Apple’s memory problem is your problem, too

Apple’s ongoing problems with RAM shortages and higher prices won’t be solved anytime soon, because rapidly accelerating demand for high-end AI memory is devouring the consumer electronics industry. GoPro has already warned it might go out of business — and the scale of the crunch has prompted analysts to call it an “absolute existential crisis” for smaller tech firms. An endless night The whole issue might get worse. Noted Apple analyst Ming-Chi Kuo believes the supply/demand crisis will deepen through 2027. He expects up to 20 of the remaining memory manufacturing capacity currently going to consumer electronics could be diverted to feed data centers in the coming year. That’s a message of doom to smaller firms, and the Android market will be eaten up. It’s lazy thinking to see Apple as a villain in this scenario. The company might have been charging more for add-on memory than market rates, but there were real technical reasons to do so. And while critics might be castigating Cupertino for those past practices, they’ll still find themselves now paying more for whatever brand of electronic devices they use to write their screeds on in future. It’s all about supply and demand. Memory manufacturers see the opportunity to feed AI need, even if it means sacrificing consumer markets as they do. Cash through chaos You can argue that the consequences of that decision are unethical. Should memory makers have considered the consequence of curtailed supply on their existing markets? After all, every business, every school, and almost every consumer is now a digital entity, and the massive increase in PC, smartphone, and other consumer electronics prices will have a consequential impact across all layers of society. It generates yet another inflationary pressure (as if more is needed) on the global economy, and the decision to further limit supply of consumer electronics memory could be seen as corporate irresponsibility. That’s partly why a class action against the big three memory makers (Samsung, SK Hynix, and Micron) has been filed in California. Between them, those three firms control around 90 of global memory supply, giving the trio colossal market power. It’s a real power imbalance. This is market power GoPro is typical; as a smaller vendor, there isn’t much it can do to save itself. Apple has more clout, so it might be able to forge a way forward. But even then, it’s rowing against what CEO Tim Cook has already called “a hundred-year flood.” So even if the company can convince the Trump Administration to let it secure memory from currently embargoed Chinese manufacturer ChangXin Memory Technologies, the move is unlikely to ease the pressure much at all. “Tim Cook is one of the few tech leaders who can still navigate both Washington and Beijing, so this is better handled before he steps down as CEO,” wrote Ming-Chi Kuo. That’s true, though Cook will continue “engaging with policy makers” once he takes on his new role as executive chairman of Apple’s board of directors in September. Apple will likely also be speaking with partners to explore the possibility of investing in additional fabrication plants together (or building its own, given it has its own stable of experts quite capable of doing so). But even if those talks come to something, it will be years before they enter operation. Sadly, manufacturing investment from the existing big memory firms seems focused on data centers. The shortage will continue until morale improves What happens now? Short of any direct intervention to change the situation, memory prices will continue to accelerate. Jefferies Equity Research warns they will rise up to 50 in Q3 and an additional 30 to 40 by the end of 2026. They’ll also continue to increase next year, by which time some new production capacity might begin to come on stream. The scale of these price increases means no one can know whether Apple’s most recent product price increases (and the looming iPhone price increases in fall) will cover the full extent of the anticipated memory price hike. Will we see prices fall if memory price inflation eases off? History says we’re unlikely to see AI-flation go in reverse, but it’s not completely impossible. Meanwhile, businesses everywhere will struggle with unexpected hardware cost increases that are impossible to plan for. You can also anticipate some smaller vendors exiting the market, leaving companies who might have deployed those products across their business exposed, as software updates and hardware repairs will cease. Yes, AI has already changed the world – it’s more expensive They told us AI would change the world. It appears to be doing so by making everything more expensive. While there will still be opportunity to generate cash through this chaos, it’s far from delivering the kind of stable, business-friendly environment most governments rely on to balance their books. In the end, all of this calls to mind the 2002 DRAM price fixing scandal, the only difference being that the consequences are much greater in this digital-everything age. Please join me on social media at BlueSky, LinkedIn, or Mastodon, and do subscribe my daily human-curated Apple news headline summary on Substack.