Apple has had a strong start to its fiscal year, with earnings exceeding expectations in the first quarter and a forecast of growth up to 16 percent for the current period.
But despite the optimistic forecast, iPhone maker Apple acknowledged that a shortage of memory chip could slow its growth.
Tim Cook, the chief executive of Apple Inc. said that memory has “a minimal effect” on the margins for the quarter ending December. However, he warned the impact could be “a little bit greater” during the quarter ending March.
Apple said that the demand for iPhones and other Apple products could increase if they had more components.
Cook admitted that Apple would also be affected by rising memory costs, even though the supply issue is partly related to chip manufacturing on advanced nodes.
Apple has “a number of options” for managing the current situation. However, the company declined to give any details about how it is responding to this AI-driven semiconductor shortage, which is changing the market.
Demand for AI triggers global memory crunch, astronomical prices and price hikes
Global memory markets are experiencing unprecedented pressure due to the rapid expansion of AI infrastructure.
Artificial intelligence workloads require a large amount of memory. The current shortage of this type of chip is due to manufacturers shifting production from lower-profit chips for consumer electronics towards higher-margin artificial intelligence chips.
Major memory manufacturers are prioritising technologies for data centres such as High-bandwidth Memory (HBM), and Advanced DDR Modules.
This shift in supply has led to a tightening of the memory market and increased prices across the board.
As artificial intelligence workloads increase at an unprecedented rate, the shortage of memory chip, such as DRAM and NAND, used for short-term storage has increased.
Nvidia AMD and Google, among others, are buying large quantities of memory to power AI chips and infrastructure for data centres, securing top priority.
The production is concentrated in a few manufacturers.
The global memory market is highly susceptible to changes in demand. Samsung Electronics Micron Technology and SK Hynix produce together more than 90 percent of the total.
As a result, prices have increased sharply.
According to Counterpoint Research the memory prices soared 50% during the last quarter of 2025, and will continue to rise 40%- 50% at the end of first quarter 2026. This is primarily due to data centre operators who are willing to pay high premiums for supply.
Avril Wa, Senior Research Vice President at Taipei-based TrendForce which monitors the global semiconductor market, said in a WSJ article: “I’ve been tracking the memory sector since almost 20 years. This time is really different.”
It’s the most crazy time of all.
MS Hwang is a Counterpoint Research research director who has worked in the memory sector for over 30 years. She says that while price increases will continue to be rapid for the time being, it may become difficult to predict memory chip pricing after mid-2027.
The cost will rise from 10% of the price of a phone to 30%.
The memory makers benefit
Memory producers enjoy a boom in profits while hardware manufacturers struggle with rising costs.
Samsung Electronics has reported a tripled increase in its quarterly profit, a record-breaking figure, due to strong demand for AI server and memory chips.
The company stated that it expects AI demand and server growth to increase in Q1 2026. This will lead to increased opportunities for structural expansion.
The Division, in response to this challenge, will focus its efforts on profitability by focusing on products with high performance,” the company said.
SK Hynix also posted record profits thanks to the soaring popularity of high-bandwidth memories.
Its revenue from these products has more than doubled since the last year. This helped it to achieve record sales and profits.
Ray Wang, a SemiAnalysis analyst, said: “We believe SK Hynix is one of Asia’s biggest AI winners, thanks to its strong memory competitiveness and leadership in high bandwidth memory.”
Hardware manufacturers face rising risks
IDC says that the impact of memory shortages is uneven. It produces clear winners and losers based on the supply chain resilience and degree of vertical integration.
The manufacturers concentrated at the bottom end of the industry are most likely to suffer the greatest pain.
Many companies, including TCL, Transsion and Realme, Xiaomi Lenovo, Oppo Vivo Honor and Huawei, operate with thin margins. This leaves them more vulnerable to increasing component costs.
Memory prices will continue to rise, and their profits are likely to be under pressure. They may have to pass some of these costs on to the consumer.
Morgan Stanley’s analysts recently warned that the “supercycle” of memory chip prices is threatening to undermine hardware manufacturer earnings in their next fiscal year.
The company added that, with OEM valuations nearing all-time-highs, it was “time to reduce risk exposure” for global original design and hardware manufacturers.
Morgan Stanley downgraded several companies in November, including Dell and HP. However, Western Digital and Seagate Technology were given a positive outlook.
Source: IDC Potential contraction of the global smartphone industry along with an increase in average sales prices (ASP).
Evercore analyst Amit Amit Daryanani wrote: “We believe cost inflation could have a significant impact on margins, especially if it doesn’t decrease.”
Daryanani, however, argues that Apple and Dell have relatively good protection.
Apple’s size and its long-term agreements with suppliers, along with Dell’s increased exposure to commercial clients, are factors that could help cushion the effect of memory cost increases.
Apple and Samsung are both structurally protected from the pressures of high-end markets. IDC said that Apple’s large cash reserves and its long-term agreements with suppliers allow it to guarantee memory supplies 12-24 months ahead.
Apple still faces an actual challenge.
According to estimates by the industry, memory can make up 10%-15% or more of the bill of material for high-end phones, which makes it difficult for price increases to continue indefinitely.
Apple’s Strategic Response
Apple seems to have recalibrated its product strategy as a result of supply shortages and increasing component costs.
Nikkei Asia reports that the company will prioritise the production of the most expensive iPhone models in 2026, while delaying its release of the standard model.
As memory and material costs rise, the strategy has shifted to maximise revenue and margins on high-end products.
Reports claim that the US tech giant will launch its first folding iPhone in 2026 alongside two other models featuring enhanced cameras and bigger displays. The standard iPhone 18 would be delayed to 2027’s first half.
The post Apple warns of rising memory costs due to AI straining the global memory supply could be updated as new information unfolds.
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