Cupertino’s cash machine is about to demand a higher fee for entry. Apple, the world’s most valuable company, is preparing to raise prices across its product lineup globally, with British consumers first in line to feel the sting. The culprit? Soaring costs for the advanced chips powering its artificial intelligence ambitions. This is not a move born of necessity but of choice, and the City will be watching the gilt-edged margins with hawkish intent.
Apple’s latest generation of iPhones, iPads, and Macs will incorporate custom silicon designed to handle on-device AI workloads. These chips, manufactured by TSMC on cutting-edge 3-nanometre processes, are becoming prohibitively expensive. The yield rates are poor, the R&D colossal, and the supply chain tight. Apple’s gross margins, once the envy of the industry, are under pressure. Enter the price increase a blunt instrument to restore the bottom line.
For the British consumer, this is a double blow. Sterling’s weakness against the dollar already inflates the cost of imported electronics. Now Apple is layering on an additional premium, citing currency fluctuations as cover. The timing could not be worse. Inflation is stubbornly above the Bank of England’s target, household budgets are squeezed, and gilt yields are dancing around 4 per cent. A new iPhone costing north of £1,200 is no longer a luxury; it is a statement of fiscal indifference.
The market narrative will be fascinating. Apple’s share price has been resilient, buoyed by services revenue and buybacks. But raising prices in a softening global economy is a gamble. Elasticity of demand for iPhones is lower than for Android rivals, but not zero. There will be a tipping point where even the most ardent fanboy balks at the tab. The risk is that Apple accelerates a trend of lengthening replacement cycles, cannibalising future sales.
Yet the company has form. It raised prices in the UK last year for the iPhone 14 Pro range, and demand barely flickered. The brand loyalty is cultish, the ecosystem sticky. But the AI chip cost issue is structural, not cyclical. If Apple is to maintain its legendary margins, it must either raise prices or accept lower returns. The market will punish the latter far more severely than the former. So expect another round of pain for British wallets.
The ripple effects will be felt across the London Stock Exchange. Tech-heavy portfolios will reprice. The pound may take a further hit if capital flight accelerates, as foreign investors reassess the UK’s consumer spending power. The Bank of England will be watching: another inflationary impulse from the tech sector is the last thing Andrew Bailey needs.
In short, Apple’s decision is a textbook case of corporate rationalism. But for the British consumer, it is a regressive tax on the digital life. The bottom line is clear: the cost of AI is being passed on, and we are all paying for it.
