By CIO Insider Team
 

Apple stated that increasing memory chip costs have begun to impact profitability in the ongoing quarter, mirroring concerns from South Korean chipmakers who are shifting production to higher-margin memory chips designed for AI applications.

"We do continue to see market pricing for memory increasing significantly," Apple CEO Tim Cook says on how the crunch was showing up in the company's production plans for the year.

While he says that the impact of the memory shortage had "minimal impact" in the holiday quarter ended December 31, which is typically its strongest for sales, he expected it would have more of an impact in the current quarter.

Apple will likely need more memory chips as demand for its latest iPhone 17 has surged, especially in China and India.

The comments come after warnings from Samsung Electronics and SK Hynix, which combined control two-thirds of the DRAM chip market and count the likes of Apple as customers, that computer and smartphone companies were set to bear the brunt of a worsening shortage of DRAM chips used in their products. The consequences include growing margin pressure and potential supply chain disruptions.

The race to build AI infrastructure has prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory (HBM) for AI servers, squeezing the supply of conventional DRAM chips.

Adding to the shortage is the fact that chipmakers, bruised by aggressive capacity expansion after 2017, have become more conservative about adding more production lines. This has contributed to the current supply shortage.

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Samsung says that such expansion would remain limited in 2026 and 2027. As the crunch is set to persist, some manufacturers have already started adjusting their products to cope with the shortage and surging prices.

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Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least two percent this year, reversing earlier forecasts for growth. The PC market is expected to shrink at least 4.9 percent in 2026, IDC estimated, after an 8.1 percent growth last year.