Experience Stern | Faculty & Research

Memory chips are key components of almost every consumer-electronics device, including laptops and smartphones. You are now competing for them with the world’s largest AI data centers, and you are losing (and will continue to lose). 

Apple recently increased prices across its Mac, iPad, HomePod, AppleTV, and Vision Pro product lines, with analysts predicting increases for its flagship iPhone lineup as well. Tim Cook has described these price increases as “unavoidable,” but the pushback has been immediate. Apple earns record profits and sits on a mountain of cash. How can price increases be unavoidable? Can’t Apple just absorb the costs? Wouldn’t raising already-high prices significantly hurt demand?

These questions are natural, but they reflect a common blind spot when thinking about a company’s pricing strategy. When setting prices, Apple certainly cares about conventional demand-side factors, such as unit sales, revenues, competition, and consumers’ willingness to pay. But Apple’s prices are also impacted by supply-side factors. These factors affect how many units Apple can produce and how cost-effectively it can produce them. The current price increases are primarily supply-driven, resulting from shortage of memory chips. 

Read the full Fortune article.

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Srikanth Jagabathula is Professor of Technology, Operations, and Statistics, the Robert Stansky Research Faculty Fellow, and the Academic Director of the Anand Khubani BS in Business, Technology, and Entrepreneurship at NYU Stern.