Apple faces rising memory costs as leadership changes

Apple announced record revenue for its March quarter—the company’s financial reporting period—even as it prepares for a leadership transition. On Thursday, during the company’s earnings call, Apple reported revenue of $111.2 billion. Outgoing CEO Tim Cook, who will transition to become executive chairman, noted that the performance included double-digit growth across every geographic segment. Cook attributed the results in part to the iPhone, noting that the device achieved a March quarter revenue record driven by demand for the iPhone 17 lineup. The transition comes as John Ternus, Apple’s former senior vice president of hardware engineering, prepares to take over as CEO on September 1. Ternus, the incoming CEO, praised the outgoing leader on Thursday, stating, “In my view, Tim is one of the greatest business leaders of all time. Stepping into the role of CEO is an incredible honor, and it means a great deal to me to have Tim’s trust and confidence,”

Despite the financial performance, the incoming CEO faces supply chain challenges. Apple is currently navigating what has been termed “RAMageddon”—a trend where the artificial intelligence industry is consuming memory chips, causing shortages and driving up hardware prices. These supply constraints are impacting Apple’s core hardware business. Specifically, the chip shortage has affected the iPhone; reports indicate that RAM costs have quadrupled, which has driven up phone production costs and placed Ternus in a less-than-enviable position as he prepares to take the helm.

These rising expenses are expected to impact Apple’s business in the coming months. Cook warned during the earnings call that Apple’s expectation is significantly higher memory costs in June and beyond, which may drive an increasing impact on the business. He noted that while Apple offset its March costs by selling stockpiled inventory, memory chip supply issues could impact business in the near future. Cook noted on Thursday that there is currently less flexibility in the supply chain for obtaining parts. To manage these rising production costs, it is possible that Apple may increase prices for the iPhone.

Why it matters

Apple is navigating a critical leadership handoff from Tim Cook to John Ternus while simultaneously managing a hardware business threatened by rising memory chip costs and supply chain constraints.