The Wall Street JournalRolfe Winkler of Rolfe Winkler reported this week that flash storage vendors once “bullied” by Apple have “taken revenge” on the company over the past year due to a severe memory chip shortage, which stems from AI companies’ construction of massive data centers that use significant amounts of flash storage and RAM.
With the iPhone taking off, Apple became the world’s largest buyer of flash storage, which naturally gave the company a lot of leverage in negotiations.
The report details some of the harsh tactics employed by Apple and its former purchasing chief, Tony Blevins.
“After ordering flash at rock-bottom prices, Apple sometimes refused to deliver if flash prices fell,” the report said. “That left suppliers holding piles of unsold chips, including those custom-made for Apple. Kioxia executives joked that it felt like Charlie Brown was trying to kick the football, with Lucy always kicking it away.”
Headquartered in Japan, Kioxia was previously known as Toshiba Memory Corporation.
Apple also allegedly “bullied flash makers into opening their books so they could monitor sales, making sure no one else gets a better deal.”
The report shares another example involving flash storage vendor Sandisk. Other Apple suppliers, such as SK Hynix and Samsung, were not mentioned.
“Toward the end of 2015, Sandisk refused Apple’s requests to send additional supplies because it already had customers willing to pay more,” the report said. “Blevins threatened retaliation against a Sandisk salesman, saying he would have Sandisk Chief Executive Sanjay Mehrotra ‘crawl on his knees’ to Apple, according to a person familiar with the call.”
Things have changed with the arrival of the AI era.
“Two years ago, Apple purchased nearly twice as much flash storage as Microsoft, Amazon, Meta and Google combined, according to TechInsights estimates,” the report said, citing a research firm. “Hyperscalers are now buying double Apple shares.”
Much of the “revenge” has been passed on to customers, as Apple has raised prices on more than a dozen products this year, including iPhones, iPads, Macs, HomePods, Apple TV, and more, with the company attributing the increases to the shortage of memory chips. Former Apple CEO Tim Cook said price increases were “inevitable.”
Apple is not completely immune, however. Higher prices could lead to lower demand, and the report says its profit margins on storage upgrades have been affected. For example, TechInsights estimated that Apple makes a gross profit of $134 when a customer spends $200 to upgrade an iPhone 18 Pro from 256GB to 512GB of storage, compared to $185 when a customer opted for the equivalent upgrade for the iPhone 17 Pro last year.
“We have worked with many of our suppliers for decades and deeply value their partnership over the years,” an Apple spokesperson said. The Wall Street Journal. “We look forward to continuing our important work together.”
In a conference call this week, SK Hynix predicted that the memory chip shortage would persist through 2030, so the pendulum may not swing back in Apple’s direction for at least four years. But this will probably be the case in the long term.
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