The sharp unavailability of dynamic random-access memory (DRAM) chips has limited Apple to a critical strategic decision of increasing the iPhone prices or incurring huge expenditures to gain a market lead over the rivals.
Chip Crisis Hits Hard
Smartphone DRAM has grown exponentially with 12-gigabyte LPDDR5X chips in high-end iPhone 17 Pro models now costing the manufacturer between $25-$29 and almost $70 in early 2025, a 230% markup.
CEO Tim Cook informed investors that memory chip prices would rise dramatically, but declined to answer analysts’ inquiries about whether Apple would hike prices in response.
Cook said on the post-earnings call.
There are different levers that we can push, and who knows how successful they’ll be, but there’s just a range of options.
The position that Apple has with other suppliers such as Samsung, SK Hynix, and Micron allows preference access unlike cash-starved Android makers who have slowed down on production.
Market Shakeup Loom
According to a report, Apple shipped 7.1 million devices last quarter, matching the figure from Q4 2024. Despite flat sales, Apple’s market share fell from 10.2% to 9.3%, while the overall market rose 9.6% year on year.
However, the fact that Qualcomm earnings fell short of expectations last quarter brought up Chinese original equipment manufacturers standing empty factories due to chip shortages and raised fears that the first downturn of the global smartphone sales as far back as 2023 could become reality.
This the biggest question for the industry now.
Said Nabila Popal, a senior research director at IDC.
This is a two-sided sword because if Apple doesn’t raise prices, while it will help grow market share, it will also upset investors.
Smart Plays and Risks
It could pose a threat to the pricing power of Apple as its gross margins will shrink to 48-49% in the second quarter due to increased memory prices, which will reduce its position on gross profits.
Other companies that compete like Samsung and its high integrity in operations might be more in a position to absorb price shocks however when Apple increases prices it can set a new price floor in the industry that moderates competitive intensity.
Said Dan Morgan, portfolio manager at Synovus Trust.
Apple generally holds priority over competitors but is immune to market shortages.
Morgan added.
Apple will most likely continue to raise prices on newer iPhone model introductions.
In 2026, these shortages may become determined, forcing iPhone 18 to sell at prices above $100, and this will give greater weight to bandwidth optimized implementations in artificial intelligence.
Apple can react by offering cost-efficient e models however the resultant cutting of margins is a danger of Wall Street dissatisfaction- the balance between expansion and profit maximization will eventually determine the course of the company.
