Apple Is Blaming AI for Price Hikes — Here’s What Happens Next (ft. Mark Gurman)

**SPEAKER_1** (0:00)
Welcome back to The Rundown, interview edition. Today, I am talking to a returning guest, Mark Gurman. Mark Gurman is the editor at Bloomberg and one of the most plugged in people when it comes to Apple. So in today's episode, we're talking all things Apple, including why Apple is raising prices, why they waited so long to do it, why they're pointing the finger at the memory makers, and some ways that Apple is trying to get around the memory supply shortage, causing all of this. We also touch on the revamp Siri that is launching this fall and what to expect from new CEO John Turnes when he takes over later this year. And finally, we also did a few minutes on the NBA at the end. Mark is a huge Laker fan and we got into his takes on LeBron leaving the team. So yeah, this is a packed episode with a ton of information. I think you guys are going to love it. So let's get into it.
All right, guys, today we are joined by returning guest, Mark Gurman, managing editor at Bloomberg. He covers the TechBeat. He's the most plugged in guy on the planet when it comes to Apple. Mark, welcome back to The Rundown.

**Mark Gurman** (1:00)
Thanks for having me. Appreciate it. Good to be back.

**SPEAKER_1** (1:01)
I'm so happy you were able to join us today because there's so much to talk about when it comes to Apple, especially since the last time we talked back in September. We gotta start with the price hike news because that was the main story last week. Apple raising prices across the board on their products like iPads, Macs, Vision Pro, Apple TV going up 15, 20, in some cases 50% on some of their products. I think a lot of people expected price hikes to happen, maybe not by this much. The market was definitely surprised. Apple stock dropped 6%.
Were you surprised to see prices go up by this much?

**Mark Gurman** (1:37)
Wasn't surprised about the prices going up by that much. Wasn't surprised about the timing. Wasn't surprised about the products hit. I guess wasn't surprised about any of it across the board. The memory shortage situation is real.
Apple wasn't going to pay the price for consumers and for the industry forever. They're not going to do anything ever that will sacrifice their margins. So they needed to hike the prices to meet that and retain their corporate average margin, which is often between 45 and 50%.
And so that's why you saw $100 to $300 to $500 price hikes on iPads and Macs. You saw the same on Apple TV and HomePods. You saw the same even on the Vision Pro. The price at $3,500 is already controversial. So jacking it up to $3,700 clearly is a satisfy the margins play, even on a product that's sold in very low volume. So this is entirely about retaining margins.

**SPEAKER_1** (2:37)
Yeah, the price hike on the Vision Pro is the most insulting to me. I'm like, no one's buying a $3,500 Vision Pro. No one's going to buy it for $3,700. But I do want to follow up on the margin story and the timing story here. So you brought up margins. On the latest earnings report, Apple's product gross margins came in at 38.7%, which was actually down from the 40.7% from the previous quarter. So they were already starting to feel a bit of the margin squeeze. Now Apple's margins are still better than industry average.
But I guess I'm curious in the timing though, right? Why did Apple decide to do it now? Because these memory shortages have been happening for about a year now. Other companies have raised prices like Sony and Nintendo. Why do you think Apple waited until now?

**Mark Gurman** (3:18)
They wanted to avoid the demand softening for their products for as long as possible. And what this really is going to impact our sales in the enterprise, business, government, education channels, the bulk purchases, a computer going up by $100 isn't going to make a person refrain from buying the machine, or at least most people.
So you're still going to see some demand softening on the consumer side, but it's really on the government and the enterprise and the school side sales. They're going to get the impact here. So they held off as long as they could. They felt that their procurement teams were going to be able to get the situation resolved, that they were able to find memory elsewhere, use new suppliers, negotiate different deals, but that just did not work out. But kudos to them for holding on as long as possible. There have been a lot of people who are saying that Apple has, you know, X dollars in cash in the bank, that they should take out debt to avoid these price hikes. But that's just not something a business run the way Apple has been run for 30 years is going to operate. So this is just the classic playbook from Apple and how a financially prudent business is going to be run.