Micron CEO again "implicitly criticized" Apple: once crazily drove prices down to one third, causing the industry to lack the ability to expand production

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As the AI boom reshapes the global semiconductor supply chain, the pricing power struggle between memory chip manufacturers and downstream terminal giants is becoming increasingly public.

Micron Technology CEO Sanjay Mehrotra recently hinted at Apple in a media interview, stating that "some customers" had previously driven memory chip prices down to extremely unreasonable levels, causing product selling prices to be only one-third of the original price. This aggressive price-cutting strategy severely eroded the gross margins of memory manufacturers and directly undermined the entire industry's ability to expand capacity and make new investments.

The capacity gap caused by stagnant early-stage investment has now turned into serious supply-demand imbalance and soaring costs in the market. It is estimated that Apple is currently facing up to 292% premiums on memory and storage components, forcing the tech giant to recently carry out its largest price hike in years for several core hardware products globally, in order to pass on the surging supply chain costs.

The backdrop of this supply chain friction is Micron's historic performance reversal, driven by AI demand. With record-breaking revenue growth and profit margin performance, Micron has joined the trillion-dollar valuation club, marking a fundamental shift in its influence within the industry chain.

Backlash from Price-Cutting: Supply and Demand Reversal in the Memory Supply Chain

In an interview with CNBC "Mad Money" host Jim Cramer, Sanjay Mehrotra expressed optimism about Micron’s future prospects in the AI era, but also reflected on the sector's previous downturn.

He noted that, during the industry's downturn several years ago, some customers took advantage of the market environment to drastically lower procurement prices.

Although Sanjay Mehrotra did not directly name Apple in the interview, he made it clear that "customers pushed prices to a level with no productivity." In 2023, Micron was forced to sell memory products to customers at one-third of the original price. This extreme pricing environment not only caused Micron's gross margin to plummet, but also seriously impaired the company's ability for strategic investment.

Nonetheless, Sanjay Mehrotra emphasized that even in the toughest periods, Micron continued to invest $10 billion based on its outlook, laying the foundation for its current market position.

Surging Costs: Apple Forced to Raise Global Prices

As supply and demand dynamics reverse in the memory chip market, the negative effects of prior price-cutting strategies are beginning to manifest, and downstream manufacturers are facing heavy cost pressures.

According to estimated data, Apple now pays about $145 for 12GB LPDDR5X memory modules and about $51 for 256GB NAND storage. During the downturn, these components cost only $39 and $13, respectively.

Premiums as high as 292% are directly impacting Apple’s hardware profit margins. According to Wallstreetcn, Apple has announced global price hikes for Mac, iPad, and many hardware products, with increases as high as $300—the company's largest global price adjustment in years.

Regarding the product price increases, Apple CEO Tim Cook publicly stated to the media that the current tight memory supply and significant increases from storage manufacturers are the direct causes forcing Apple to raise product prices.

Micron's Explosive Results and Strategic Counterattack

The public showdown over responsibility for current high memory chip prices is no longer limited to statements by executives.

In response to Cook's remarks, Micron Technology Chief Business Officer Sumit Sadana has earlier commented, suggesting that Apple’s aggressive price-cutting procurement strategy in the past is a major reason for the current supply chain capacity shortage in memory manufacturing.

This transfer of industry influence is supported by Micron’s strong financial data.

Micron Technology's third-quarter revenue grew 346% year-on-year, with margins approaching 85%. Its fourth-quarter guidance also exceeded market expectations, leading the stock price to soar nearly 16% the following day. Before the AI boom, Micron was regarded as a typical commodity memory manufacturer, but its market status has now changed dramatically.

Looking ahead, supply tightness in memory chips is unlikely to ease soon. Sanjay Mehrotra stated that Micron has reached strategic agreements with customers to ensure the company maintains growth and profit margins when memory and storage prices eventually stabilize in the future. For the tech industry as a whole, this means the pain of high memory costs and supply shortages will continue for quite some time.

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