Apple CEO Tim Cook described the current state of the memory market as “a hundred-year flood on the memory pricing.” He indicated that adding more suppliers to the mix may not necessarily lower product prices for consumers.
Cook noted that the DRAM market currently relies on three main suppliers and that while adding more would help on the supply side, the resulting effect on pricing remains unclear. He suggested that these memory price increases could be permanent rather than temporary.
Supply Chain Diversification Efforts
Apple has been seeking US government approval to work with Chinese memory suppliers CXMT and YMTC. The Financial Times reported in July that Apple has begun testing CXMT DRAM for devices sold in China and is lobbying Washington for clearance to use its parts more broadly.
The company plans to use memory obtained from Chinese suppliers in devices sold outside the US. This strategy is intended to free up existing suppliers' components for US-market products and reduce overall stock problems. CXMT is considered the fourth memory supplier available to Apple.
Political pressure regarding these suppliers persists. US Representatives John Moolenaar and George Whitesides wrote to US Commerce Secretary Howard Lutnick asking for purchases from CXMT and YMTC to be barred outright, including through allied supply chains. CXMT listed on Shanghai's STAR Market in July.
Apple is evaluating all options.
When asked whether Apple's sourcing-flexibility push is about securing volume or protecting price points, Cook said Apple is “evaluating all options.” The company stated it is evaluating all options to increase global supply chain flexibility.
Financial Impact and Inventory Buildup
Apple has had to raise prices on several of its products because of the recent memory shortage. Cook told analysts that Apple will pay even more for memory in the September quarter than it did in the June quarter. He said market pricing for memory keeps rising past September and the effect on Apple's business could grow.
Apple's consolidated financial statements for the quarter ended June 27 put inventories at $11.09 billion, up 87% year over year. The company held $5.93 billion of inventory at the end of June 2025 and $5.72 billion at its September fiscal year end; the $11.09 billion reported for June 27 is a 94% increase in nine months.
Apple consumed $5.46 billion of cash building its inventory position over the nine months ended June 27. The cash flow statement shows this amount was consumed by inventories over those nine months, against a $1.22 billion release in the year-ago period.
Measured against quarterly cost of sales of $54.65 billion, Apple's June inventory position was roughly 18.5 days of inventory, up from about 10.7 days a year earlier. Apple has run one of the leanest working capital positions in consumer electronics for two decades, but that has now been flipped on its head.
Apple CFO Kevan Parekh said the benefit Apple gets from carry-in inventory shrinks after September. He told analysts that carry-in inventory partially offset memory costs in the June quarter and will do so again in September, with a decreasing benefit beyond that.
Margin Pressure and Future Outlook
Apple's 2026 third-quarter results clearly showed the pressure of memory costs on the company's financial statements. Parekh said Apple's gross margin was 49.3% in the March quarter and 48.1% in June, after roughly two percentage points of tariff refunds, and that memory costs explained more than 100% of the 120-basis-point decline.
Foreign exchange was a factor in Apple's June quarter but not the main one. Apple's product cost of sales rose 8.1% year over year to $47.15 billion. Apple's product revenue increased 18.1% year over year to $78.68 billion.
Apple's product gross margin rose to 40.1% from 34.5%. Apple's June Mac and iPad price increases, the tariff refunds, and the stockpile together more than covered the memory increase in the reported quarter.
Apple guided September gross margin to 47% to 48%, including about one percentage point of tariff refunds, putting the adjusted midpoint near 46.5%. Parekh attributed the September gross-margin step-down to the same memory-cost dynamic.
Cook attributed the September-quarter unit supply constraints to the availability of advanced process nodes, after iPhone and Mac demand ran ahead of plan. He said they will affect iPhone, Mac, and iPad in September, versus Mac primarily in the June quarter.
Apple guided September revenue growth of 9% to 11% year over year, down from 16% in the previous quarter. Management said it remains uncertain whether the impact of higher memory costs on product prices is temporary.
Morgan Stanley analyst Erik Woodring asked whether Apple intends to pursue multi-year long-term agreements with suppliers at pre-agreed prices. Cook answered the pricing-philosophy part and left the agreements question alone.
Industry data reflects the tight market. SK hynix ran a 76% operating margin on revenue of 79.32 trillion won and operating profit of 60.54 trillion won, and guided third-quarter DRAM bit shipments up only about 10% sequentially. TrendForce expects conventional DRAM contract prices to rise a further 13% to 18% in the third quarter.
Apple's third-quarter earnings call included a question about whether its supply-chain diversification strategy would lower prices. Cook initially suggested adding memory suppliers could have a positive effect on pricing, then immediately corrected his statement.
The July 30 earnings call was Cook's final call before John Ternus takes over as CEO.