Apple Raises MacBook, iPad Prices Citing AI Chip Costs

Apple has announced significant price increases for its MacBooks and iPads starting this week, citing unprecedented surges in memory and storage chip costs driven by the rapid expansion of AI data centers. The tech giant revealed that it could no longer absorb the rising component costs.

The price hikes affect several models, including the MacBook Neo, which launched earlier this year at a starting price of $599 aimed at budget-conscious consumers and will now cost $699. Other affected products include:

• MacBook Air 13-inch: Now $2,099 from $1,799
• MacBook Pro 14-inch: Now $3,199 from the previous price of $2,699
• iPad Air 128GB: Now $749 from $599

The price increases exclude the iPhone, though industry analysts predict that similar hikes are inevitable. Apple shares dropped significantly following the announcement, falling nearly 5% in midafternoon trading.

Apple's decision to raise prices comes as the global demand for computing power skyrockets, exacerbating an existing chip shortage that began during the pandemic. The semiconductor shortage has been further intensified by the race to build data centers required to power AI services, with industry experts predicting these challenges will persist well into 2027.

Apple's deep supplier ties have provided some cushion, several analysts said – some of its rivals have been forced to raise prices even more sharply. Still, analysts expect prices for the iPhone to go up next. 'The iPhone isn’t spared. Its hike is coming,' said Nabila Popal, a senior research director at IDC.

Prices of dynamic random access memory, used in virtually all modern tech gadgets, rose as much as 98% in the first quarter of this year and are set to jump by another 58% to 63% in the current quarter, according to industry tracker TrendForce. That surge has been driven by a boom in AI data center construction, with companies like Nvidia signing long-term deals with memory makers who are racing to increase capacity.

Additionally, Apple's Mac Studio M3 Ultra desktop computer saw the steepest price rise of any product, jumping from $3,999 to $5,299. The base price of the iPad Pro increased from $999 to $1,199. Apple stated that while it had shielded consumers from rising chip costs until now, it had “reached a point where we need to begin raising prices”.

Trevor Long, a consumer tech analyst and commentator based in Australia, said he expects the price increases to affect Apple’s sales. 'Some products, like their newest product, the MacBook Neo, while excellent as products, were also outstanding because of price,' Long told Al Jazeera. 'This hits that hard. They are still a decent deal but push closer to other competitive product prices as well.'

Long said he expects the coming year to be challenging for leading tech players such as Apple. 'The key thing will be the next iPhone and how close they can price it to the last one,' Long said. 'I’d expect a $50-150 price rise across the range, depending on models.'

Microsoft also cited rising chip prices in an announcement confirming that it would raise the price of the 512 GB and 1 TB models of its Xbox gaming console by $100 and $150, respectively. 'We hoped another price increase would not be necessary, and we have spent the last several months working with suppliers on options,' Microsoft said in a statement.