Apple’s ‘unprecedented’ memory warning fuels shaky Micron, SK Hynix trade

Investing.com — Apple (NASDAQ:AAPL) has issued perhaps one of the clearest warnings yet that the global memory squeeze is set to continue, giving investors another reason to watch Micron (NASDAQ:MU), SK hynix (NASDAQ:SKHY) and Samsung Electronics Co Ltd (KS:005930).

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During the earnings conference call Monday, Apple CEO John Ternus called the price of memory “unprecedented” and said the prices the company paid would continue to rise beyond the December quarter. As one of the world’s largest buyers of memory for iPhones, Macs and iPads, Apple provides a window into pricing pressure well beyond AI data centers.

The impact is already being felt in Apple’s margins. The company expects a gross margin of 45-46% for the December quarter, up from 47.9% in September. Chief Financial Officer Kevan Parekh said most of the decline would be due to rising memory costs. Excluding pricing effects, memory accounted for the entire one-percentage-point sequential decline in margin between June and September.

Management sees no relief around the corner. Ternus said Apple paid more for memory in September than in June and expects costs to rise further in the December quarter. Beyond this period, the purchase prices of memories are expected to continue to increase. Apple has raised prices on Macs, iPads and iPhones to help offset the pressure. Carry-in stocks and lower costs of some non-memory components provide some relief, but the advantage of older stocks is expected to fade.

The pressure isn’t just about cost. Apple said supply of Macs and iPads would remain constrained in the December quarter, primarily due to memory, as demand exceeded expectations. The company’s obligations to purchase manufactured goods increased by $33 billion between June and September as it works to improve supply. These commitments cover broader manufacturing needs, not just memory, but highlight efforts to secure components.

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For memory makers, Apple’s comments confirm suppliers’ pricing power. Spending on AI infrastructure has encouraged chipmakers to prioritize high-bandwidth memory and server products, reducing the supply of conventional DRAM used in phones and computers. TrendForce expects conventional DRAM contract prices to rise 10-15% in the fourth quarter, while NAND flash prices are expected to rise 15-20%.

Yet the memory business has become more complicated. Despite the favorable supply-demand backdrop, Micron, SK hynix, Samsung and other memory stocks have fallen sharply from recent highs as investors fear that China will eventually add enough capacity to disrupt the market. China’s largest DRAM maker, ChangXin Memory Technologies, or CXMT, is expanding its conventional memory production and moving toward advanced AI memory, raising concerns that new Chinese offerings could weaken pricing power.

These fears helped cause a sharp sell-off in the sector. Micron fell sharply in late October as investors reacted to renewed concerns about CXMT, while SK hynix and Samsung were among the hardest-hit stocks during a chip rout in early October. The worry is not that Chinese suppliers are already on par with industry leaders, but that they could become bigger competitors over time.

The short-term gap remains significant. Reuters reported last week that CXMT planned to start limited production of HBM3E, an advanced memory chip used with AI processors, despite yields of only 20 to 30 percent, compared with around 70 percent at SK hynix. Testing also suggested that the CXMT product remains closer to an earlier generation of HBM. China therefore represents a longer-term risk, not an immediate replacement for established suppliers.

For now, Apple has added a powerful new data point to the memory bull thesis: demand for AI isn’t just leading to shortages of specialized chips in data centers. It also makes memory in everyday consumer devices more expensive and harder to secure. The question for investors is how long this imbalance can last before new supply, particularly from China, changes the equation.

Original article

Apple’s ‘unprecedented’ memory warning fuels shaky Micron, SK Hynix trade

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