For more than a decade, Apple has sat at the centre of the global electronics supply chain, dictating terms to manufacturers across Asia. That balance of power is now shifting as artificial-intelligence players pour extraordinary sums into hardware, outbidding Apple for key components and forcing suppliers to rethink their priorities.

Companies racing to build AI infrastructure are spending heavily on advanced chips, memory and specialised materials, and their appetite is reshaping the market. As a result, suppliers that once bent over backwards to meet Apple’s demands are finding they can push back, often by charging higher prices. Analysts warn this could squeeze Apple’s famously strong margins and, over time, flow through to consumers.

Chief executive Tim Cook alluded to the issue during a recent earnings call, noting tight chip availability and sharply rising memory costs. Despite blockbuster iPhone sales and record profits, Apple’s share price barely moved after the update, suggesting investors are wary of the pressure building inside the supply chain.

Industry analyst Sravan Kundojjala of SemiAnalysis said Apple was clearly feeling the strain. A major turning point came when Nvidia overtook Apple as the largest customer of Taiwan Semiconductor Manufacturing Company, or TSMC, according to Nvidia boss Jensen Huang. Apple had held that position by a wide margin for years. TSMC is the world’s leading producer of cutting-edge chips used in smartphones, AI servers and other high-performance devices.

Although AI servers look nothing like consumer phones, they rely on many of the same suppliers. Memory has become a particular bottleneck as companies such as OpenAI, Google, Meta and Microsoft commit hundreds of billions of dollars to expand data centres. Mike Howard from TechInsights said the pace of memory price rises is without precedent, affecting both NAND storage and DRAM, which keeps devices running smoothly. By the end of this year, TechInsights expects DRAM prices to be four times higher than in 2023, while NAND prices are set to more than triple.

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Those increases have direct implications for Apple. Howard estimates the memory inside the base iPhone 18, due later this year, could cost Apple about $A86 more than the equivalent components in the current iPhone 17. On a handset retailing for around $A1,199, that represents a meaningful hit to margins.

Apple’s scale and design expertise once made it an unstoppable force among suppliers. It spends billions each year on memory alone, making it one of the largest buyers globally, and manufacturers long viewed Apple contracts as both lucrative and prestigious. That dynamic is changing as firms like Nvidia take the lead in what analysts describe as the most ambitious engineering projects in the industry.

Demand for AI hardware shows no sign of slowing, while Apple’s spending growth looks modest by comparison, even with record iPhone sales. South Korean memory giants Samsung Electronics and SK Hynix have already lifted prices on certain DRAM products sold to Apple, according to people familiar with the supply chain. AI customers are willing to pay more, lock in volumes and make upfront commitments, giving chipmakers greater leverage.

Historically, Apple used long-term contracts and its sheer buying power to negotiate aggressively, sometimes revisiting prices weekly or walking away from suppliers it felt were charging too much. It even stockpiled extra memory to strengthen its hand, an unusual move for a company known for keeping inventory lean to maximise cash flow.

The battle now extends beyond parts to talent. Engineers who once focused on refining smartphone displays are increasingly being pulled into projects involving specialised glass for advanced AI chip packaging. Sensor makers and other component suppliers inside the iPhone are also landing new contracts with AI firms developing their own hardware.

Even so, suppliers say Apple remains an invaluable customer. Working with the company is still seen as a rigorous training ground, given its exacting standards and disciplined processes.

At the chip level, Apple has traditionally anchored TSMC’s most advanced manufacturing nodes with predictable iPhone demand. As TSMC expands its work with Nvidia and other AI clients, Apple is reportedly examining whether some lower-end processors could be sourced elsewhere.

One lever Apple has used to protect profits is storage pricing. Last year it dropped the 128-gigabyte iPhone Pro, pushing buyers to a 256-gigabyte minimum at an extra $A150. Analysts say similar moves could help offset rising costs, although Apple is not expected to lift headline prices on its next iPhones compared with similarly specified iPhone 17 models.

As AI investment continues to accelerate, Apple’s long-held dominance over its suppliers looks less assured, signalling a more competitive and costly era for the world’s most valuable consumer electronics brand.