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Apple's Stock Drops Nearly 10%. How Will It Respond to Memory Shortage?

1 month ago

Apple's stock "fell just shy of 10% on Friday," reports Yahoo Finance, "after CEO Tim Cook warned about the impact of the global memory shortage on the company's business." During Apple's third quarter earnings call, Cook said the company paid significantly more for memory in the quarter and expects that to further increase in the current period. And while Apple is able to offset some of that price jump, it won't be able to tackle it all... The CEO said that iPhone and Mac sales outpaced Apple's own expectations and that a lack of flexibility in the supply chain is making it more difficult to keep up with demand. Yahoo Finance cited an investment analyst who predicts overall gross margins for Apple's iPhone could drop from 38% to 34.5%. But another analyst sees a scenario where Apple "raises iPhone prices, unit growth will slow, and as unit growth slows, so will user growth, which we think ultimately will slow Services growth." (Still, Yahoo Finance predicts Apple's new leasing program "could help address those concerns.") Apple has another controversial option, according to the blog 9to5Mac: Bloomberg reports that US senators from both sides of the aisle are urging Apple CEO Tim Cook to commit by August 21 to not using memory chips from Chinese suppliers CXMT and YMTC.... Apple is not required to obtain U.S. government approval to purchase chips from the companies, but doing so without the administration's support could expose it to significant political ramifications. Which is why, in an interview with The Wall Street Journal ahead of Apple's recent price hikes, Tim Cook said that "everything needs to be on the table," adding that "we should look at all supply...." More recently, the Journal reported that Apple's use of Chinese memory chips could extend beyond China, with the company seeking the administration's blessing to use components from CXMT and YMTC in products sold elsewhere outside the US. The report also detailed Micron's efforts to persuade the administration to reject Apple's request, arguing that allowing Chinese suppliers into Apple's supply chain could undermine domestic memory production... [Bloomberg's reported that U.S. lawmakers warned] other companies could follow Apple's lead, potentially undermining domestic memory production and planned investments in states such as Indiana, Idaho, New York, and Virginia... [T]he senators sought details about any information Apple has shared with CXMT during the component qualification process, noting that the transfer of controlled technical information to advanced chipmaking facilities in China may require a Commerce Department license. The blog MacRumors notes that Apple has already increased prices for Macs and iPads in June because of surging memory prices. Apple CEO Tim Cook said Thursday "we did it because we're in what I would characterize as a 100-year flood on memory pricing with exponential increases in memory prices." Cook did not comment on whether Apple plans to raise iPhone prices when the iPhone 18 Pro models and first foldable launch this September, but multiple analysts believe prices will go up. Cook said Apple is expecting to pay higher memory costs in the September quarter, though Apple will be able to partially offset it with lower costs on some non-memory components and a stockpile of inventory. Sky News points out that "It was Tim Cook's final earnings appearance before his retirement after 15 years at the helm of the company." Apple, which recently topped Nvidia as the most valuable listed company, has been largely spared the volatility in share price seen by chipmakers and big spenders on artificial intelligence. Apple continues to generate cash without the huge investment spending that its Wall St peers are dealing with "and that showed across most parts of the operation," said Thomas Monteiro, an analyst at Investing.com.