As memory prices soar, Apple launches a "price war"

Apple is transforming a memory crisis sweeping the consumer electronics industry into a strategic opportunity to expand its market share.

According to Wall Street News, Apple has launched a series of entry-level new products this week. The iPhone 17e is priced starting at 4,499 yuan, consistent with the previous generation. The MacBook Neo laptop is priced at 4,599 yuan, lower than some analysts' previous expectations.

It is noteworthy that the cost of memory and storage chips used in these devices continues to rise. According to Wall Street News, Samsung's semiconductor division has raised the price of LPDDR5X sold to Apple for the iPhone 17 series to double the original price.

Samsung's semiconductor division initially aimed to increase Apple's supply price by about 60%, starting negotiations with a 100% price hike as the opening offer to leave room for negotiation on the final outcome. However, Apple accepted this offer on the spot, and the price was thus set.

For competitors, the impact of this crisis will be far more severe than for Apple. Francisco Jeronimo, Vice President of IDC Research, stated:

Apple is entering an offensive mode, viewing the memory crisis as an opportunity to seize market share. All other smartphones in the same price range will face upward price pressure.

He added that this will create opportunities for consumers to switch from Android to iOS and from Chromebooks and PCs to Macs.

Memory Crisis Hits the Industry Hard, Android Camp First to Suffer

IDC predicts that due to soaring memory chip costs and supply shortages, global smartphone shipments will decline by 13% this year, marking the largest drop in history.

Driven by demand for AI servers, the prices of memory and storage chips have surged significantly. Memory affects application running speed, while storage concerns the local saving of files such as photos and videos.

The impact is most concentrated on low-end Android devices. IDC points out that these products will face a no-profit dilemma. PCs and Chromebooks are also under pressure, with IDC predicting an 11% decline in shipments for this market this year.

Mid-range models from Chinese smartphone brands such as Xiaomi, Oppo, and Honor are expected to be forced to raise prices, while Apple's low-price strategy compresses the price gap between the two, particularly evident in markets like China, Japan, and the United States where Apple offers a 24-month installment payment plan.

Additionally, following the success of the 16e in the Japanese and American markets, the 17e also has growth potential in these markets.

However, Apple has also admitted that it is difficult to remain completely unaffected. Apple CEO Tim Cook stated during the company's recent earnings call that Apple "sees the market price of memory rising significantly" and expects profits to be more noticeably impacted starting from this quarter

Apple's Dual-Track Strategy: Low-Priced Entry Products and High-Priced Flagship Products

Apple's pricing strategy reveals a clear offensive and defensive logic.

Wallstreetcn mentions that Apple's current strategy is to enhance profits through flagship products, offsetting the gross margin pressure from low-end products. This week, Apple launched both the MacBook Pro equipped with the M5 Max chip and the budget-friendly MacBook Neo.

This indicates that Apple's goal is to expand its product line in both directions, aiming to retain high-end buyers while attracting first-time Mac purchasers, users transitioning from Windows and Chromebooks to Mac, and iPhone users who have never owned a Mac.

Analysts point out that similar strategies may extend to the smartphone product line, with some models of the iPhone 18 expected to face higher pricing when released this fall.

Bernstein Research estimates that the manufacturing cost of the iPhone 18 Pro Max will surge by 25% due to rising costs of memory, storage, and processor chips