what's the headline here? "Apple might have to raise prices or drop margins due to memory costs" (as if that's unique to Apple.) I believe the technical term for that is "bullshit."

        • Re: (Score:2)

          by znrt ( 2424692 )

          bullshit, slop, noise ... this indeed is regular online entertainment. people make a living with inane charlatanery, slashdot making a living by regurgitating it, we granting them our precious attention, clicks, comments, business as usual. but in fairness ... it still isn't a doom call. you made me skimread the fricken article, nowhere it spells doom. that's just the magic happening in human brains when exposed to headlines.

      • this could ofc mean that their product will become even more overpriced for customers, and probably will, but i bet most won't care or even be premium happy with it.

        Historically, Apple's customers will accept higher prices (as long as they are told that the new device is the best ever). And it is not as if most of the alternatives are not also increasing in price for roughly the same supply issues.

        It is always possible that people will just stop purchasing new laptops/phones for a few years until the prices seem more rational, but the American consumer usually just pays (and grumbles).

        • And, historically, someone here will post about how Apple products are overpriced and over-hyped. Still, people seem to be willing to pay that premium. I wonder why that is....

    • Their annual profits used to be 17% but now RAM suppliers are receiving record profits. Which means that their prices are inflated.

      • RAM manufacturers got into the lucky situation where demand is higher than supply. And nobody can increase capacity quickly. So the price will go up until buyers canâ(TM)t afford it.

        For Apple, customers will say âoeIâ(TM)ll make do either 16GBâ instead of âoe32GB isnt that much more, so I get more RAMâ. And eventually the AI companies run out of investment money.
  • Apple's profit margins will not be impacted long term, as they will increase the price of their new iShiny to compensate for their higher costs. And they are preparing for that price increase with the statements in the earnings call. They are likely to eat some of the increase for the current devices as long as they can, but they will almost certainly increase the price for upcoming products and refreshes.

    • Yeah, given that Siri hasn't been all that successful and Apple hasn't been at the top of the AI wave, they'll probably come out the strongest when this bubble pops. Whereas it'll be ugly for Nvidia and AMD. As well as OpenAI

    • Re: (Score:2)

      by gtall ( 79522 )

      Go to a physics conference sometime, notice all the "iShiny". Those crazy physicists are such fashionistas.

  • The AI crash is coming for not only the profits but the capital of everyone who thought there was going to be some trees-growing-to-the-sky "AI" miracle, so there's that.

  • that App Store cut will be "adjusted" (Score:4, Informative)

    by haruchai ( 17472 ) on Monday February 02, 2026 @05:06PM (#65964984)

    and it won't be downwards

  • The AI companies are bleeding cash out of every orifice. They're throwing money around without even thinking. Buy whatever building we can get our hands on! Power grid issues? Buy jet engines! Maybe nuclear! Need more chips? Buy the entire TSMC production capacity and sign a 6 year locked-in contract. Price? Pffffff whatever they want. Why are you asking questions about revenue or ROI? What are you, some sort of boomer? The singularity is coming in 12 months and you better be on this train or you'll lose ou
    • That sounds more probable and in line with Apple's modus operandi for the last 25+ years. Don't be the first one to the table, but make sure to clean everyone's plate before you get up. They'll probably take the same stance on AI - wait for all the flash-in-the-pans to go up in smoke and sweep in with a solution that everyone was shooting for at pennies on the dollar. It's the difference between bleeding edge and cutting edge as to who is holding the knife and who is being cut.

  • With a flagship iPhone Pro at over $1,000, and the Mac Pro at $7,000+, why would they not simply raise prices to cover the new costs? They certainly have the market power to do so.

  • whatever. top-quality phones ARE over-piced: from Apple, Samsung, Google, whomever.

  • Hello,
    Steve Jobs didn't invent the Smart Phone, I did in 2000, signed by Carnegie Mellon
    I'm already succeeding in what I wanted to achieve because revealing these designs to Warren Buffet's lawyers
    resulted in Warren Buffet selling $133 billion in Apple stock.
    I didn't want money. I designed this to fight surveillance state.
    Yes, I chose to not take big money when I was young so I could help the world when I was older. Not many are like me.
    I saw the phone would have GPS and everyone would use it (ubiquit

  • I think most suppliers know that Apple will be a long term customer, possibly for the next few decades or longer.

    How long do the suppliers think the AI companies will be around? 2 years? 10? 50?

    If I am a supplier, and I have multiple customers for my supply limited products, I will be careful about antagonising the customer who has a pretty good chance of being around long term, compared to customers who may or may not be around tomorrow.

    Do I want short term profits and piss off a potential long term custom

  • Power move (Score:3)

    by radarskiy ( 2874255 ) on Tuesday February 03, 2026 @01:32PM (#65966798)

    The ultimate power move by Apple would be to buy Samsung Semiconductor from its parent.

  • First, this doesnâ(TM)t just affect Apple, but any phone maker who doesnâ(TM)t also make RAM or chips.

    If it gets bad, Apple can put a lot more effort into iOS to make it more processor and RAM efficient. Which would be useful forever. And create faster SSD drives so virtual memory becomes more efficient and phones can work with less RAM. And make it possible to turn off RAM hungry things like AI.

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