AI Memory Crunch Squeezes Apple as Samsung Cashes In

The AI-driven memory shortage that has handed Samsung record profits is now showing up in Apple's numbers. On Monday, 2 November, Apple told investors that rising memory chip prices will pull its gross margin down to 45–46% in the December holiday quarter, from 47.9% in the September quarter (Reuters via TechCentral).

The warning overshadowed an otherwise strong report. Revenue for fiscal Q4 FY26 (Jul–Sep 2026) reached $114.48 billion, ahead of the $113.39 billion analysts expected, lifted by early iPhone 18 Pro demand and higher prices. Apple shares dropped as much as 4% during the earnings call before recovering to a decline of about 2%.

The message from Cupertino is simple: the same chips that are minting money for memory makers are becoming one of Apple's biggest cost problems, and management expects that to last into 2027.

Why memory got so expensive

The squeeze starts in AI data centres. Memory makers are steering their most advanced production lines toward server DRAM and high-bandwidth memory (HBM) for AI, which leaves less capacity for the chips that go into phones and laptops (Evertiq, citing TrendForce).

Prices have climbed quarter after quarter. TrendForce estimates conventional DRAM contract prices rose 13–18% in Q3 2026 and expects a further 10–15% in Q4, with NAND flash up 15–20%. Those gains stack on top of steep increases already locked in earlier in the year.

Even Apple, one of the world's largest memory buyers, has lost its usual bargaining power. It reportedly agreed earlier this year to pay roughly double the previous price for iPhone DRAM from Samsung and SK hynix (Korea JoongAng Daily). A Counterpoint Research analyst told the paper that memory already accounts for about half of a smartphone's manufacturing cost.

Samsung's windfall

Samsung is the boom's biggest winner. On 29 October it reported Q3 2026 operating profit of KRW 107.4 trillion (about $80 billion), making it the first tech company to clear KRW 100 trillion in a single quarter (Samsung Newsroom). That is up roughly 782% on a year earlier (The Korea Times).

Nearly every won of it came from chips. The split across Samsung's businesses shows the memory boom cutting both ways inside one company:

Segment revenue includes sales between Samsung units, so it adds up to more than the company total.

Source: Samsung Q3 2026 results and investor presentation.

The Galaxy business grew revenue on new foldables, yet swung from a KRW 3.6 trillion profit a year earlier to a KRW 0.6 trillion loss, which Samsung put down to cost pressures. Samsung's memory arm, meanwhile, expects AI-driven demand in 2027 to far outstrip industry supply, which points to more of the same for device makers.

How the squeeze reaches Apple

Unlike Samsung, Apple makes no memory of its own, so every price rise lands straight on its costs. Its September-quarter gross margin of 47.9% still beat the 47.5% analysts expected, cushioned by inventory bought at older prices and cheaper non-memory parts (Reuters via TechCentral). That cushion is thinning: chief financial officer Kevan Parekh told analysts he expects memory costs to keep rising into 2027.

Apple has already passed part of the bill to customers. It raised iPad and MacBook prices in June, and the iPhone 18 Pro and Pro Max launched in September at $1,199 and $1,299, each $100 above last year's models (Reuters via Business Standard). It also added $100 to iPhone 17 prices when the new phones arrived.

Those increases may be costing it volume. Nikkei Asia reported in October that Apple cut iPhone 18 Pro component orders for the month by at least 15% on softer demand; Apple did not respond to Reuters' request for comment at the time.

There is a less visible hit too. Apple earns rich margins on higher-storage iPhones and Macs, and dearer NAND flash eats into that upsell. To secure supply, Apple's purchase commitments rose by $33 billion in the quarter, though chief operating officer Sabih Khan would not confirm a long-term memory contract. Technalysis Research analyst Bob O'Donnell said the big question is how well Apple can "weather the significant component price increases" that have already slowed its rivals.

What to watch next

Relief is not on the horizon. Samsung's memory business expects the gap between AI-driven demand and industry supply to widen in 2027, and TrendForce warns that PC DRAM supply could shrink as more capacity moves to servers.

Apple's levers are pricing, timing and suppliers. It plans to charge more for iCloud+ to cover the cost of cloud-based AI features such as Siri, and it is now spreading iPhone launches across the year, with more models due in 2027 (Reuters via TechCentral). Speculation also persists that it could revisit Chinese NAND maker YMTC, a supply deal US sanctions derailed in 2022 (Korea JoongAng Daily).

Smaller phone makers face a harder test than Apple. In June, Counterpoint Research forecast a 12% fall in global smartphone shipments this year, to the lowest level since 2013. The next check on Apple comes with its December-quarter results early in 2027, when investors will see whether the 45–46% margin guidance held.