Apple delivered a powerful start to the fiscal year with first-quarter earnings that exceeded expectations and an outlook pointing to growth of up to 16% in the current quarter.
Yet alongside the upbeat forecast, the iPhone maker acknowledged a growing constraint that could cap its momentum: a global shortage of memory chips.
Chief executive Tim Cook said memory had “a minimal impact” on margins in the December quarter but warned it could have “a bit more of an impact” in the March quarter.
Apple suggested that demand for its products, particularly iPhones, could be even stronger if it had access to sufficient components.
Although the current supply issues are partly linked to advanced-node chip manufacturing, Cook acknowledged that rising memory prices would affect Apple as well.
The company is exploring “a range of options” to manage the situation, he said, but declined to provide details on how Apple is responding to the AI-driven shortage that is reshaping the global semiconductor market.
AI demand triggers a global memory crunch and astronomical price rise
The rapid ramp-up of AI infrastructure is placing unprecedented strain on the global memory market.
AI workloads demand vast amounts of memory, and the current shortage is partly the result of manufacturers diverting production away from consumer electronics toward higher-margin chips tailored for artificial intelligence.
Rather than expanding output of conventional DRAM and NAND used in smartphones, PCs, and other devices, major memory makers are prioritising data-centre technologies such as high-bandwidth memory (HBM) and advanced DDR modules.
The shift has tightened the supply of mainstream memory and pushed prices higher across the market.
The shortage of memory chips, including DRAM and NAND used for short-term data storage, has intensified as artificial intelligence workloads expand at an unprecedented pace.
Companies such as Nvidia, AMD, and Google are absorbing large volumes of memory for AI chips and data-centre infrastructure, often securing priority supply.
At the same time, production remains concentrated among a small group of manufacturers.
Samsung Electronics, Micron Technology, and SK Hynix together produce more than 90% of global memory, leaving the market highly sensitive to shifts in demand.
Prices have risen sharply as a result.
Memory prices surged by 50% in the final quarter of 2025 and are expected to climb a further 40% to 50% by the end of the first quarter of 2026, according to Counterpoint Research, driven largely by data-centre operators willing to pay steep premiums to secure supply.
“I have tracked the memory sector for almost 20 years, and this time really is different,” says Avril Wu, senior research vice president at Taipei, Taiwan-based TrendForce, which tracks the global semiconductor industry in a WSJ report.
“It really is the craziest time ever.”
MS Hwang, a research director at Counterpoint Research who has been in the memory industry for more than 30 years, says while rapid price appreciation will continue for now, it’s hard to gauge memory-chip pricing beyond mid-2027.
He predicts they will soon be considered one of the pricier components in a device, rising from under 10% to as much as 30% of the total cost of phones and other gadgets.
Memory makers reap the benefits
While hardware manufacturers grapple with cost pressures, memory producers are enjoying a surge in profitability.
Samsung Electronics reported a threefold increase in quarterly profits, hitting a new record, driven by strong demand for AI servers and memory chips.
“Looking ahead to Q1 2026, the DS Division expects AI and server demand to continue increasing, leading to more opportunities for structural growth,” the company said.
“In response, the Division will continue to focus on profitability via a strong emphasis on high-performance products,” it added.
SK Hynix has also reported record profits, supported by soaring demand for high-bandwidth memory.
The company said its revenue from such products more than doubled in the previous year, helping it achieve record annual sales and operating profit.
“We see SK Hynix as one of the biggest AI winners in Asia, driven by its leadership in high-bandwidth memory and strong overall memory competitiveness,” said Ray Wang, an analyst at SemiAnalysis.
Rising risks for hardware manufacturers
According to IDC, the effects of the memory shortage are uneven, producing clear winners and losers depending on supply-chain resilience and the degree of vertical integration.
Manufacturers concentrated in the lower end of the market are likely to feel the sharpest pain.
Companies such as TCL, Transsion, Realme, Xiaomi, Lenovo, Oppo, Vivo, Honor, and Huawei operate on thin margins, leaving them far more exposed to rising component costs.
As memory prices climb, their profitability will come under significant pressure, leaving them little choice but to pass on some, if not most, of the additional costs to consumers.
Morgan Stanley analysts warned in a recent note that a pricing “supercycle” in memory chips increasingly threatens hardware manufacturers’ earnings as they head into the next fiscal year.
They added that with hardware original equipment manufacturer (OEM) valuations already near all-time highs, “we believe it’s time to de-risk exposure” to global hardware original equipment manufacturers and original design manufacturers “where memory is a significant input cost.”
Morgan Stanley in November downgraded several hardware firms, including Dell, HP, and Hewlett Packard Enterprise, while maintaining a more optimistic outlook for companies such as Seagate Technology and Western Digital.
Source: Potential contraction in the global smartphone market alongside an increase in average selling prices (ASP) by IDC
“We think cost inflation, especially on DRAM and NAND, could be a sizable drag to margins in the coming year, particularly if the cost inflation doesn’t slow down,” wrote Evercore analyst Amit Daryanani.
However, Daryanani argued that Apple and Dell are relatively well protected.
He cited Apple’s scale and long-term supply-chain agreements, as well as Dell’s greater exposure to commercial customers, as factors that could cushion the impact of rising memory costs.
“In the high end of the market, Apple and Samsung face pressure but are structurally hedged. Its cash reserves and long-term supply agreements allow it to secure memory supply 12-24 months in advance,” said IDC.
Even so, Apple faces a tangible challenge.
Memory can account for 10%-15% of the total bill of materials for high-end smartphones, according to industry estimates, making sustained price increases difficult to absorb indefinitely.
Apple’s strategic response
Apple appears to be recalibrating its product strategy in response to supply constraints and rising component costs.
According to Nikkei Asia, the company is prioritising production of its most premium iPhone models for 2026 while delaying the rollout of its standard model.
The strategy shift towards maximising revenue and margins from high-end devices is a response to memory and materials costs increase.
The US tech giant plans to prioritise the launch of its first foldable iPhone alongside two non-folding models with enhanced cameras and larger displays in the second half of 2026, while the standard iPhone 18 is expected to be pushed back to the first half of 2027, the report said.
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