Apple Inc. has confirmed it will increase the price of its flagship products in the UK by up to 15 per cent, blaming a global shortage of advanced semiconductors used for artificial intelligence. The decision, announced late yesterday, threatens to stoke inflationary pressures in an economy already wrestling with sticky price growth.
The tech giant said the price hikes, effective from next month, were necessary to offset soaring costs for chips designed to run AI features in iPhones, iPads and MacBooks. ‘The AI chip crisis is the biggest supply chain disruption we have faced since the pandemic,’ a spokesperson said. ‘These are not ordinary components – they are custom-built, and the entire global market is scrambling for them.’
British consumers will be hit hardest. Apple’s UK prices already include a 20 per cent VAT, and the latest rise will push the entry-level iPhone 16 to over £1,200. The move comes as the Office for National Statistics reports UK inflation stuck at 3.2 per cent, well above the Bank of England’s 2 per cent target.
Market analysts were quick to connect the dots. ‘This is a textbook cost-push shock,’ said James Hartley, an economist at Lombard Street Research. ‘Apple has pricing power, but if other firms follow suit, the BoE’s hope of rate cuts this year will evaporate. Gilts will sell off, and sterling will take a hit.’
The crisis stems from a concentration of AI chip production in Taiwan and South Korea, where geopolitical tensions and power shortages have constrained output. Nvidia, the leading designer, warned last week that supplies would remain tight into 2026. Apple, which uses its own A-series and M-series chips custom-built by TSMC, is particularly exposed.
Yet the timing could not be worse for Chancellor Jeremy Hunt, who staked his fiscal credibility on inflation returning to target by spring. He has little room for tax cuts in his March budget after borrowing overshot forecasts. ‘Apple’s price rise is a political problem for Hunt,’ said Rachel Clark, a political economist at King’s College London. ‘It reminds voters that the cost-of-living crisis is not over.’
The BoE faces a dilemma. If it holds rates high to crush inflation, it risks strangling growth; if it cuts, it risks fuelling price rises. Money markets now price in only one quarter-point cut this year, down from three expected in January. The yield on the 10-year gilt has risen to 4.3 per cent, reflecting fears of persistent inflation.
For Apple investors, the arithmetic is brutal. The company earns roughly 10 per cent of its revenue in Britain. A price rise may protect margins but could hit volumes. Shares in Apple fell 2 per cent in after-hours trading on Wednesday. ‘The market hates uncertainty,’ said Nick Evans, a portfolio manager at Newton Investment Management. ‘This tells us that the chip shortage is not just a tech problem. It is a macro problem.’
For the British consumer, the message is stark: the era of cheap gadgets is over. The AI revolution, billed as a boon for productivity, now looks like a burden on wallets. And in the City, the old adage holds: when Apple sneezes, the market catches a cold.
Alastair Thorne, Chief Financial Editor
