Apple and Microsoft Raise Prices Amid Memory Crisis; Small Electronics Firms Face Existential Threat

▲ Apple

A memory supply crisis triggered by the artificial intelligence (AI) boom is hitting the global consumer electronics industry hard.

While big tech companies like Apple and Microsoft are passing costs on to consumers through price hikes, small and medium-sized electronics firms are struggling to survive as they absorb massive costs without such flexibility, U.S. business news channel CNBC reported on June 28 (local time).

On June 25, the day after U.S. memory chipmaker Micron announced its quarterly earnings, Apple raised prices across its Mac computer and iPad lineups by 15 to 25 percent, including a 200 dollar (approximately 307,000 won) increase for the MacBook Air and 300 dollars (approximately 460,000 won) for the MacBook Pro.

CEO Tim Cook had previously likened the current surge in memory prices to a "once-in-a-century flood" in an interview with the Wall Street Journal (WSJ), warning of price hikes by stating, "I have never seen such a rapid increase in component prices."

On the same day, Microsoft also raised the price of its Xbox Series S game console by 100 dollars to approximately 500 dollars, stating, "The cost of storage and memory for consoles has risen more than 2.5 times, and we expect an additional two-fold increase by the fall of 2027."

Apple's stock price plunged 6 percent that day, wiping out approximately 265 billion dollars (approximately 407 trillion won) in market capitalization.

◇ Suppliers Have Their Say On the other side of this crisis, Micron is the biggest beneficiary.

Micron posted record-breaking results this quarter, with revenue surging fourfold compared to the same period last year and its gross margin soaring from 39 percent to 85 percent.

The average selling price of DRAM has skyrocketed 260 percent year-over-year, and the company's stock price has jumped 800 percent over the past year.

However, Micron argues that it is not entirely without justification.

The company explains that during the memory downcycle of 2022 to 2023, extreme price-cut demands from client companies caused gross margins to fall into negative territory, forcing them to halt investments and ultimately exacerbating the current supply shortage.

Sumit Sadana, Chief Business Officer (CBO) at Micron, said in a WSJ interview shortly after Apple's price hike announcement regarding the memory crisis, "I told some customers who were trying to cut prices extremely at the time that 'this approach is not constructive.'"

He further countered, "In 2023, prices and margins were so bad that a significant portion of industry investment was halted, and this led to the current supply shortage."

Although he did not name Apple directly, the industry interprets these remarks as being aimed at the company.

◇ Small Firms Face Existential Crisis Small and medium-sized electronics firms are taking a direct hit.

IDC analyst Nabila Popal stated, "Memory suppliers are only taking calls from large customers," adding that for small manufacturers making devices under 100 dollars, the current situation is an "absolute existential crisis."

Action camera maker GoPro warned of a possible shutdown this month after memory costs surged 80 to 115 percent at the end of the first quarter.

Shares of speaker manufacturer Sonos have fallen 23 percent this year.

Elaine Ferguson, co-founder of telecommunications equipment company W5 Technologies, lamented that a server that cost 5,373 dollars in 2020 has now jumped nearly three times to 15,000 dollars (approximately 23 million won), adding, "There is no promise of delivery dates."

Tomaz Zaman, co-founder of small router startup Mono Technologies, said the price of 8 gigabytes of Micron DRAM has jumped more than eightfold from 35 dollars at the time of development to 300 dollars (approximately 460,000 won) now, adding, "A 900 to 1,000 dollar router is not worth the price, but we have no choice."

(Photo: Getty Images)

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