Apple has long leveraged its position as the world's largest flash memory buyer to secure industry-low prices, often auditing supplier accounts to ensure no other client received better terms. This strategy, led by former procurement head Tony Blevins, allowed Apple to maintain gross margins of over 80% on storage upgrades for iPhones, iPads, and Macs.
The market dynamic has shifted as AI demand from hyperscale cloud operators like Microsoft, Amazon, Meta, and Google surged. These companies are now purchasing twice the amount of flash memory as Apple, driving prices up by 550% from 5 cents per GB in 2023 to over 30 cents per GB today.
Suppliers, including Kioxia, have gained new leverage, signing contracts with cloud providers that guarantee higher prices and long-term supply. These deals provide suppliers with profit protection that was previously unavailable during their restrictive partnerships with Apple.
Apple is now facing the consequences of these rising costs, with storage upgrade margins being squeezed. The cost for Apple to provide an additional 256GB of storage has risen from 15 USD to 66 USD, while the company has also raised prices across its product lineup by an average of 13%.
