Apple Buffers DRAM Shortage, Shifts Smartphone Market as Competitors Face Supply Crunch

Apple’s supply‑chain managers have already begun reallocating DRAM inventory to keep the iPhone 17 production line humming, a move that could blunt the impact of the broader memory crunch on the premium‑segment market. According to a MacRumors analysis, Apple is paying Samsung roughly twice the going rate for LPDDR5X chips needed for its newest handsets, a price premium that the company can absorb because its devices command higher average selling prices and enjoy wider profit margins than most Android competitors (Macrumors). Tim Cook acknowledged the higher component costs on the earnings call for the 2025 holiday quarter, noting a “minimal impact” on gross margin but warning that the first quarter of 2026 would see “a bit more of an impact” as the shortage tightens (Macrumors).

The broader industry, however, is confronting a far steeper decline. IDC, citing Bloomberg data, projects a 13 percent contraction in global smartphone shipments for 2026, dropping from 1.26 billion units in 2025 to roughly 1.1 billion—a slump it describes as a “crisis like no other” (Macrumors). The root cause is a surge in demand for high‑bandwidth memory (HBM) by AI‑focused data‑center operators, which has forced DRAM fabs to prioritize server‑grade chips over the lower‑cost LPDDR memory used in consumer phones (Macrumor​s). IDC senior research director Nabila Popal warned that the shortage will not ease until mid‑2027, and that the resulting price pressure will reshape the market’s size, average selling price, and competitive dynamics (Macrumors).

Cheap Android models stand to lose the most, as manufacturers scramble to secure dwindling DRAM supplies while contending with rising component costs. Reuters reported that the memory crunch is already prompting Android OEMs to consider price hikes or to delay launches of mid‑range devices, a shift that could erode the price‑sensitive segment that has traditionally driven volume growth in emerging markets (Reuters, “Pricier iPhones?”). By contrast, Apple’s premium‑only strategy insulates it from the worst of the squeeze; its ability to negotiate larger, higher‑priced contracts with Samsung and SK Hynix gives it a more reliable supply pipeline, even as those suppliers shift capacity toward AI‑centric HBM production (Reuters, “Apple warns memory costs…”).

Apple’s own sales outlook reflects this relative resilience. Reuters noted that the company expects “strong sales growth” as iPhone demand rebounds in Asia, with Chinese shipments up 38 percent on the back of the iPhone 17 launch (Reuters, “Apple forecasts strong sales growth…”). The surge in high‑margin units helps offset the higher memory spend, and analysts cited by Reuters suggest that Apple’s earnings could remain robust despite the sector‑wide headwinds. Nonetheless, the company’s CFO cautioned that memory price inflation may become a permanent feature of the cost structure, implying that future iPhone pricing could trend upward even after the DRAM shortage eases (Macrumors).

If the DRAM shortage persists, the market may see a lasting tilt toward higher‑priced smartphones. IDC predicts that even after supply normalizes, memory prices will stay above 2025 levels, cementing a “permanent shift toward higher‑priced smartphones” (Macrumors). This could accelerate the premiumization of the overall handset market, squeezing out low‑cost competitors and reshaping consumer expectations. For Apple, the immediate challenge is to manage the higher component spend without eroding its margin cushion, while leveraging its brand premium to pass some of the cost to buyers. For the rest of the industry, the crunch underscores the strategic risk of relying on a memory supply chain increasingly dominated by AI‑driven demand, a risk that may force Android OEMs to diversify component sources or accelerate the shift to alternative architectures.