New iPhone generation could cost $300 more while Apple keeps similar profit margins

Apple's iPhone 18 Pro Max is on track to cost significantly more to build than the current iPhone 17 Pro Max, with component costs expected to rise by nearly $300. Counterpoint Research has published a detailed breakdown of the next iPhone's bill of materials, highlighting a sharp increase in key parts, and the cause of the price increase is the demand from AI companies.

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NAND and DRAM price hikes are the primary cost drivers. Counterpoint notes that the costs for these memory components alone could nearly equal the total bill of materials of the current model. Both NAND and DRAM industries are currently in a crisis as demand cannot keep up with supply, and current supply is being directed toward the AI industry, driving up the cost of the components.

Another factor contributing to the expected price increase is the new 2nm SoC and advanced packaging. Display and other parts are expected to see cost reductions, but camera costs will rise due to the new variable-aperture Main camera.

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What is perhaps going to hurt the most when swallowing this price increase is knowing Apple is expected to adjust retail pricing across storage tiers to maintain its gross profit margins, particularly for high-capacity models. Despite a projected average retail price increase of $200, the company is still likely to maintain similar profit margins for the iPhone 18 lineup, meaning the new cost for each iPhone has been passed on to the end consumer.

Frequently Asked Questions

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Question #1

How might the NAND and DRAM price increases affect iPhone 18 Pro Max storage tier pricing compared with the iPhone 17 Pro Max?

The article says NAND and DRAM cost increases are the primary drivers of nearly $300 higher component costs for the iPhone 18 Pro Max, and Apple is expected to raise retail prices across storage tiers to keep similar gross margins. That means higher-capacity iPhone 18 Pro Max models will likely see larger price increases compared with iPhone 17 Pro Max, as Apple passes the increased memory and storage costs on to consumers.

Answered

Question #2

Will Apple likely change the capacities offered (e.g., base storage) for the iPhone 18 lineup to manage costs?

Yes. The primary article states Apple is expected to adjust retail pricing across storage tiers to maintain similar profit margins, particularly for high-capacity models, meaning prices for different capacities (including base storage) are likely to be changed to pass higher component costs to consumers.

Answered

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Price increases are now common across the tech industry, as it was only recently that Xbox warned gamers to expect price shifts with the new Xbox console due to the memory and storage crisis.