Apple and the Memory Crunch: Smaller Phone Makers Lose Units, Apple Loses Margin

IDC measured Apple's third-quarter smartphone shipments down 4.0%, against declines of 29% to 35% at Xiaomi, OPPO and vivo, which points to a market split by scale: smaller phone makers are losing units and Apple is losing margin.⁠¹ Apple has not yet reported the quarter that ended in September, which it reports on 2 November, and the share-price fall that followed its 30 July results dates to that earlier report, not to anything since.⁠²⁠³ Confidence: moderate, because the shipment figures are preliminary tracker estimates and Apple's own memory cost for the quarter will not be public until 2 November.

Apple's drop dates to 30 July, and its supply limit is processors

Apple reported fiscal third-quarter revenue of $109.4 billion on 30 July, up 16%. It also gave financial guidance, the forecast a company issues for coming quarters, of September-quarter revenue growth of 9% to 11% against a consensus near 12%.⁠² Sharecast reported the shares down 9.3% at one point the next day.⁠² The September-quarter report, the first under CEO John Ternus, is scheduled for 2 November after the market closes.⁠³

Reported On the 30 July earnings call, the quarterly call where executives present results and answer analysts' questions, Tim Cook described the memory market as "a 100-year flood on the memory pricing" and said Apple had raised iPad and Mac prices reluctantly because of it.⁠⁴ He attributed Apple's supply constraint to a different input. A semiconductor supply constraint is a limit on how many chips can be made or bought, and Cook located Apple's in the availability of advanced manufacturing nodes, the newest chipmaking process generations, for Apple's own processors.⁠⁴ He called it a demand-forecasting problem and not a supplier problem.⁠⁴

Memory entered as a cost. Two types matter here: DRAM, dynamic random-access memory, is the working memory in phones and PCs, and NAND flash memory is the storage that holds files and apps. Cook said Apple paid more for memory in the March quarter than in December, significantly more in June than in March, and expects to pay more again in September.⁠⁴

Apple's stated supply limit is processor availability, and its stated memory problem is price.

Memory cost Apple about 280 basis points of gross margin in two quarters

Gross margin is the share of revenue left after the cost of what Apple sells, as Apple reports it, and gross profit is the dollars that remain. Reported Apple's total-company gross margin was 49.3% in the March quarter and 50.1% in June, of which about two percentage points came from tariff refunds, which leaves 48.1% without them.⁠⁴ The September guide of 47% to 48% includes about one point of refunds, which puts the midpoint at 46.5% without them.⁠⁴ CFO Kevan Parekh said memory cost more than fully explains each step, 120 basis points from March to June and a further 160 to the September midpoint, and that carry-in inventory, cheaper non-memory parts and favorable mix offset part of it.⁠⁴ A basis point is one hundredth of a percentage point.

Summed, that is 280 basis points of margin since March, or 2.8 percentage points. Apple's 9% to 11% growth guide on a year-earlier base of $102.5 billion implies revenue of about $111.7 billion to $113.8 billion.⁠³ At the midpoint of about $112.8 billion, 2.8 points of margin is about $3.2 billion of gross profit a quarter, by this article's arithmetic, assuming revenue and product mix stay constant.

Apple also raised prices. Reported On 25 June it lifted US prices of the MacBook Neo from $599 to $699, the 512 GB MacBook Air from $1,099 to $1,299, the 1 TB MacBook Pro from $1,699 to $1,999, the 128 GB iPad Air from $599 to $749 and the 256 GB iPad Pro from $999 to $1,199.⁠⁵ By this article's arithmetic those are increases of 17% to 25%. Apple said it had never seen a component price rise this large this fast, and the iPhone price was unchanged at that point.⁠⁵ Cook said on the later call that it was too early to judge price elasticity of demand, meaning how far unit demand falls when prices rise, on the Mac and iPad increases, because channel inventory, the stock retailers and distributors already hold, delays the consumer response.⁠⁴

Shipments fell about 20% in phones and PCs, and far more at smaller vendors

Measured IDC's preliminary tracker put third-quarter smartphone shipments at 255.3 million units, down 22.0% from 327.3 million a year earlier, the largest year-over-year (YoY) fall of any quarter in its data.⁠¹ YoY compares a period with the same period a year earlier. In IDC's count Samsung shipped 5.8% fewer units and Apple 4.0% fewer, while Xiaomi, OPPO and vivo shipped 29.2%, 34.5% and 31.5% fewer.⁠¹ Counterpoint Research measured a 20% fall, the weakest third quarter since 2012, and reported that average selling prices have risen 20% so far this year as makers passed memory costs on.⁠⁶ Average selling price (ASP) is revenue per unit shipped.

IDC's preliminary PC tracker counted 62.7 million units in the third quarter, down 20.1% YoY and 9.1% from the second quarter, a quarter that normally grows.⁠⁷ HP shipped 30.9% fewer units, Dell 25% fewer and Lenovo 22.6% fewer, while Apple's PC shipments fell 11.3% and Asus's 8.6%.⁠⁷ IDC attributes the drop partly to inventory pull-forward, which means buying stock earlier than needed and so moves volume from later quarters into earlier ones. Vendors and channels bought early in the first half to get ahead of memory-driven price increases, which pulled volume out of the third quarter.⁠⁷

In both categories Apple's unit decline was smaller than the market's.

What was measured, by whom, and who paid

Every shipment figure here is a preliminary estimate from a research firm and not an audited count, and IDC marks its own data as subject to change.⁠¹ The margin and pricing figures are Apple's own, from a call it hosted.⁠⁴ The memory price figures are forecasts, weekly quotes or seller-reported results.

Four memory terms recur in the table. A memory spot price is what uncommitted chips fetch on the open market in a given week, and a memory contract price is what a device maker pays under a negotiated quarterly agreement. DDR4 and DDR5 are two generations of DRAM, with DDR5 the newer and faster, and the table's DDR4 figure is a spot quote.

Sources disagree on how fast prices rise and when the squeeze ends

IDC's Nabila Popal said memory costs have surged about 350% since last year and are still rising, but that the third-quarter sequential increase was in the low double digits against 50% to 100% in earlier quarters.⁠¹ Forecast TrendForce forecasts fourth-quarter contract prices up 10% to 15% for conventional DRAM and 15% to 20% for NAND flash.⁠⁸ SK hynix's DRAM average selling price rose in the high 20s percent in the third quarter, according to a Yonhap Infomax report carried by TrendForce News.⁠⁹

These measure different things. IDC's figure is a device-side cost estimate with no stated method. TrendForce's is a contract quote that excludes high-bandwidth memory (HBM), the stacked DRAM paired with AI accelerators. SK hynix's is a seller's blended price that includes server DDR5, whose sales rose more than 40% sequentially.⁠⁹ This article gives TrendForce's contract series the most weight for what phone and PC makers pay.

Spot and contract prices diverged in late October. TrendForce's weekly report shows the average spot price of mainstream DDR4 chips up 0.55% on 27 October and 512Gb TLC NAND wafers down 9.19% in the week of 26 October, after Chinese phone brands that raised prices in September met a sudden halt in demand and discounted during Double 11 promotions.⁠¹⁰ Its contract forecast, issued about a month earlier, still has NAND rising in the fourth quarter.⁠⁸ Contract prices reflect negotiated volumes and spot prices reflect thin trading, so contract carries more weight. A one-week spot move is nonetheless the first datum in this set that shows demand pushing back on price.

Forecasts of when relief arrives run from late 2027 to 2030. Counterpoint has said a volume recovery may not begin until late 2027.⁠⁶ IDC expects growth constrained through 2027 with any recovery pushed to 2028 at the earliest, and says makers increasingly see a permanent structural shift in cost.⁠¹ SK hynix says long-term supply agreements, multi-year contracts in which a supplier commits capacity to a buyer, with 14 customers cover more than 50% of its planned 2027 and 2028 capacity, and Korean press reports cited by TrendForce News say output is effectively sold out through 2029 and the shortage could last to 2030.⁠⁹ Those last reports are secondhand and come from a seller that benefits from a tight-market narrative, so this article weights the 2027 to 2028 range from IDC and Counterpoint more heavily.

What the evidence does not establish

Apple's September-quarter memory cost is a guide until the result arrives on 2 November.⁠³ The 47% to 48% margin range includes about one point of tariff refunds, and the split between memory and other costs is Parekh's description of the change and not a disclosed schedule.⁠⁴

The PC decline mixes lost demand with timing. IDC says part of it reflects the first-half pull-forward, and none of the sources separates that from lost demand.⁠⁷

Nothing here shows why Apple lost fewer units. Apple has not disclosed its memory contract terms, and IDC attributes share gains to scale, secure supply and premium mix, which is an analyst reading and not a measurement.⁠¹ Counterpoint says part of Apple's volume decline came from the absence of a base iPhone 18 this cycle, so the product calendar distorts the comparison.⁠⁶

The sources also attribute the shortage to AI data center demand without measuring it. Apple said so in a statement, and TrendForce says suppliers keep prioritizing advanced-process capacity for server products.⁠⁵⁠⁸ GetCoreTech's scorecard of Big Tech's AI infrastructure spending documents what major technology companies spend, and it does not establish how much of the memory shortage that spending caused. No source here sizes how much of the supply shift comes from AI and how much from other uses.

The crunch taxes volume at small vendors and margin at Apple

Opinion The evidence supports a split: smaller smartphone vendors are paying in lost units, and Apple is paying in gross margin while keeping more of its volume.

Apple's guide implies about 280 basis points of margin gone since March, while Xiaomi, OPPO and vivo shipped 29% to 35% fewer phones.⁠¹⁠⁴ Confidence stays moderate. The shipment data are preliminary, Apple's cost is a guide, and the first spot-price decline sits against contract forecasts that still rise.

One measurement would change this verdict: Apple's September-quarter gross margin excluding tariff refunds, due on 2 November. A figure above 47%, the top of the guided range without refunds, would mean memory cost Apple less than it expected and would weaken the margin-tax reading. A figure inside 46% to 47% would leave it intact, and a figure below 46% would strengthen it.