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ZDNET’s key takeaways
- Apple CEO Tim Cook says product prices are due to rise.
- Cost increases on memory chips are to blame.
- The price of an iPhone Pro could shoot up by at least $200.
Looking to buy a new iPhone or other Apple device this year? If so, get ready to shell out more money than in the past. In an interview with The Wall Street Journal (subscription required), Apple CEO Tim Cook confirmed that the company aims to raise prices on its products as a result of the shorter supply and higher cost of memory and storage chips.
“Unfortunately, price increases are unavoidable,” Cook told the WSJ. “We’re doing our best to mitigate the huge increases that are being passed to us, and we’ve been trying to shield our customers from the increases, but the situation has become unsustainable.”
Cook didn’t reveal when this might happen or which products would be affected. Apple is expected to kick off a new product lineup in September, which would introduce new iPhones (including a potential folding iPhone Ultra), a new Apple Watch, and other new devices. The impending price increases could easily surface at that point. But higher costs for Macs and iPads might arrive sooner, said the WSJ.
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Already, one product has been socked with a price increase. Last month, Apple changed the starting price and configuration for its cheapest Mac Mini. Previously, the base Mini sold for $599 and included an M4 chip, 16GB of RAM, and 256GB of storage. Now, the least expensive model costs $799 with the same chip and amount of memory but with 512GB of storage.
What’s causing the price increase?
Blame it on AI demand and the resulting pressures on the memory and storage chip market.
AI companies have been scooping up much of the available supply of DRAM (dynamic random access memory) and NAND flash storage for their power-hungry systems. That’s led to a severe shortage of chips for everyone else, thereby triggering cost increases for the remaining stock.
The three dominant memory manufacturers (Samsung Electronics, SK Hynix, and Micron Technology) have also shifted their limited resources and budgets toward higher-margin, enterprise components, leaving scraps for the consumer market.
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Companies like Apple typically grab enough memory to last a year or two in advance. But as that supply dwindles, they’re forced to eventually pass along the increases to customers lest their profit margins start to suffer.
Given Apple’s increasing focus on its new AI-powered Siri and Apple Intelligence, iPhones and other devices also need a healthy chunk of memory to support the demanding AI features. To run all the AI tasks on an iPhone using both the on-device and cloud-based AI models, you’d need an iPhone 17 Pro, Pro Max, or iPhone Air, all of which come with 12GB of RAM.
“There’s less supply at a time when consumers want devices, and the memory guys are passing along huge price increases,” Cook told the WSJ. “We definitely need memory pricing and supply to return to reasonable levels for consumer products. That’s the bottom line.”
How much more could you pay for a new iPhone?
Naturally, that depends on the device, the configuration, and the amount of memory and storage it contains.
Analysts at tech research company TechInsights have estimated at least a $200 increase in the consumer price for an iPhone Pro given Apple’s costs and profit margins, according to the WSJ and verified by ZDNET.
Here’s how that breaks down.
The iPhone 17 Pro comes with 12GB of DRAM and a minimum of 256GB for flash storage. By this fall, prices for these parts could quadruple over last year, projects Mike Howard, director of memory markets at TechInsights.
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For the 17 Pro, Apple pays only around $39 for the 12GB of DRAM and just $13 for the 256GB of storage. This year, the cost of that DRAM could shoot up to $145, while the cost of the storage could rise to $51.
Factoring in both DRAM and storage, Wayne Lam, service director of wireless components at TechInsights, estimates that Apple’s total cost for iPhone 17 Pro parts and manufacturing is around $582. For an iPhone 18 Pro, that cost could jump by 25% to $726.
To maintain a profit margin estimated by TechInsights at around 47%, Apple would have to charge iPhone 18 Pro buyers $1,371. Given the need for standardized prices, the company would likely set that price to at least $1,399. If accurate, that would be an increase of $200 over the $1,099 currently charged for the iPhone 17 Pro.
To try to coax consumers to buy the latest iPhone, Apple typically tries to maintain prices from one generation to the next. But given the pressure on the chip market, the company seems to have little choice but to reverse that trend this year.
