When market conditions become too extreme, making economic sense difficult, companies often have no choice but to change direction. Morgan Stanley now believes this is exactly what’s happening with Apple. The tech giant’s strategy to dominate the market by freezing prices and strategically managing memory resources seems to be running into trouble.
Apple’s unusual approach to keeping prices stable, even as memory costs fluctuate, first became clear when it chose not to raise MacBook prices. This happened while Microsoft significantly increased the prices of its Surface laptops, putting them in a challenging position.
These ill-timed price hikes by Microsoft only strengthened Apple’s price advantage for Macs. For example, the 12-inch Surface Pro now starts at $1,049, while Apple’s 13-inch M4 MacBook Air starts at a lower $999. To highlight the change, that base Surface model used to cost just $799.
At the high end, a 15-inch Surface laptop with 64GB of RAM, the Snapdragon X Elite chip, and a 1TB SSD now costs $3,649. In comparison, Apple’s 16-inch M5 Pro MacBook Pro, with similar RAM and SSD, starts at a more affordable $3,299. Apple’s strategy of freezing prices got another push last week. The company decided to stop selling the base 256GB storage version of the M4 Mac mini instead of raising its price.
However, this strategy is now clashing with worsening economic realities. During its latest earnings call, Apple admitted that it expects a “substantial” increase in memory costs in the June quarter. The company stated it would use various strategies—which likely include price increases—to manage the impact on its profit margins. It’s therefore not surprising that Erik Woodring from Morgan Stanley now expects Apple to raise the prices of the upcoming iPhone 18 models by $100 compared to the iPhone 17.
Even with these potential price hikes, Apple’s competitive edge might not be fundamentally altered, especially in the current market. Many of Apple’s rivals are increasing their prices even more aggressively. Some Chinese phone makers are reportedly facing material costs as high as $917 for their top-tier flagship phones.
Furthermore, Samsung has been raising the prices of its Galaxy S-series phones for years without offering significant upgrades to justify the cost. Despite these factors, Apple’s ambition to showcase its unmatched power and control over its supply chain by avoiding price increases seems to have finally met an unyielding reality: rising memory costs.
