TechJun 20, 2026
How AI Infrastructure Demand is Squeezing Apple’s Margins
Component Squeeze
Rhea Lobo
Discover
Apple has spent years squeezing chip suppliers for the lowest possible prices. That leverage is gone. The AI boom has created a memory chip shortage severe enough that Tim Cook told the Wall Street Journal price increases are "unavoidable," noting the company has publicly signaled it can no longer shield customers from rising component costs.
Two types of chips sit inside every iPhone: DRAM memory, which handles active tasks like running apps, and NAND flash storage, which holds photos and files. Both have become dramatically more expensive as AI data centers compete for the same supply.
Google, Microsoft, Meta, and Amazon have all ramped up capital spending on AI infrastructure. That demand has pulled chip manufacturers toward high-bandwidth memory built for servers, away from the consumer-grade components Apple needs.
DRAM and NAND prices have quadrupled since last year, according to research firm TechInsights.
Morgan Stanley estimates that production capacity for DRAM wafers will grow 30% by 2027. Even so, wafers for consumer tech will fall up to 15% short of demand as suppliers continue prioritizing AI orders.
TechInsights has modeled what these cost increases mean for the iPhone 18 Pro.
Apple paid ~$39 for the 12GB of DRAM inside the iPhone 17 Pro. For the iPhone 18 Pro, that cost could rise to $145.
NAND storage costs are projected to climb from ~$13 to ~$51 for the base 256GB tier.
Adding those figures to the rest of the bill of materials, TechInsights estimates the iPhone 18 Pro could cost ~$726 which marks a 25% jump.
To maintain its estimated 47% gross margin on the Pro model, Apple would need to charge ~$1.37K. Because the company favors standardized price points, analysts put the likely sticker price at ~$1.3K, which implies margin compression to ~44%.
A potential camera system upgrade could push the starting price to ~$1.4K or higher, according to supply chain analyst Ming-Chi Kuo.
The broader industry impact is already visible. Dell, Hewlett-Packard, and Nintendohave all raised prices on hardware.
The average global smartphone selling price is expected to rise ~20% in 2026 to an all-time high, according to research firm Omdia.
For Apple, the exposure is unusually sharp. The company spends in the low tens of billions of dollars annually on memory and storage, making it one of the largest buyers in the world. Historically it used that scale to extract the lowest supplier prices.
Now AI hyperscalers are signing three-to-five year contracts with large cash prepayments — terms Apple is unlikely to match given its history of disciplined spending.
Cook acknowledged Apple is willing to use its balance sheet to help secure supply but ruled out building its own memory factories.
"This is a hundred-year flood. I've never seen anything like it in any area in over 40 years."
Tim Cook, Apple CEO
President Trump announced on Truth Social that Apple had agreed to work with Intel to design and build chips in the US. Intel's stock jumped on the news while Apple also rose.
The announcement adds a domestic chip design angle to the story but doesn't address Apple's immediate DRAM and NAND shortfall, which involves memory suppliers like Micron and Samsung, not logic chip foundries.
Micron's stock rose 4.4% in premarket trading after Cook's comments. A Deutsche Bank analyst raised her price target on Micron to $1.5K, citing expectations that the supply-demand imbalance will persist through 2028. The memory crunch squeezing Apple's margins is, for now, a direct tailwind for the suppliers Apple depends on.
