Secure the chips, absorb the costs, and grab more market share

If Apple is stressed imagine how the other guys feel.

Analyst Mark Newman resets Apple price target, weighing in on memory cost inflation.

Rising memory costs may increase iPhone prices, but Apple’s execution and ecosystem provide resilience.

Apple’s AI ambitions, particularly regarding Siri 2.0, could drive a major upgrade cycle and services revenue.

Apple’s latest Wall Street price targets
Wedbush: $350 (outperform).
Goldman Sachs: $330 (buy).
JPMorgan: $325 (overweight).
BofA Securities: $325 (buy).
Morgan Stanley:$315 (overweight).
Sources: Yahoo Finance, Investing.com

Apple’s cost pressures are real, but the growth story is bigger

Despite memory cost inflation being a big deal, it still doesn’t fundamentally impact Apple’s tremendous earnings power, Newman shared in a CNBC interview.

That’s not to say he doesn’t expect iPhone production costs to rise, though.

Heightened component costs could push iPhone prices up by as much as 15%, Newman added, while bumping the overall average selling price by nearly 12% as some customers trade down to cheaper models.

Source: thestreet.com

NB: Hard disagree...

... on iPhone costs and price and customer behavior. Apple guided to higher margins while stating that there would be "a bit more of an impact." I almost certain that there will be no iPhone price increases in Q1 and therefore higher margins suggest a tailwind in components cost.

However Newman does make a point about the consequences on the market. Whatever the impact on Apple, Samsung et. al. will have it worse. When components are scarce the advantages lie with the volume players. The higher the volume the more leverage exists. A similar phenomenon occurred when the iPod was new. Apple bought so much of the 1" drive capacity that nobody could source any. Nokia did a similar thing with RF components in an earlier episode. In both cases market share rose as competitors simply had no products on the shelf.

The idea that Apple is somehow always the most fragile and most vulnerable while the exact opposite is true is a recurring one. A true market psychosis.