John Ternus says Apple expects memory costs to increase into December and beyond; Apple's inventory grew to $14.54B in Q4, up 31.1% QoQ and 154.3% YoY

You might pay more for Apple devices as memory costs continue to rise.

Apple's inventory saw a substantial increase of 154.3% year-over-year, reaching $14.54 billion in the fiscal fourth quarter. This surge, a 31.1% increase from the previous quarter's $11.09 billion, is largely attributed to rising memory chip costs. Apple CEO John Ternus described current memory pricing as "unprecedented" and expects these costs to continue climbing into December and beyond. While increased inventory and earlier price hikes on some devices provided partial offsets, Apple's gross margin for the December quarter is projected to be between 45% and 46%, down from 47.9% in the September quarter. The company's manufacturing purchase obligations increased by $33 billion from June to September to secure more memory components, and supply constraints also impacted iPad sales, which fell 10% year-over-year.

The significant increase in Apple's inventory, particularly in memory components, highlights a strategic response to escalating memory chip costs. The company is actively stockpiling these essential parts, anticipating further price hikes and potential supply constraints. This move suggests a proactive approach to managing its supply chain in the face of industry-wide memory cost volatility.

Apple's elevated purchase obligations and the expectation of continued memory cost increases signal potential headwinds for its profitability. While the company has implemented some price increases, the persistent rise in component expenses could pressure future margins. Investors and consumers will likely monitor how Apple navigates these rising costs and their impact on product pricing and overall financial performance.