AI demand driving up Apple prices, says Cook

Anyone waiting for September's annual iPhone launch will be unhappy with this news: Apple CEO Tim Cook has said rising memory costs mean handset prices will be going up too.

That comes via an interview with Apple's CEO in the Wall Street Journal, in which Cook said memory chip prices had become "unsustainable."

RAM prices have skyrocketed because of a drive for data centre demand sparked by AI, with prices of some models more than tripling by the end of last year. IDC said at the time that it was "the end of an era of cheap, abundant memory and storage". The data centre demand has led manufacturers to shift to equipment to meet those needs, away from components for consumer-grade hardware, further exacerbating the problem, while constricted supply has meant prices of remaining parts have continued to rise – not helped by a rise in scalper bots targeting what remains.

Amid these challenges, it's perhaps no surprise hardware prices are set to rise – and no surprise that Cook is concerned, as Gartner said earlier this year that PC shipments were at their lowest level in a decade.

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"Unfortunately, price increases are unavoidable," Cook said, according to the WSJ. "We're doing our best ⁠to mitigate the huge increases that are being passed to us, and we've been trying ​to shield our customers from the increases, but the situation has become unsustainable."

How much will prices rise?

Cook didn't get into details, however, so it's unclear when those price rises will kick in, or which products they will impact.

But he did pin the blame on AI, saying the drive for higher-spec memory was impacting consumers. "There's less supply at a time when consumers want devices and the memory guys are passing along huge price increases," he said. "We definitely need memory pricing and supply to return to reasonable levels for ​consumer products. That's the ​bottom line."

Chiew Le Xuan, an analyst at Omdia, told the BBC that the average price of smartphones will increase by 20% this year, predicting that iPhones will cost $150 more this year – though that will also come with upgrade specifications. He added: "This is the new pricing reality, not a temporary spike."

What can be done?

Asked if the US should ease controls around sourcing such parts from China, Cook said: "Everything needs to be on the table."

Cook also suggested Apple was willing to help fund solutions from its own massive cash pile – which currently sits above $68bn, with total liquid reserves above $162bn – though it has no plans to build its own memory manufacturing. "We're willing to use our balance sheet ⁠to ​help be a part of the solution," he said. "Obviously, ​more capacity is needed. "

The BBC reported that Trump claimed on his social media site that Apple would be working with Intel to produce chips in the US, but any such deal has yet to be confirmed by either company. Last year, the US government bought 10% of struggling Intel as part of a bid to bring chip manufacturing to the US.

Cook is set to step down as CEO in September, handing the reins to John Ternus.