Customers try out iPhone 17 Pro smartphones inside the Apple Store at Sanlitun Taikoo Li (Photo by Cheng Xin/Getty Images)
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Apple is expected to increase the price of the iPhone 18 Pro, with Apple CEO Tim Cook saying that inflationary pressures on memory and storage have made the current pricing of Apple’s hardware unsustainable. Analysts at JP Morgan suggest the iPhone 18 Pro’s price will rise by at least $100; others are predicting up to $200.
Apple must protect its iPhone margins as the cost of manufacturing the premium smartphone increases, balancing ongoing revenue with the cost of new software services demanded by consumers.
Apple is accelerating its in-house design and manufacturing pipelines to insulate its corporate balance sheet from rising silicon foundry costs.
The rush for Artificial Intelligence-focused data centers is impacting the consumer electronics landscape. Silicon foundry TSMC is raising prices by 5% to 10% across all advanced nodes, affecting not only Apple but also AMD, Nvidia and Qualcomm. As one of TSMC’s largest customers, Apple is well-positioned to negotiate lower pricing while demanding capacity ahead of smaller Android manufacturers.
This impact on all smartphone manufacturers is being countered by Apple’s engineers. Where Android suppliers such as Qualcomm and TSMC need to support a wide range of system architectures, Apple’s engineers only have to focus on the iPhone. This will help absorb some of the financial shock, reducing potential assembly costs from $449 to $426. By using in-house designs, such as the new C-series modems, Apple has reduced the number of licensing fees payable to third-party suppliers, but the raw material costs cannot be overcome.
Apple is utilizing the premium price shift of the Pro tier to create a structural cushion for standard configurations within the broader smartphone lineup.
Apple is updating pricing for the iPhone 18 Pro and iPhone 18 Pro Max alongside the introduction of the foldable iPhone Ultra at $1,999. This expands the portfolio with wider price gaps and more popular handset configurations, helping protect gross margin targets. This is dependent on the base model specifications absorbing the pressure from the supply chain to maintain an acceptable margin.
Samsung was one of the first manufacturers to take this approach. It removed the 128 GB storage option seen in 2026’s Galaxy S25 smartphones, forcing the entire consumer S26 portfolio to start at 256 GB. The increased storage balanced out the increased price, normalizing Android’s higher starting points, which in turn gives cover to the iPhone 18 Pro strategy.
While Android consumers can make a lateral move to another manufacturer with similar specs but more attractive pricing, Apple’s software lock-in with iOS and iCloud makes that much harder. Online community forums are arguing that price-conscious consumers could wait and downgrade to the vanilla iPhone 18 in early 2027 or look towards Apple’s refurbished store for their next iPhone.
Apple is shifting capital recapture from one-time hardware transactions over to long-term digital services segments to stabilize net hardware returns.
The iPhone’s technical performance is improving to support features such as generative AI, even as consumer requirements plateau. Ongoing revenue from Apple Services is rivalling hardware turnover; three years of Apple One’s premium tier has generated $1,366 in revenue, which sits on top of the iPhone 17 Pro's $1,099 price, although the latter’s bill of materials is matched by the investment and running costs of the online services.
New services and features, such as Apple Intelligence and Siri AI can be bundled into the Apple One program, allowing tier pricing to rise or new tailored tiers to be introduced. Rivals with open-platform approaches have to lean into lower price points or less profitable third-party partnerships to offer the same suite of services. Apple will be measuring revenue over the lifespan of a device, not just at the point of sale, allows finer control over rising prices and consumer reluctance on the shop floor.
CEO Tim Cook has made it clear that Apple’s hardware margins are being reduced. The iPhone 18 Pro will be more expensive, but consumers will see this as a trend across all smartphone manufacturers. Higher prices are not Apple’s main line of defence against revenue losses. It is the structural shift away from a pure hardware play to increased infrastructure that amortises costs against revenue per user over multiple years which will guarantee the financial success of the iPhone 18 Pro.
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