The Fruity Cargo Cult Apple’s inflated price margins are under threat as AI outfits are hoovering up parts with ridiculous chequebooks.
Artificial intelligence companies have begun to outduel Job’s Mob in the race to secure components, leaving Job’s Mob haggling like the riffraff.
Suppliers accustomed to catering to Jobs’ Mob’s every whim now have the leverage to demand higher prices from the iPhone maker.
Analysts expect that Apple profit margins, which have been generally favourable, will come under pressure this year, and consumers could feel the impact.
The Fruity Cargo Cult Apple, chief executive Tim Cook mentioned the problem in a Thursday earnings call, saying it was seeing constraints in chip supplies and that memory prices were increasing significantly.
Those comments appeared to weigh on Job’s Mob shares, which traded flat despite blowout iPhone sales and record company profit.
AI chip leader Nvidia recently became the largest customer of Taiwan Semiconductor Manufacturing, or TSMC, Nvidia’s chief executive Jensen Huang said on a podcast.
This title had belonged to Apple for years, which is what happens when you ship iPhones by the container shipload.
Memory chips are in short supply as companies such as OpenAI, Alphabet’s Google, Meta, Microsoft and others collectively spend hundreds of billions of dollars to build AI computing capacity.
That applies both to the flash NAND and DRAM. By the end of this year, the price of DRAM is expected to quadruple from 2023 levels, and NAND will more than triple.
Apple could pay $57 more for the two types of memory that go into the base-model iPhone 18 due later in the year, compared with the base model iPhone 17 currently on sale.
For a device that retails for $799, that would be a chunky hit to profit margins, which is awkward when your brand is built on charging top whack.
Job’s Mob spends billions of dollars a year on NAND, according to people familiar with the figures, likely making it the single biggest buyer globally.
Suppliers flocked to win Job’s Mob’s business, hoping to leverage its know-how and prestige to attract other customers and to enjoy the reflected glow.
These days, however, TF International Securities analyst Ming-chi Kuo said: “The companies now pushing the boundaries of human-scale engineering are the ones like Nvidia,”
Samsung Electronics and SK Hynix are raising the price of a type of DRAM chip for Job’s Mob, according to people familiar with Apple’s supply chain.
One issue for Apple is that it has long used its leverage to squeeze suppliers, and some see this as payback time.
