Apple Faces Soaring Memory Costs as AI Demand Reshapes Supply

Apple faces a sharp increase in memory procurement costs as artificial intelligence infrastructure absorbs growing quantities of NAND flash storage, giving semiconductor suppliers greater leverage over pricing and contracts. According to estimates from market research firm TechInsights reported on October 29, 2026, Apple may spend approximately $25 billion this year to secure roughly the same NAND volume it purchased in 2025.

The projected expenditure compares with about $6 billion in 2025, representing more than a fourfold increase. NAND contract prices have risen from approximately 6.7 cents per gigabyte in 2025 to more than 30 cents in 2026, according to the figures published by Finance BigGo.

The shift reverses a longstanding relationship in which Apple used its purchasing scale to negotiate favorable terms. The Wall Street Journal, as cited by Wccftech and Finance BigGo, reported that Apple once purchased more than 20% of global NAND supply and required suppliers to offer it their lowest available prices.

Apple's contracts included a "most favored customer" provision designed to ensure that suppliers did not offer other buyers lower prices. The company also conducted extensive financial audits to verify compliance, with its procurement team negotiating volume discounts with Deloitte because of the frequency of those reviews.

Those inspections extended beyond accounting records to factory equipment and production operations, giving Apple insight into suppliers' capacity and financial circumstances. In one case, an audit revealed that Micron had sold NAND to other customers at lower prices, leading to an arbitration settlement worth tens of millions of dollars.

Apple also sometimes declined deliveries when market prices fell, leaving suppliers with unsold inventory, including storage chips manufactured specifically for its products. Former procurement chief Tony Blevins arranged meetings with competing suppliers to intensify price competition and conducted negotiations that sometimes continued past midnight without dinner breaks.

In 2015, Blevins threatened a SanDisk sales representative after the company declined to provide additional supplies because other customers were paying more. He warned that SanDisk's then-CEO, Sanjay Mehrotra, would "crawl on his knees" back to Apple. Mehrotra now serves as Micron's CEO.

During a memory shortage in 2017-2018, Western Digital asked Apple to pay a reservation fee to secure chips without guaranteeing a purchase. When prices subsequently declined, Blevins demanded a full refund and sought an additional fee for testing Western Digital's chips, despite no obligation for Apple to buy them.

Scott Nelson, a Kioxia sales executive, expressed his frustration with Apple's purchasing practices by destroying his iPod with a rifle in the Southern California desert, according to Finance BigGo. He continues to keep the shattered device on his desk and uses an Android smartphone.

The balance of power has changed as major cloud companies increase their investments in AI data centers. Meta, Microsoft, and Amazon have signed long-term supply agreements with Kioxia at elevated prices, securing capacity that would otherwise have been available to buyers such as Apple.

Two years ago, Apple purchased nearly twice as much NAND as Microsoft, Amazon, Meta, and Google combined, according to Finance BigGo. Those cloud operators now collectively buy approximately twice Apple's volume, reducing suppliers' dependence on the iPhone maker.

Walt Coon, an analyst at TechInsights, described the change in the relationship between Apple and memory manufacturers.

"Apple has negotiated very harshly with memory companies," Coon said. "Now the balance of bargaining power has shifted, and the memory industry is rejoicing."

Mark Newman, an analyst at Bernstein Research, characterized the longstanding commercial relationship as a "love-hate relationship." Apple's ability to constrain memory prices had benefited its shareholders while creating resentment among suppliers.

The rising costs also threaten Apple's margins on storage upgrades. Finance BigGo reported that the company maintained average gross margins above 80% on additional iPhone and iPad storage capacity through 2025. In 2023, when the NAND industry recorded approximately $19 billion in operating losses, Apple was estimated to have generated about $14 billion in gross profit from storage upgrades.

The cost of adding 256 gigabytes of storage to an iPhone 17 Pro reportedly increased from approximately $15 in 2025 to $66 in 2026, while the consumer price for that upgrade remained $200 in the comparison provided by Finance BigGo.

Former Apple CEO Tim Cook compared the surge in memory prices to a "once-in-a-century flood" and said price increases were unavoidable. Apple has raised prices across nearly all its products, including the iPhone, with the average iPhone price increase reaching 13%, according to Finance BigGo.

Apple designs its processors in partnership with Taiwan Semiconductor Manufacturing Company but does not design or manufacture its own memory chips. The company therefore remains dependent on external suppliers as competition for memory intensifies.

SanDisk has also signed long-term agreements establishing minimum prices near market levels when the contracts were signed. According to Wccftech, prices would need to fall approximately 70% to materially challenge those floors in a systemic market downturn.

Although some market observers expect the memory upcycle to peak after 2028, the expansion of on-device AI could sustain demand by increasing the memory required to run large models locally. Apple's immediate challenge is securing sufficient supply without allowing rising component costs to erode profitability.