Originally published at: Tim Cook Confirms Apple Will Raise Prices Due to Memory and Storage Costs - TidBITS
In “iPhone and Services Drive Apple to Record Q2 2026 Despite Supply Constraints” (1 May 2026), Michael Cohen and I wrote:
the more revealing guidance came from Cook, who warned that memory costs would be “significantly higher” next quarter due to memory manufacturers redirecting output to AI chips. It’s going to get worse before it gets better, as Cook noted, saying, “beyond the June quarter, we believe memory costs will drive an increasing impact on our business.” Apple can absorb some of that impact thanks to its scale and margins, but only up to a point.
That point has now arrived. In an exclusive interview with the Wall Street Journal’s Rolfe Winkler, outgoing Apple CEO Tim Cook acknowledged that the company would have to raise prices to account for the soaring costs of memory and storage chips, driven by demand from AI companies. The article is behind a paywall, but you can watch the summary video for free.
Winkler suggests in his summary that Apple has absorbed the cost increases so far because it has always treated memory and storage upgrades as profit centers. That’s no surprise to the Apple community, which has long chafed at Apple’s premium prices for memory and storage. But now, for instance, the price of standalone internal flash storage is closer to and sometimes even higher than Apple’s upgrade prices.
Calculating Possible Price Increases or Margin Hits
Winkler quotes research firm TechInsights as saying that the cost of memory and storage in an iPhone 17 Pro was about $50 last year, but the same components for the upcoming iPhone 18 Pro would be about $200. Apple’s gross margin on hardware was 38.7% in Q2 2026, down from 40.7% in Q1 2026. We don’t know the iPhone 17 Pro’s specific margin—as a premium product, it’s probably higher than average—but let’s use 38.7% for illustration. For a 256 GB iPhone 17 Pro that retails for $1100 and has a 38.7% margin:
- Profit would be $1100 × 0.387 = $425.
- Cost of goods would be $1100 – ($1100 × 0.387) = $675.
- The estimated memory/storage portion of the cost of goods is $50.
So, for a hypothetical iPhone 18 Pro:
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The increase in the estimated memory/storage cost is $200 – $50 = $150.
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The estimated cost of goods would be $675 + $150 = $825.
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To maintain the $1100 price, the profit would fall to $1100 – $825 = $275.
- At a price of $1100, the resulting margin would be $275 ÷ $1100, or 25%.
- To maintain a 38.7% margin, the price would be $825 ÷ (1 – 0.387) = $1345.
- In raw dollars, the price increase would be $1345 – $1100 = $245.
- As a percent increase, it would be ($1345 – $1100) ÷ $1100 × 100 = 22.3%.
Again, these numbers are almost certainly off because the iPhone 17 Pro likely has a higher gross margin, and we don’t know how other component prices might change over the year, especially with Apple’s volume purchasing abilities. The point, however, is that a $150 increase in the cost of goods would only result in a $150 price increase if Apple were willing to accept a gross margin of ($1250 – $825) ÷ $1250 × 100 = 34%.
Obviously, Apple could absorb such costs and more if it were to accept dramatically lower gross margins. But as high-minded and customer-focused as Apple is, the company is still in business to maximize profit.
Should You Buy Now?
Practically speaking, if you’re pondering the purchase of a new Mac, iPhone, iPad, or Apple Watch, you might consider making it sooner rather than later. Historically, I would have recommended that anyone in the market for a new iPhone wait until the new models appear in September, for instance, but it might make sense to buy one of today’s models instead if it’s $250 less. We don’t know when Apple will raise prices, but it would be easiest to do so with the release of new products.
Of course, Cook didn’t let the possibility of increased prices slip accidentally. If the threat of higher prices increases demand for Apple products now, that could still boost Apple’s bottom line. That’s what happened in 2025 when threatened tariffs caused people to move up planned purchases to an extent that outweighed the cost of the actual tariffs (see “Apple Reports Record-Breaking Q3 2025 Results,” 1 August 2025).
In other words, don’t look for Apple to be starting a GoFundMe anytime soon.
First World problem, I know, but still a bit annoying.