Apple (AAPL) has long been the most powerful buyer in consumer electronics. That advantage is starting to erode, The Wall Street Journal reported late Saturday.
As artificial-intelligence companies pour vast sums into data centers, they are snapping up chips, memory and other critical components, and increasingly outbidding Apple (AAPL). Suppliers that once bent over backward for the iPhone maker now have the upper hand, pushing prices higher and narrowing Apple’s (AAPL) famously rich margins.
Apple Chief Executive Tim Cook acknowledged the pressure on a recent earnings call, citing chip constraints and sharply rising memory costs. Despite strong iPhone sales and record profits, the comments appeared to weigh on the stock, which finished the day little changed.
The shift is most visible at Taiwan Semiconductor Manufacturing (TSM) (TSMWF), the world’s top producer of advanced chips. Nvidia (NVDA) recently overtook Apple (AAPL) as TSMC’s largest customer, underscoring how demand from AI workloads is reshaping the semiconductor pecking order.
Memory is another flashpoint. Companies such as OpenAI, Google (GOOG) (GOOGL), Meta (TEMA) and Microsoft (MSFT) are collectively spending hundreds of billions of dollars on AI infrastructure, tightening supplies of both DRAM and NAND memory. Those are components used in everything from smartphones to servers. Researchers at TechInsights estimate DRAM prices could quadruple from 2023 levels by year-end, while NAND prices may more than triple.
Those increases could materially affect Apple’s (AAPL) costs. TechInsights estimates that memory alone could add roughly $57 to the bill of materials for Apple’s (AAPL) next base-model iPhone, a meaningful hit for a device that sells for under $800.
For years, Apple’s (AAPL) scale and discipline allowed it to dictate terms, renegotiate prices frequently and even walk away from suppliers. But AI customers are willing to pay premiums, lock in long-term supply and make upfront commitments, giving memory makers such as Samsung Electronics (SSNFL) and SK Hynix (HSXC.F) more leverage than before.
Apple (AAPL) is also competing for talent and attention inside supplier organizations. Engineers who once focused on smartphone displays, sensors and components are now increasingly pulled toward specialized materials and hardware for AI chips.
The company still holds advantages. Suppliers say working with Apple (AAPL) remains a gold standard, and its tight integration of hardware and software gives it room to maneuver. Apple (AAPL) may also lean more heavily on upselling storage configurations, an especially profitable tactic. Or the company may explore alternative manufacturers for less advanced processors.
Still, analysts expect Apple (AAPL) to hold the line on iPhone pricing this year, even as costs rise, the Journal reported. That means the AI boom, for the first time in years, may force Apple (AAPL) to absorb pressure rather than pass it on.