Apple’s Pricing Blitz Lands as Rising Memory Costs Trap Rivals in a Margin Squeeze

AppleAAPL

started a price war its rivals can’t afford to fight. As memory chip prices surge and rivals face a brutal cost squeeze, the iPhone giant unveiled its cheapest laptop and smartphone in over a decade, both priced at $599. It’s a calculated gamble that competitors cannot match without sacrificing margins, turning Apple’s supply chain strength into a weapon.

Offense mode: Apple rolled out six products this week, but the $599 MacBook Neo and iPhone 17e stand out as clear plays for market share disguised as budget devices. The timing lines up with a surge in memory and storage chip prices driven by booming AI server demand, giving Apple a rare chance to lean on its supply chain scale and balance sheet while rivals deal with higher costs. CEO Tim Cook acknowledged the company will feel “market pricing for memory increasing significantly” starting this quarter, yet Apple is choosing to absorb those costs instead of passing them on to consumers.

• IDC projects global smartphone shipments will drop 13% this year while PC and Chromebook sales fall 11%, creating a brutal market where only the biggest players can endure.
• The iPhone 17e doubles base storage to 256GB compared with last year’s model, adding consumer value while squeezing Apple’s margins during the memory price surge.

The Memory Gambit

IDC’s Francisco Jeronimo believes, “Apple is going into attack mode. They see the memory crisis as an opportunity to gain market share.” That strategy could squeeze Chinese phone makers selling midrange Android devices, many of whom will likely have to raise prices as component costs climb. This could also narrow the gap with Apple’s entry-level models in markets like China, Japan, and the US, where 24-month payment plans make higher prices easier to swallow. Last year’s iPhone 16e already proved the strategy works as the model captured 11% of US iPhone sales in its launch quarter, more than double the share of its predecessor.

• Bernstein Research estimates Apple’s cost to build the iPhone 18 Pro Max could rise 25% due to pricier memory, storage, and processor chips.
• Apple can offset margin pressure from cheaper devices by charging more for premium models like the newly announced MacBook Pro and MacBook Air.

Locking in: IDC forecasts the lowest-priced Android devices may soon become unprofitable to produce, effectively removing Apple’s cheapest competition from the market. Bernstein’s Mark Newman says this gives Apple “a unique opportunity to gain share over lower-end Android smartphone makers who cannot secure enough memory” during the shortage. The strategy reflects a long game, and while the first purchase might be discounted, the ecosystem lock-in rarely is.