Dive Brief:
- Apple expects supply constraints on advanced semiconductors — especially memory — to intensify quarter to quarter, executives said on a July 31 earnings call.
- The cost of memory critical to all Apple devices has risen steadily since the quarter ended in late December and will keep climbing after the current quarter ends in late September, CEO Tim Cook told investors.
- "If you look beyond September, we see the market pricing for memory continuing to increase, which could drive an increasing impact on our business, and we're continuing to evaluate this," Cook said.
Dive Insight:
Apple and other computer makers have faced memory shortages as demand for AI servers has surged among enterprises and data centers. Higher memory costs led Apple to raise prices recently, and the supply constraints sparked a multiyear deal with longtime supplier Broadcom to develop U.S.-made custom silicon for multiple generations of Apple products. The agreement is expected to top $30 billion.
In the previous quarter, Apple's supply constraints mainly hit the Mac and — to a lesser extent — the iPhone and iPad, Cook said. The limits were driven mainly by the lack of advanced-node capacity used to produce Apple's systems-on-a-chip.
"That's the primary supply constraint now, and the root cause of it is not a regular supply issue," Cook said. "It's a demand forecast issue to be candid, where the iPhone and the Mac are both doing remarkably better than we thought they would do."
Apple has been pulling supply forward despite less flexibility than normal in the supply chain because of the strength of iPhone and Mac sales. Year to date, the growth rate has been 22% and 29%, respectively.
"And at some point, there's a limit to that," Cook said. "And so we've got a [current] quarter that we're going to be scrambling on the supply side essentially.”
The memory crunch is partly driven by the fact that the dynamic random access memory market has only three primary suppliers, Cook said. More suppliers could help on the supply side, though it's unclear whether they would lower prices.
In 2025, Apple committed to investing $600 billion in its U.S. supply chain over four years, Cook said. The company also plans to reinvest its tariff refunds into the network.
This year, Apple plans to open an Advanced Manufacturing Center at its Houston facility, where it currently assembles AI servers, Cook said. Later this year, it will also make Mac minis there.
