AI Demand Reshapes NAND Market as Apple Loses Pricing Leverage

Apple's long-held leverage in the NAND flash market is weakening as AI-driven demand from hyperscale cloud companies pushes prices sharply higher, The Wall Street Journal reported on the 28th local time. According to TechInsights, NAND flash prices have surged fivefold over the past year, and the largest buyers are now major cloud providers rather than the iPhone maker.

Cloud buyers gain the upper hand

Two years ago, Apple's NAND purchase volume was double that of Microsoft, Amazon, Meta, and Alphabet combined. The volume purchased by those Big Tech companies now exceeds double that of Apple. Meta, Microsoft, and Amazon have entered long-term contracts that guarantee high prices to suppliers such as Kioxia to ensure stable supply chains.

TechInsights predicts Apple will spend approximately $25 billion on NAND flash purchases this year, similar to the volume it secured in 2025 for about $6 billion. The cost to secure the same amount of chips has ballooned more than fourfold in one year. Apple CEO Tim Cook recently likened the steep rise in memory prices to a "100-year flood," and the report said Apple overlooked market analyses that had warned of the crisis in advance.

Prices swing sharply

NAND flash reached $68 per gigabyte in 2005 and fell to 5 cents by 2023, but it has recently surged more than 550% to more than 30 cents due to AI demand. For the iPhone 17 Pro, consumers paid an additional $200 when doubling capacity from the base 256GB model. The NAND cost borne by Apple was only $15, but the procurement cost for that additional capacity has now soared to $66.

Facing rising costs, Apple recently raised prices for most of its products. Breaking the custom of lowering prices for older models, the company increased prices in the iPhone line by an average of 13%. The market is watching whether consumers will delay device replacements or continue existing purchasing patterns.

Supplier pressure and margin strain

Apple's relationship with NAND manufacturers dates back to 2001, when it exclusively purchased 1.8-inch small hard drives developed by Toshiba engineers, now Kioxia, for the iPod. In 2005, it launched the iPod Nano and made a $1.25 billion advance payment to five component suppliers. Since the iPhone's popularity in 2007, Apple has accounted for more than one-fifth of global NAND flash volume. The report describes aggressive tactics, including forcing suppliers to designate Apple as a most-favored nation and auditing suppliers' accounting books. Former procurement head Tony Blevins was known among suppliers as "The Blevinator."

Apple has profited for years by using high-capacity models as a draw. According to IDC, nearly 100 million iPhone buyers paid extra to upgrade storage last year. The structure involved charging an extra $200 for a 256GB upgrade and up to $800 for a 1.75-terabyte increase. A Wall Street Journal analysis found Apple earned over $10 billion in gross profit from the capacity business, with margins around 85%.

In 2023, when flash memory prices fell to 5 cents per gigabyte, the global NAND industry recorded an operating loss of $19 billion, according to Bernstein Research estimates. Apple earned $14 billion in gross profit that year solely from device capacity upgrades. TechInsights analyst Walt Coon said Apple squeezed its memory suppliers very harshly in the past, and that with the balance of power shifted, there is a prevailing sentiment of satisfaction among suppliers.

Sources: JKN