Apple warns memory costs are starting to bite as makers prioritise AI chips

Apple said rising memory chip prices had started to pressure profitability in the current quarter, echoing warnings from South Korean chipmakers that are diverting production toward higher-margin memory chips that support AI workloads. 

"We do continue to see market pricing for memory increasing significantly," Apple CEO Tim Cook said on Thursday when asked on an earnings call about how the crunch was showing up in the company's production plans for the year. 

While he said the impact of the memory shortage had "minimal impact" in the holiday quarter ended December 31, which is typically its strongest for sales, he expected it would have more of an impact in the current quarter. 

 

Apple will likely need more and more memory chips as demand for its latest iPhone 17 has surged, especially in China and India. Cook called demand for the device in the December quarter "staggering," but declined to answer a question from an analyst on whether Apple might raise product pricing because of the paucity of memory chips. 

The comments come after warnings from Samsung Electronics and SK Hynix, which combined control two-thirds of the DRAM chip market and count the likes of Apple as customers, that computer and smartphone companies were set to bear the brunt of a worsening shortage of DRAM chips used in their products. The consequences include growing margin pressure and potential supply chain disruptions. 

The race to build AI infrastructure has prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory (HBM) for AI servers, squeezing the supply of conventional DRAM chips. Adding to the shortage is the fact that chipmakers, bruised by aggressive capacity expansion after 2017, have become more conservative about adding more production lines. This has contributed to the current supply shortage.

 

Samsung said such expansion would remain limited in 2026 and 2027. As the crunch is set to persist, some manufacturers have already started adjusting their products to cope with the shortage and surging prices. "Due to a recent surge in memory chip prices, PC and mobile customers are adjusting purchase volumes," SK Hynix said on its earnings conference call on Thursday.

 

"Some customers are taking a more conservative approach to shipment plans or considering adjusting (memory chip) specification in their price-sensitive product ranges." Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least 2 per cent this year, reversing earlier forecasts for growth. The PC market is expected to shrink at least 4.9 per cent in 2026, IDC estimated, after an 8.1 per cent growth last year. 

Prioritising AI demand 

Samsung, the world's second-largest smartphone maker, also bracing for the impact of the chip shortage, with its mobile business profit slumping 10 per cent in the fourth quarter. 

Cho Seong, a Samsung mobile business executive, warned on Thursday of a "challenging year" in 2026, expecting flat global smartphone shipments and risks of downward adjustment due to memory chip prices. 

"PC and mobile customers are having difficulties securing memory supplies, as they are being directly and indirectly affected by supply constraints and strong demand for server-related products," Park Joon Deok, head of DRAM marketing at SK Hynix, told analysts on its earnings call. 

Samsung prioritised supplying server customers in the fourth quarter and plans to continue increasing the portion of AI-related products, a move that could lead to further constraints in the output of conventional memory chips.

Samsung's aggressive push into AI memory chips comes as the tech giant seeks to narrow its market share gap with SK Hynix in the lucrative segment. 

SK Hynix, a leading chip supplier for Nvidia, led the HBM chip market last year with a 61 per cent share, followed by Samsung at 19 per cent  and Micron at 20 per cent, according to Macquarie Equity Research. HBM chips are used to build AI chipsets.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)