The Beleaguered Chip Sellers Getting Their Revenge on Apple
Surging demand from AI data centres has driven flash memory prices up fivefold over the past year, giving suppliers such as Kioxia greater leverage over Apple. The shift is increasing storage costs for the iPhone maker, putting pressure on profit margins and contributing to higher prices across its product lineup.
3 min
During a ride in a Southern California desert, sales executive Scott Nelson stopped his dirt bike, pulled out a rifle and shot his old iPod.
Nelson sold flash storage to Apple AAPL -0.94%decrease; down pointing triangle and hated feeling like he always got the worst end of the deal. His Japan-based manufacturer, Kioxia, had little leverage. Apple was the world’s biggest buyer of flash—the chips in iPhones that store photos, music and apps—and used its position to squeeze every cent from suppliers. Apple bullied flash makers into opening their books so it could monitor sales, making sure no one else got a better deal.
Kioxia and other flash makers stewed as Apple paid them pennies for flash storage that the iPhone maker resold to customers for dollars. The disparity in bargaining power had galled Nelson, who used Android phones in protest.
Nelson kept the broken pieces of his iPod, the first Apple device to use flash. They sit on his desk and hold a special reverence now that the tables have turned.
In the past year, demand by AI hyperscalers has quintupled prices for flash, according to research firm TechInsights, opening a new era for Kioxia and other suppliers. Two years ago, Apple bought nearly twice the flash storage of Microsoft, Amazon, Meta and Google combined, according to TechInsights estimates. Hyperscalers are now buying double Apple’s share.
Flash memory suppliers and their sales teams privately expressed their glee at Apple’s comeuppance during chitchat at the industry’s largest conference this summer in Santa Clara, Calif. AI deals have given Kioxia sales executives and other flash suppliers new leverage to charge Apple higher prices.
Meta, Microsoft and Amazon signed contracts with Kioxia this year to secure long-term supply by committing to higher prices. The contracts protect Kioxia’s profits if the market turns. The company declined to comment.
Hyperscalers can afford to pay more. Flash storage is a smaller part of building a data center than making an iPhone, and accounting rules allow companies to spread the cost over years.
Apple is expected to spend $25 billion on flash storage this year for about the same amount it bought for $6 billion in 2025, according to estimates by TechInsights. Tim Cook, Apple’s executive chairman, compared escalating memory chip prices to a “100-year flood.”
Yet Apple had ignored analysts’ warnings and was caught off guard, said people familiar with the company’s procurement practices.
Company executives believed they knew the market better than anyone else, the people said. Flash that cost $68 a gigabyte in 2005 had fallen to a nickel by 2023. Now, demand by the AI industry has lifted the price to more than 30 cents a gigabyte, a 550% jump, threatening Apple’s steep profit margins from selling extra storage.
Buyers of the iPhone 17 Pro paid Apple $200 last year for double the storage of its 256-gigabyte base model. The extra storage at the time cost Apple $15 and has since shot up to $66, according to an analysis by The Wall Street Journal.
Storage upgrades for iPhone 17 Pro (2025) versus iPhone 18 Pro (2026)
“Apple has historically driven a very hard bargain with memory suppliers,” said Walt Coon, an analyst at TechInsights. “And there’s no shortage of satisfaction among suppliers now that the balance of power is shifting.”
“We’ve worked with many of our suppliers for decades, and we deeply value their partnership over the years,” Apple said in statement. “We look forward to continuing our important work together.”
Apple recorded an average gross profit of more than 80 cents for every dollar it charged iPhone and iPad buyers for extra storage since it first released those devices through 2025, the Journal found. For Mac computers sold since 2010, it averaged nearly 80 cents.
In recent months, Apple raised prices for nearly all of its products. Prices rose an average of 13% for iPhones, an increase that included older models which typically get a price cut.
Price, change from Fall 2025 to 2026
The question for Apple is whether consumers will react to the higher prices by keeping their iPhones longer or whether they will continue to buy at their usual pace. For flash-storage makers, the question is when—or if—Apple will regain its flash-market leverage.
“It’s been a love-hate relationship between Apple and the flash industry,” said Mark Newman, an analyst with Bernstein Research. Apple has sustained the manufacturers for years, he said, but its power to cap prices, while beneficial to shareholders, left suppliers feeling “screwed.”
Commitment-phobe
In 2001, engineers at Kioxia, then called Toshiba, showed two Apple executives a 1.8-inch-diameter, 5-gigabyte hard drive they had developed but didn’t yet know what to do with.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
On the owner’s deck, a 20-metre swimming pool incorporates Feadship’s patented ContraWave technology and extends indoors as a suspended, glass-bottomed infinity pool.
Automobili Lamborghini is turning its attention to something considerably more difficult to define: what makes Italian excellence uniquely Italian?
Microsoft is extending voluntary exit offers to eligible employees in the U.S., Canada, the U.K. and India, providing financial support and career planning resources. The time-limited program follows an earlier buyout initiative in April, which was accepted by more than 30% of eligible employees, according to a person familiar with the matter.
< 1 min
Microsoft MSFT 1.54%increase; is extending voluntary buyout offers to thousands of employees across several countries including the U.S., the company said on Monday.
Around 60,000 employees are eligible for the program, according to a person familiar with the matter. The offer is available to select employees in Canada, India, the U.K. and the U.S.
“The Voluntary Exit Offer reflects an important part of how we’re evolving our approach to change: creating greater flexibility and, where possible, more ways for employees to shape their next chapter,” Amy Coleman, Microsoft’s chief people officer, said in a message sent to employees.
Microsoft said the program was “time-limited” and would provide eligible employees with financial support and career planning resources. Coleman said eligible employees would receive an email link with their offer details in the next few hours.
Microsoft in April announced a voluntary retirement program, which offered around 8,600 employees buyouts, the person familiar with the matter said, and more than 30% accepted the offer. The company expects a far lower percentage to accept the latest buyouts, the person said. Microsoft employed 223,000 employees as of the end of June.
The voluntary retirement program was part of a broader shift by Microsoft to alter its performance system and how it awards bonuses and stock options, according to a memo to employees from Coleman viewed by The Wall Street Journal at the time.
Microsoft earlier this year announced 3,200 job cuts in its Xbox videogames division.
Porsche’s Cayenne Turbo Electric produces up to 1,156PS and reaches 100km/h in a claimed 2.5 seconds.
Records keep falling in 2025 as harbourfront, beachfront and blue-chip estates crowd the top of the market.
