Apple raises hardware prices; AI gets the blame

30/06 16:15 - Apple raises hardware prices; AI gets the blame
Apple’s threatened product pricing hike arrived Thursday with steep increases landing across all its products (except the iPhone) — and rapidly accelerating RAM prices are to blame. Apple CEO Tim Cook had warned last week about the need for price increases, with Bloomberg reporter Mark Gurman subsequently telling us these were “imminent.” The increases have been imposed as a result of the massive demand for memory and storage components generated by the rapid investment in AI servers. Prices have increased to meet this demand, with vendors shifting manufacturing to the advanced memory modules demanded by AI companies. In doing so, they have not invested in additional production capacity, further exacerbating the demand/supply imbalance. “Unfortunately, price increases are unavoidable,” Cook told The Wall Street Journal. “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.” The price increases are going to hurt The price hikes even affect products Apple hasn’t updated in years, such as the HomePod and Apple TV. The extent of the increase is big in some cases — the Apple TV is up 55% while an M3 Ultra Mac Studio sees a 32.5% rise. While I had hoped any higher prices would be aimed at Apple’s high-end products, the extent and scale of the changes suggests the enormity of the component price increases the company has been struggling with.   “We haven’t seen anything like this in modern Apple,” said Neil Cybart at Above Avalon. Here’s what starting prices look like now: Macs MacBook Pro, up $300 to $1,999. MacBook Air, up $200 to $1,299. MacBook Neo, up $100 to $699. iMac, up $200 to $1,499. Mac mini (M4 Pro), up $200 to $1,599.  Mac Studio (M4 Max), up $500 to $2,499. Mac Studio (M3 Ultra), up $1,300, to $5,299. iPads iPad Air, up $200 to $749. iPad Pro, up $200 to $1,199. iPad, now starts at $449. iPad mini, now $599. Other hardware Vision Pro, up $200 to $3,699 HomePod mini, up $30 to $129. Apple TV, up $70 to $199. There were no immediate changes to the iPhone, Apple Watch and AirPods — but no guarantees, either, that their prices won’t also jump. This is AI-flation The scale of these increases is like a dose of cold water on the already tepid optimism of investors. This was quickly reflected by a big sell off on Apple stock, which was down more than 6.5% at one point today. And the impact was contagious across the sector as investors realized that if Apple was forced to increase prices even at the lower end of the market it so recently secured, it’s likely other manufacturers will be forced to do the same. This can only further dampen market optimism. Concerning the MacBook Neo, Francisco Jeronimo, IDC vice president for client devices, said: “The $100 increase takes the entry model from $599 to $699, close to a 17% increase, one of the sharpest percentage hikes in the announcement, and it hits one of Apple’s best-selling, most price-sensitive laptops right as it is winning share. Raising the price of its fastest-selling entry product indicates that Apple believes demand will stay strong, given the value the product offers. It also signals Apple is willing to give up some unit growth at the bottom of the range to defend margin, and it widens the gap the Neo had just closed against Windows entry-level machines.” The fact of the matter is that consumers are effectively paying an inflationary fee for the benefit of the ongoing global AI rollout. That rollout is already consuming vast quantities of investor cash, despite the shaky business plan of existing incumbents.  “We have never seen a component price increase this much, this quickly,” Apple ​said in a statement. “We have shielded our customers from these increases so far, but we have now reached a point where we need to begin ⁠raising prices on a number of products, including today’s increases for iPad and Mac.” Apple and the entire industry will not want to maintain prices at these levels if they can avoid it. That’s going to mean the entire tech industry will now begin leaning on memory manufacturers such as Micron to do more about building out production capacity, or at least promising to do so. Of course, the other hope might be that investors finally see the folly of the AI business model and slow down deployment, though that seems unlikely. “We know this is not welcome news, and we are working tirelessly to find solutions,” the company said. Please join me on social media at BlueSky,  LinkedIn, or Mastodon, even better, please subscribe to The Core for your daily collection of human-curated Apple News. ...