Be prepared to pay significantly more for your next brand new iPhone which is expected to be released in September.
According to a report by The Wall Street Journal (WSJ), Apple CEO Tim Cook has warned that rising memory and storage costs could eventually force the company to raise prices.
Although Tim Cook didn’t mention specific products, WSJ estimates that the upcoming iPhone 18 Pro with the base storage could cost as much as USD 1,299 due to the sharp increase in memory prices driven by the AI boom. As a reference, the current iPhone 17 Pro with 256GB of storage starts from USD1,099. That’s a USD200 increase, or about 18%.
If a similar price increase were to be reflected in Malaysia, an equivalent 256GB model could potentially cost over RM6,300 compared to the current iPhone 17 Pro’s starting price of RM5,499 for 256GB.
AI is making smartphone memory more expensive
The main source of this price hike is memory. Companies such as Google, Microsoft, Meta and Amazon are spending billions on AI infrastructure, which resulted in massive demand for memory chips used in AI servers.
Cook reportedly said memory suppliers are prioritising high-bandwidth memory (HBM) which causes tighter supply for consumer electronics. He said when there’s less supply at a time when consumers want devices and the memory guys are passing along huge price increases. He added that Apple definitely needs memory pricing and supply to return to reasonable levels for consumer products.
The three companies that dominate DRAM memory market are Samsung and SK Hynix in South Korea and Micron int he US. Meanwhile the makers of NAND storage include the above mentioned three companies as well as Kioxia and Sandisk.
It is forecasted that production capacity for DRAM wafers will grow by 30% by 2027 while wafers for consumer tech will fall up to 15% short of demand.
How much does it cost to build an iPhone?
WSJ has posted an analysis which calculated how rising component costs could affect pricing of a future iPhone Pro model.
For an iPhone 18 Pro equipped with 12GB RAM and 256GB storage, the cost of DRAM memory would be increased from US$39 to US$145. Meanwhile, the cost of 256GB NAND storage is estimated to increase from USD13 to USD51.
While Apple does not disclose its gross profit margin for individual products, it is estimated to be 47%.
With all components put together, Apple’s cost for the iPhone 18 Pro 256GB is estimated to be USD 726 and with the margins added in, it would retail for USD 1,299. As a comparison, the cost of the iPhone 17 Pro 256GB is estimated to be USD 582, and it currently retails for USD1,099.
It is also worth noting that the above calculation does not include potential cost increase for other components. This includes a new camera system which is expected to cost 50% more than its predecessor.
Apple says price increase may be unavoidable
In the WSJ interview, Tim Cook says the price increases are unavoidable and they are doing their best to mitigate the huge price increases that have been passed to them. He added that Apple has been trying to shield customers from the price increase but the situation has become unsustainable.
The price increase is expected to affect other Apple products especially Macs and iPads. Apple recently killed off its base Mac Mini M4 with 256GB storage. This raises its base price of RM2,499 (256GB SSD) to RM3,349 (512GB SSD).
Cook added that during his time working in the electronics supply chain, he has never seen a commodity price swing like this one from the past six months. He described it as a hundred-year flood as he’s never seen anything like it in any area in over 40 years.
