Apple boosts inventory amid rising memory chip prices

The tech giant anticipates a gross margin of 45% to 46% in the upcoming December quarter, largely influenced by the escalating costs of memory chips. The gross margin for the September quarter was reported at 47.9%.

“What we’re seeing with memory pricing right now is unprecedented,” stated Apple CEO John Ternus during a call with analysts. He explained that memory costs were higher in the June quarter and were partially offset by lower costs on other components.

Ternus indicated that even higher memory costs are expected in the December quarter, with earlier price increases on products like Macs, iPads (implemented at the end of June), and iPhones (in September) intended to mitigate the impact. He also suggested that memory costs are projected to continue rising beyond December.

“As we said before, we do believe we’ll see a decreasing benefit from the carry-in inventory on memory over time,” Ternus added, noting increased purchases of the critical component. The company’s manufacturing purchase obligations increased by $33 billion between June and the September quarter.

COO Sabih Khan, who manages Apple’s supply chain and manufacturing operations, also participated in the call. He confirmed the increased purchase obligations and did not dismiss the possibility of future price adjustments for Apple products.

Supply constraints were cited as a factor in the weaker-than-expected iPad sales. While iPhone and Mac sales exceeded projections, iPad revenue totaled $6.2 billion, falling short of analyst estimates of $6.7 billion and marking a 10% decrease compared to the previous year.