Apple and Microsoft hike prices as AI crunches global memory chip supply

Apple hiked iPad and MacBook prices on Thursday, saying it could no longer shield customers from soaring memory and storage chip costs driven by the AI industry’s data centre buildout.

“The consumer electronics industry is facing an unprecedented challenge,” Apple said in a statement to CBC News. “We have never seen a ​component price increase this much, this quickly.”

The company has shielded customers from increases thus far, it said. “But we have now reached a point where we need to begin raising prices on a number of products, including today’s increases for ​iPad and Mac.”

Apple website hiked immediately, other stores unclear

Apple pricing on its website changed right away, with its lowest-price laptop, the MacBook Neo, now starting at $949, an increase of $150. The Education model will start at $819, up from $679.

Apple also raised the prices for both versions of its HomePod smart speaker and Apple TV set-top box, but the move does not affect its main cash cow, the iPhone. 

Other Canadian retailers carrying Apple products will increase prices depending on when the company notifies its other distributors, so it is unclear if the prices will go up at the same time.

However, one major Western Canadian retailer says these increases were expected.

“It’s not surprising to see this starting to make its way into some of the mainstream products that customers are buying today,” said Jeff Townsend, general manager of technology at London Drugs, which carries higher-end products from companies like Apple.

Prices going up as AI drives down parts supply

Certain critical components in everything from Apple computers to Nintendo gaming systems are being bought up by artificial intelligence companies, leaving less supply for consumer devices, and that’s driving up prices.

Random access memory, or RAM, is a critical component in most electronic devices. As AI companies race to build out data centres, Micron, Samsung and SK Hynix — the world’s major memory manufacturers — have pivoted more of their production capacity away from consumer memory.

They are now prioritizing orders from AI chipmakers like Nvidia, helping them earn record profit but leaving little supply ​for electronics makers.

“We’ve seen pretty dramatic price increases [across consumer products],” said Willy Shih, a professor of management practice at Harvard Business School. 

“Historically, over the long term, memory prices have continued to go down. It’s highly unusual to see memory prices actually go up,” he said. “I haven’t seen anything quite like this.”

“These AI data centres are pulling a whole bunch of resources out of the supply chain. And it’s having a far reaching impact,” said retailer Townsend, who said even after decades at London Drugs he hadn’t seen anything like this before either.

While companies typically forecast their production in advance and lock down suppliers through contracts, Shih said now, those supplies are running dry and products will have…