Tim Cook says prices of Apple devices will jump amid memory chip shortage
"This is a hundred-year flood," says the Apple CEO.
Amid a global shortage of computer memory and storage chips, Apple CEO Tim Cook is giving customers a heads-up that a price hike on the tech giant's popular devices is "unavoidable."
Cook said in an interview with The Wall Street Journal that an insatiable appetite for memory chips from artificial intelligence companies has Apple facing a crisis he compared to a "hundred-year flood."
"I've never seen anything like it in any area in over 40 years," Cook said in the Journal article published on Wednesday.
With Apple set to launch its new iPhone 18 lineup later this year, Cook said prices will jump. But he declined to say when the price increase will go into effect or which products will be affected.
"Unfortunately, price increases are unavoidable," Cook told the Journal. "We're doing our best to mitigate the huge increases that are being passed to us, and we've been trying to shield our customers from the increases, but the situation has become unsustainable."
Cook, who is set to step down as CEO of the Silicon Valley company on Sept. 1, said the soaring cost of memory and storage chips being caused by the demand from AI servers has left Apple struggling to maintain profit margins.
While Cook did not disclose the range of the price increases on its devices, the tech research firm TechInsights has estimated that the cost of the soon-to-be-released iPhone Pro 19 will go up more than $200, bringing the device to around $1,299, according to the Journal.
"There's less supply at a time when consumers want devices and memory guys are passing along huge price increases," Cook said. "We definitely need memory pricing and supply to return to reasonable levels for consumer products. That's the bottom line."
Shawn Kim, head of Morgan Stanley's Europe and Asia technologies, explained in a June 8 podcast that PC and smartphone manufacturers are feeling the pinch of "chipflation" -- when memory chips stop getting cheaper over time and become more expensive and harder to obtain.
"Memory prices have risen more than sixfold over the last year," Kim said on Morgan Stanley's "Thoughts on the Market" podcast.
Kim said the high demand for memory chips from AI servers has created a two-tiered market.
"Large AI and cloud buyers can find long-term agreements, prepay and secure priority access," Kim said. "Traditional buyers, including PC makers, smartphone makers and industrial hardware companies must compete for what remains."
In 2027, PC makers are expected to face a 15% shortfall in chips, equivalent to about 58 million PCs, Kim said. He said smartphone manufacturers could be facing a 12% shortfall in memory chips, equivalent to about 134 million units.
"Companies may have to raise prices, cut specifications, delay launches and accept lower profits," Kim said.
Because of the demand from AI companies, the memory chip market is expected to grow to an $890 billion industry by the end of this year, up from about $220 billion in 2025.
"AI has turned memory from the cheapest part of the digital economy into one of its most contested resources," Kim said. "These tiny chips most people never think of may now decide what gets built or delayed and how much we'll all end up paying."
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