Apple CEO John Ternus will face two critical decisions soon after taking over, new report says Financial Times report.
First, how would you react to the huge increase in memory prices, with Apple’s RAM costs increasing by more than 400% next year. Second, how to organize the company’s production plans across China, India, and the US…
Memory costs increase by more than 400%
Apple is facing a whole new world when it comes to buying memory for its devices. The company tends to be a dominant player in the market so much so that it can dictate terms to suppliers. Since memory is so demanding for AI servers, that’s no longer the case.
I Financial Times says that memory until recently represented about 10% of iPhone costs and this will increase to 45% next year. That will leave Ternus faced with an uncomfortable decision: will Apple take that big cost increase, accepting a corresponding reduction in its margins? Or does the company raise prices at the risk of reducing sales?
This is likely to be a key question asked by analysts in tomorrow’s earnings call.
Manufacturing throughout China, India, and the US
Another key question will be how the company restructures its manufacturing profile across China, India and the US.
One of Tim Cook’s diplomatic victories was sitting on Trump’s right side, persuading him that producing iPhones in the US was not a realistic prospect, while at the same time giving the president a PR victory in the form of investment in US manufacturing.
Apple has sometimes walked a tightrope in China, with the government responding forcefully to the increasing shift of iPhone assembly from China to India. A report back in February said China was deliberately disrupting iPhone production in India in three different ways.
The report states that Ternus will have to make procurement decisions that will impact the company for years to come.
The pressures come as Apple reconsiders where it builds its products, how it protects components and when it launches new devices — decisions that will reshape its business for years to come.
“US investment will be one of the key areas of Apple’s strategy in the coming years,” said Samik Chatterjee at JPMorgan. “For John Ternus, the question is: how do I position the company to be on the right side of Washington and Beijing?”
9to5Mac’s Take
Tim Cook appears to be volunteering to be a politician as his title has been changed from CEO to Executive Chairman. It is Cook instead of Ternus who is likely to continue critical negotiations with both the US and Chinese administrations.
Cook using his interpersonal skills and making unpopular decisions will free Ternus to focus more on Apple products.
It will also be interesting to hear how the company responds to tomorrow’s question from analysts. A reduction in restrictions may not be attractive to investors while an increase in prices will be to customers as well.
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