Apple has secured enough NAND flash memory to sustain production through the first quarter of 2026. But the iPhone maker is facing steep price increases for DRAM as artificial intelligence demand shifts leverage toward chipmakers, according to Morgan Stanley.
The supply outlook remains critical for hardware margins. Memory components now represent a larger portion of total device costs. AI infrastructure is absorbing a growing share of global DRAM and high-bandwidth memory (HBM) production. This price inflation is changing cost structures for smartphones, personal computers, and data center hardware.
NAND secured, DRAM negotiations tighten
Morgan Stanley analysts said Apple has locked in NAND supply through the beginning of 2026. Availability is steady. But pricing from suppliers such as Kioxia is expected to rise once long-term contracts are finalized.
Negotiations over DRAM have been more difficult. The bank expects Apple to secure its DRAM needs through the first quarter of 2026 only by accepting sequential price increases of more than 50%. Memory vendors are seeking to close the gap between long-term contract rates and higher spot market prices.
Apple appears to have maintained more favorable terms with its primary foundry partner, TSMC. Morgan Stanley said TSMC is expected to raise prices for Apple's leading-edge wafers by low single digits. That's smaller than the mid-single-digit hikes applied to other customers using advanced nodes.
The report estimates that Apple's next-generation A20 processor will cost roughly 30% more than the 3nm A19 chip used in the current iPhone 17 lineup. The A20 is expected to use TSMC's 2nm process.
That estimate contrasts with an earlier report from the Economic Daily. The Taiwanese publication said the A20 chip could cost Apple as much as US$280 per unit. That implies a year-over-year increase of about 80% versus the A19. The publication attributed the projected increase partly to rising memory costs. It also cited TSMC's use of first-generation nanosheet transistor technology and ultra-high-efficiency metal interlayer capacitors in its N2P manufacturing process.
Morgan Stanley's latest assessment suggests a different picture. Apple's large order volumes and scale-driven bargaining power may have secured more favorable pricing from TSMC. This would limit the overall cost increase for the A20 despite broader inflationary pressures across the semiconductor supply chain.
AI demand drives memory market imbalance
Heavy investment in AI is driving the broader market imbalance. CNBC reported that demand for DRAM and HBM used in AI accelerators has tightened supply across the industry. Counterpoint Research forecasts that DRAM prices could rise by as much as 40% through the second quarter of 2026. Manufacturers are prioritizing AI-related orders over consumer electronics.
This trend has supported financial results for major memory suppliers. Shares of Samsung Electronics, SK hynix, and Micron Technology have risen in early 2026. Data compiled by LSEG indicate a sharp year-over-year increase in Samsung's fourth-quarter 2025 operating profit. Analysts expect Micron to post a significant rise in earnings per share due to higher realized prices.
Component shortages ripple across hardware sectors
The memory squeeze is affecting other hardware segments. Engadget reported that Nvidia has restarted production of its GeForce RTX 3060 graphics card. The model was first released in 2021. Newer memory standards, such as GDDR7, are increasingly allocated to AI data centers.
For Apple, these developments underscore the limits of its negotiating power. The company can use its scale to help moderate costs at TSMC. But it remains exposed to the global memory cycle. Analysts warn that sustained component inflation could eventually force Apple to choose between narrower margins and higher retail prices.
Morgan Stanley said Apple may be exploring longer-term hardware updates. These include a possible move to a 200-megapixel camera sensor in 2028. The company may also add STMicroelectronics as a second LiDAR sensor supplier alongside Sony. For the near term, however, Apple's hardware economics are expected to be shaped primarily by rising memory costs.
Article edited by Jerry Chen
