Apple's Signature Move Returns... Will It Squeeze Memory Prices This Time? [Tech Talk]

Will Apple Use Chinese Memory as a Bargaining Chip?

Apple’s Long-standing “Supply Chain Squeezing” Strategy

Chinese Memory Still Lags Behind Korean Competitors

As demand for artificial intelligence (AI) drives up memory prices, it has been reported that Apple, the world’s largest electronics company, is searching for Chinese-made memory. Apple has long been known for its so-called “margin squeezing” strategy, in which it deliberately pits companies from the same industry against each other to increase its bargaining power. This is why attention is focused on whether Chinese memory will emerge as a rival to Korean memory products from Samsung Electronics, SK hynix, and others.

Will Apple Join Hands with Chinese Memory Companies?

Tim Cook, Chief Executive Officer (CEO) of Apple. Photo by Yonhap News

On February 26 (local time), semiconductor market research firm TrendForce, citing a report by IT media outlet Wccftech, stated, "Apple is considering sourcing DRAM from Chinese suppliers." According to the report, Apple has only secured DRAM and solid-state drives (SSD) needed for the first half of this year. Any additional volume will have to be purchased through price negotiations with suppliers. However, memory prices have already surged due to skyrocketing demand for AI.

China has two major memory manufacturers: YMTC, specializing in NAND flash, and CXMT, specializing in DRAM. These companies have faced production setbacks for advanced memory chips because they cannot obtain state-of-the-art EUV lithography equipment due to U.S. technology restrictions. Nevertheless, they have succeeded in stabilizing yields for the latest generation DDR5 DRAM at up to 80%. As of last year, their market share stood at 5%, signaling their emergence in the global market.

A Long Tradition of Squeezing the Supply Chain

It appears likely that Apple will leverage Chinese memory as a bargaining chip in price negotiations. From smartphone chip foundries to displays, Apple has a long-standing business strategy of deliberately sourcing parts from multiple suppliers within the same sector to induce price competition.

Apple is known for its business strategy of maintaining cooperative relationships with multiple suppliers in the same industry, thereby fostering price competition. The Asia Business Daily

According to a report by Gartner, an IT advisory company, analyzing Apple’s supply chain strategy, Apple “signs numerous exclusive long-term contracts with key suppliers, negotiates favorable pricing terms with prepayments, and ensures mass production.” The report also noted, “By utilizing multiple suppliers for the same component, Apple can delay supply chain disruptions and maintain overall margins, as the competition among suppliers helps reduce supply costs.”

In fact, Apple prioritizes supply chain management above all else. Tim Cook, Apple’s current Chief Executive Officer (CEO), was originally a supply chain expert. Furthermore, Apple does not simply delegate component manufacturing to suppliers and watch idly. The company invests heavily in quality control and production processes. For example, all displays supplied to Apple are manufactured according to Apple’s quality standards, and every detail-from equipment used to raw materials-must meet Apple engineers’ specifications. In other words, if Apple partners with a Chinese memory company, there is a high possibility that the supplier will benefit from Apple’s accumulated expertise in maintaining quality and production stability.

Many Obstacles Remain: "If Successful, Others Will Follow"

DDR DRAM from the Chinese memory company CXMT. CXMT official website

However, it remains uncertain whether Apple will immediately use Chinese memory components in its next iPhone. Although Chinese memory is growing rapidly, its market share is still minimal compared to Samsung Electronics and SK hynix, which together hold around 70% of the market.

There are also issues related to mass production technology. CXMT has only just commercialized 16-nanometer-class DRAM, whereas Samsung Electronics and SK hynix have been producing at this node for several years. Most importantly, as U.S.-China competition intensifies, questions remain over whether Apple, a leading American company, can use Chinese semiconductors. TrendForce commented, “The key question is whether Apple’s bargaining power can influence the upward trend in memory prices. Furthermore, if Apple’s strategy succeeds, other major companies will likely attempt to diversify their supply chains with Chinese memory as well.”

This content was produced with the assistance of AI translation services.