If you think MacBooks and iPhones are expensive now, just wait
Macworld ·
Macworld Earlier this year, when other rival companies were slowly raising prices due to RAM and storage shortages, we praised Apple for keeping things steady, but when the price hikes arrived in June, they were brutal . Products released since then, including the iPhone 18 Pro and M6 Mac mini, have seen additional price hikes, and there are numerous clues that further price hikes are a distinct possibility. In an otherwise celebratory earnings call this week, for instance, hints were dropped about recent increases in component costs, and what they might mean for Apple’s pricing in the future. Over the course of the call (for ease of reference, I’m working from Jason Snell’s transcript over on Six Colors ), Apple CFO Kevan Parekh used the phrase “higher memory costs” four times and “memory impact” twice; he also, as a bonus, said, “We expect the memory costs to continue to be a challenge for us.” New CEO John Ternus, meanwhile, spoke about the topic at some length, describing current memory pricing as “unprecedented,” then predicting “even higher memory costs, partly offset by a few factors” in the December quarter followed by still more increases in the quarters beyond. Given those predictions, and Apple’s citation of higher memory costs as the reason for the original price hikes, it seems logical to expect Apple products to continue to get more expensive in the short to medium term. But the company was reluctant to admit this in so many words. Wamsi Mohan, a representative of Bank of America, posed a question about this at the earnings call: “Is Apple changing anything in the way that you are procuring memory?” he asked. “How do you think about the progression of memory over time? And if it continues to be a headwind, is pricing also going to remain dynamic [and] potentially move higher?” This, I’m afraid, is a classic journalistic mistake: the multi-part question which allows the respondent to answer only the parts they like. And cynical readers will be unsurprised to hear that Apple COO Sabih Khan chose to focus on the altogether less awkward first two parts and ignore the third. He talked about supplier relationships and purchase obligations and left it at that. But that wasn’t the end of the matter. Perhaps Kevan Parekh figured that, if that was all the answer he received, Mohan would use his follow-up to drill down into the pricing issue some more and it would look like Apple had dodged the question. So he addressed it… after a fashion. “Wamsi, maybe I’ll add here because you asked the question about pricing and how we’re managing it,” he began. “So look, we’re trying to manage this with a number of actions. “You were just talking about the fact we’re continuing to pursue lower cost in non-memory components. John mentioned the fact that we have some benefit of carry-in inventory, and we did reluctantly make the decision to change pricing on a number of our products, starting with the iPad and Mac in the June timeframe and then iPhone more recently in September. I think what we try to do, in doing all that, we evaluate the unit’s revenue and margin, and we’re really being thoughtful and deliberate at evaluating kind of the short-term and long-term considerations, and I believe we’re balancing this well.” In other words, Apple looks at the revenue and margin of a product and then acts accordingly, trying to balance short- and long-term considerations. (I’m putting words in Parekh’s mouth here, but I take that to mean balancing the short-term harm of reduced profit against the long-term harm of lower sales and a smaller install base to sell services and accessories into.) Which is fairly obvious and doesn’t offer a great deal of new information. So the official answer on the subject of Apple price rises is… we will act in a “thoughtful and deliberate way.” But we’ve heard that before, and reading between the lines of all the complaints about memory costs in the rest of the earnings call, it’s looking increasingly likely that Apple will have to push up pricing again.