Key Takeaways
- Apple warns rising memory chip costs will pressure its profit margins.
- Suppliers Samsung and SK Hynix are prioritising high-bandwidth memory (HBM) for AI chips, reducing supply for smartphones.
- Apple’s gross margin forecast for June is slightly below analyst expectations.
Apple has signalled that soaring memory chip prices, driven by the artificial intelligence (AI) boom, are beginning to impact its profitability. The tech giant forecasts a dip in its gross margin for the current quarter as suppliers like Samsung and SK Hynix prioritise more lucrative AI components.
Margin Pressure from AI-Driven Chip Shortage
Apple Chief Financial Officer Luca Maestri stated that costs for DRAM and NAND memory are expected to rise sequentially in the June quarter, creating a “headwind” for gross margin compared to the March period. This shift occurs as chipmakers reallocate production to high-bandwidth memory (HBM), a critical component for AI chipsets, squeezing supply for standard memory used in iPhones and Macs.
“We’re seeing a significant increase in the cost of memory chips, and that’s something we’re managing through,” Maestri said on an analyst call.
Financial Impact and Market Reaction
Apple reported a March quarter gross margin of 46.6% but forecasts 46.5% for June, slightly below analyst estimates of 46.6%. Following the announcement, Apple’s shares fell about 1% in extended trading.
The memory chip industry is recovering from a downturn, with Samsung and SK Hynix cutting production and raising prices. Samsung anticipates a tight market for the rest of the year due to AI demand, while SK Hynix has reportedly sold out its HBM supply for 2024.
Analyst View: A Tangible AI Ripple Effect
“The memory cost headwind is a real issue for Apple,” said Amit Daryanani, an analyst at Evercore ISI. “It’s a sign that the AI boom is having a tangible impact on the broader tech industry.”
This cost pressure adds a layer of challenge as Apple races to enhance its own AI capabilities. The company has trailed rivals like Microsoft and Google in rolling out generative AI features.
Apple’s AI Ambitions Amid Rising Costs
CEO Tim Cook expressed excitement about AI opportunities, confirming heavy investment and hiring in the sector. Apple is expected to unveil major AI features at its Worldwide Developers Conference in June.
However, sustaining its industry-leading profitability—with gross margins consistently above 44%—could become harder if memory costs keep climbing. “If memory costs continue to rise, it could start to pressure that margin,” Daryanani noted.
The Bigger Picture: Winners and Losers
The situation underscores the widespread ripple effects of the AI boom. As chipmakers pivot to profitable AI components, the reduced capacity for commodity memory drives up costs for consumer electronics giants like Apple.
“The AI boom is creating winners and losers across the tech industry,” Daryanani concluded. “For companies like Apple, it’s creating new opportunities, but it’s also creating new challenges.”
