Apple's Power Rebalancing with "Micron and Co.": Unpacking the iPhone's Profit Bill Behind the Scenes
- Core Thesis: In Apple's iPhone profit structure, Apple itself dominates (approximately 25% net profit margin), while key component suppliers like memory manufacturers have long operated on razor-thin margins (<3%). Driven by AI demand causing memory prices to surge, the supply-demand dynamic has reversed, giving memory makers greater leverage, forcing end-device companies like Apple to face cost pressures and raise prices.
- Key Elements:
- Imbalanced iPhone profit distribution: Apple's net profit margin has consistently remained above 24%, capturing about 75% of the industry's total profits. In contrast, memory manufacturers like Micron capture only about 3% of profits, with TSMC at roughly 4%-5%.
- Memory costs shift from "incidental component" to "critical component": The cost share has risen from 2% in the 2017 iPhone X to an estimated 12%-15% (approximately $60-$80) for the 2026 iPhone 17 series, nearly an 8-fold increase.
- AI demand is the core driver of price increases: AI servers require 8 times the DRAM capacity of standard servers, forcing companies like Samsung and SK Hynix to shift production capacity toward high-margin HBM, leading to shortages in consumer-grade memory supply.
- Rare public statements from Cook and Musk: Tim Cook described the memory price increase as an "unprecedented shock in 40 years," prompting Apple to raise prices across its product lines. Elon Musk also publicly called it "the most aggressive price jump" he has ever seen.
- Memory manufacturers' profitability surges: Micron reported a Q3 gross margin of 84.6% and year-over-year revenue growth of 346%. On the macro level, DRAM contract prices are expected to rise 93%-98% quarter-over-quarter in Q1 2026, with average annual prices projected to increase by 88%.
Original｜Odaily Planet Daily (@OdailyChina)
Author｜Wenser (@wenser2010 )
Have you ever wondered, when you sell an iPhone, how much of the profit goes to each component supplier?
Recently, overseas tech blogger @BluthCapital, in the persona of the Micron CEO, joked about the "business model" behind the iPhone: "For over a decade, Apple has been buying chips from us (MU) for $5, putting them in a metal box, and selling them to consumers for $99. When we tried to raise the price to $7, they mocked us. But now, when we charge them $50, they raise the product price by $250." His words conveyed a strong disdain for Apple's recent price hikes and its tendency to blame memory chip manufacturers.
The post quickly sparked discussion on social media. This morning, @BluthCapital continued the topic, sharing a cost structure breakdown for the iPhone 18 with specific figures to support his point:
Previously, Micron's Chief Business Officer Sumit Sadana also stated in an interview with The Wall Street Journal, "During the downturn in the memory industry, certain customers took advantage to squeeze prices, resulting in negative profits for the company." Now, driven by strong demand from the AI and tech sectors, the memory industry has become the one holding the leverage. This has led to a complete reversal of fortunes along the entire supply chain.
Profit Structure of an iPhone: Apple Takes Nearly 25%, Micron and Other Memory Manufacturers Get Less Than 3%
According to estimates, for each iPhone's profit, Apple takes about a quarter, memory giants take only about one-thirtieth, TSMC, due to its monopoly position, takes around 4%-5% of the profit, with the remainder covered by other hardware suppliers, distribution channels, R&D, and taxes.
Looking Back at Apple's Financial Reports: Net Profit Margin Consistently Above 24%, Grabbing 75% of the Industry's Total Profit
According to data from Counterpoint and other agencies, Apple has long held nearly 50% of the operating profit in the global smartphone market. IDC data for 2025 shows that with an 18% market share, it captured about 75% of the industry's total profits.
Based on Apple's latest Q2 2026 data, iPhone revenue was $57 billion, net profit was $34 billion, with estimated shipments of around 61 million units. From this, it can be inferred that Apple's net profit per iPhone is approximately $320-$340, with a net profit margin of 33%-36%.
Comparing financial data over the past five years, we can clearly see that iPhone revenue has been relatively stable overall; net profit has gradually grown from around $94 billion in 2021 to approximately $112 billion in 2025; the net profit margin has remained relatively stable, typically around 25%.
Looking at different models like the 2017 iPhone X, the 2023 iPhone 14 Pro, and the 2026 iPhone 17 series, their profit structures have undergone a series of changes due to varying memory costs.
From iPhone X to iPhone 17: Memory Costs Doubled
The role of memory costs in iPhones has gone through three historical phases: from the initial "afterthought," to an "important component," and now to a "critical component."
2017 iPhone X Era: The "Afterthought" Memory Period
According to Counterpoint's teardown report from that time, during the iPhone X era, thanks to its long-standing brand advantage and dominant position in the ecosystem, Apple's net profit margin approached 50%. In contrast, the profit share of memory manufacturers like Samsung and SK Hynix was only about 135–195 RMB, representing approximately 1.6%–2.3% of the total retail price of 8,388 RMB.
This was the weight of "memory" in the iPhone X era: about 2% of the cost, making it almost the component Apple cared least about.
2023 iPhone 14 Pro Era: The "Important Component" Memory Period
In 2023, with the launch of the iPhone 14 series, Apple's bill of materials (BOM) costs rose slightly. For the Pro version, the BOM cost reached around $464 (approximately RMB 3,170), accounting for nearly 40% of the selling price. However, Apple's net profit margin still remained around 40%.
According to tech media reports at the time, these figures were for the 128GB version. The cost increase for more expensive memory versions wasn't high, but their selling prices were significantly higher. This was a period of "camera and processor price increases." Consequently, the overall profit for the iPhone 14 Pro was 3.7% lower than that of the iPhone 13 Pro.
2026 iPhone 17 Era: The "Critical Component" Memory Period
Fast forward to 2025-2026, the iPhone 17 series has become Apple's main model, and memory costs have doubled compared to a few years ago. Currently, memory costs are estimated to account for 12%-15% of the BOM cost, approximately $60-$80.
In summary, the following chart shows the cost structure and memory cost share for different iPhone generations.
It is worth noting that TrendForce data shows that in Q1 2026, contract prices for commodity DRAM increased quarter-over-quarter by a staggering 93% to 98%. Citigroup expects the average DRAM price for the full year 2026 to rise by 88%. This aligns with the overall trend of rising memory costs. This phenomenon has also been acknowledged by Apple CEO Tim Cook and Elon Musk.
Tim Cook: Memory Price Hike is a Once-in-40-Years Event
On June 17, Apple CEO Tim Cook (Odaily Planet Daily Note: He will step down as CEO this September, to be succeeded by John Ternus, Senior Vice President of Hardware Engineering) mentioned the cost pressure from memory price increases in an interview with The Wall Street Journal. He said: "At a time when consumers need devices, supply has decreased, and memory manufacturers are passing on enormous price increase pressure. We absolutely need memory pricing and supply to return to reasonable levels for consumer products. That is the bottom line."
But less than a week later, he quickly changed his tune.
On June 25, Cook again spoke to The Wall Street Journal, calling the cost shock a "once-in-a-century flood," saying: "In over 40 years, I have never seen anything like this in any field." Subsequently, Apple announced price increases across its product lines, including Mac, iPad, HomePod, Apple TV, and Vision Pro.
Upon the news, Apple's stock fell 6%, erasing $263 billion in market value, marking its biggest single-day drop since April 2025.
Elon Musk: I've Never Seen This Either
Cook's comments also resonated strongly with Elon Musk. Recently, he posted: "Cook told WSJ this cost surge is unlike anything he’s ‘ever seen in any field in over 40 years.’ Me too. That’s the most insane price jump I’ve ever seen."
Thank AI Data Centers and HBM, Memory Has a Stronger Backbone
Looking closely at the "memory bull market" that started last year, the key driver is undoubtedly the booming demand from the AI industry.
The industry generally estimates that compared to standard servers, each AI server requires 8 times the DRAM and 3 times the NAND capacity.
Given this market demand, the three major memory giants—Samsung, SK Hynix, and Micron—naturally shift more advanced manufacturing capacity towards high-profit HBM and high-end DDR5 products, actively cutting back on consumer-grade production lines like DDR4, thus leading to a shortage of general-purpose DRAM.
Public information shows that the DRAM content per AI server is 8 to 10 times that of a traditional server. Combined with replenishment demand for general-purpose servers and the adoption of AI PCs, the supply-demand gap for memory chips continues to widen.
Micron's stunning Q3 gross margin of 84.6% and its revenue scale of $414.6 billion, a year-over-year increase of 346%, have shown many the cash-generating power of monopolistic memory manufacturers. On the other hand, SK Hynix recently announced plans for a U.S. IPO, seeking to raise approximately $29 billion to further capitalize on memory demand.
It's no exaggeration to say that memory demand from the AI industry is squeezing, even cannibalizing, the memory supply for consumer electronics. Statistics show that a single NVIDIA Vera Rubin AI server uses as much memory as approximately 14,500 MacBook Neos. The ratio of 1:14,500 starkly illustrates the supply-demand imbalance.
For memory manufacturers who have long suffered from price suppression by giants like Apple, this is their moment. It's no wonder there were reports that Apple is actively lobbying the Trump administration to gain approval to procure memory chips from Chinese chip company CXMT (Changxin Memory Technologies).
Whether CXMT can replicate the wealth-creation miracles of star companies like SK Hynix and Micron in the capital market might be revealed as early as next month.
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