AI-Driven Memory Costs Squeeze Apple and Samsung
As AI demand drives up memory prices, Apple and Samsung face squeezed margins and rising device costs, forcing shifts in pricing and services strategies.
The surge in artificial intelligence development is driving up memory costs across the tech industry, squeezing profit margins for giants like Apple and Samsung. Memory manufacturer Micron has warned that this supply and demand imbalance will likely persist for at least another year. The resulting inflationary pressure is already impacting consumer electronics, forcing smartphone manufacturers to adjust their pricing structures and product strategies to cope with the rising cost of components.
Samsung users are already experiencing these consequences with significant price hikes on the Galaxy S26 series. The high-end 1TB Galaxy S26 Ultra now retails at $1,399, making it more expensive than Apple's iPhone 18 Pro Max, which starts at $1,299. This pricing shift has eroded the traditional price gap between the two rivals, making Apple's premium devices increasingly competitive. Meanwhile, smaller, low-budget smartphone vendors are facing even tighter squeezes, making Apple's entry-level iPhone 17e and refurbished models more attractive to budget-conscious consumers.
Morgan Stanley analyst Erik Woodring notes that while Apple possesses a strong upcoming product roadmap, Wall Street consensus indicates that accelerating memory prices will continue to compress the company's margins. Apple has previously managed these pressures by targeting price increases at wealthier customers buying larger storage tiers. However, analysts speculate that Apple's new leadership may be forced to raise prices again early next year when the next wave of memory cost increases is expected to hit.
To mitigate the impact of squeezed hardware margins, Apple is leaning heavily into its ecosystem of accessories and services. The company recently launched Apple Pay in India and is expanding its service portfolio with offerings like AppleCare One, Apple Upgrade, Apple Business, and Creator Studio. By driving revenue through these high-margin services and smart home accessories, Apple aims to offset the rising cost of manufacturing its core smartphone lineup.
This is our own summary of reporting by Computerworld AI
