Written by: Rita

Trend Guide

Morgan Stanley has released its latest research report on Apple, with a headline that sounds enticing: "Price Increases Lead to Profit Growth." But the story is not that simple. Over the past two weeks, Apple has raised prices on Mac, iPad, and accessories by 15-54%, while keeping iPhone prices unchanged. On the surface, this seems to be capitalizing on a lack of price sensitivity in demand to extract profits. However, the deeper logic is the opposite: these price increases are forced, in response to the crazy rise in memory chip costs. DRAM costs are expected to rise by 190% by 2027, and NAND by 280%. If Apple doesn't raise prices, gross margins will be eaten away. This is survival defense. Morgan Stanley's implication is clear: iPhone prices will increase by $200 in September, rather than the $100-150 previously modeled. Behind this number is a cost war. The target price is $360, representing a 34.4% increase from the current $317, but the implied risk is consumer tolerance for this wave of price increases.

From Historical Elasticity, Apple Has the Capital for Price Increases

There is a clear divergence in price sensitivity for Apple products. Morgan Stanley's analysis of historical data shows that iPhone demand elasticity is the lowest (0.2-0.5), meaning that a 10% price increase results in only a 2-5% decline in demand. In contrast, the elasticity for Mac and iPad is much higher (0.8-1.0), which means they are more sensitive to price changes. This structural difference gives Apple the space for differentiated pricing. The loyalty of the iPhone user base is stronger, and the brand premium is deeper, so they have the highest tolerance for price increases. This is why Apple dares to increase prices on Mac and iPad by 15-33%, but remains restrained on the iPhone. However, this restraint has a time limit.

The Explosion of Memory Costs is the Real Driving Force

Morgan Stanley conducted a detailed analysis of the material costs for iPad and Mac. For an iPad with 128GB of storage, the DRAM cost is $32 and the NAND cost is $19. If DRAM rises by 190% and NAND by 280%, these two costs alone would add an additional $41 (DRAM) and $53 (NAND). In other words, the pressure from chip costs alone can eat away 30-40% of an iPad's gross margin. Apple's increase in iPad prices by $100-150 seems like a money grab, but in reality, it is merely to maintain the current gross margin level. The situation is even more extreme for Mac. The cost of DRAM and NAND for an M4 MacBook Air is about $79 this year, which could soar to $226 by 2027. Apple's $200 price increase on Mac is still a defensive game.

$200 Price Increase for iPhone: A Forced Cost Defense

This is the most critical prediction in Morgan Stanley's report. Based on analyses of demand elasticity and cost pressure, they now believe Apple will raise iPhone prices by $200 in September (a significant increase from the previous expectation of $100-150). This figure sounds radical, but it is logically supported. The DRAM and NAND costs for the iPhone 18 Pro are expected to soar from the current $65 to about $200. A $200 price increase could create about a 40% incremental gross profit. However, looking closely at the numbers, most of this incremental gross profit is absorbed by cost pressures. Morgan Stanley's model indicates that even with a $200 price increase, the gross profit growth for iPhone will be only about 40%, far below historical levels. This is the truth: price increases are meant to prevent gross margins from declining further.

Trend Perspective

This report reveals a cost crisis in the chip industry. Apple's price increase plan, from Mac to iPad and soon-to-be-released iPhone, follows the same logic: in an era of exploding memory chip costs, maintaining gross margins requires price increases across the board. The question is whether this cost pressure can be fully absorbed by consumers. The 34.4% price increase target set by Morgan Stanley assumes consumer tolerance, positing that the elasticity of the demand curve will not change due to consecutive price increases. However, in reality, demand elasticity is dynamic. Consumer tolerance is highest at the first price increase, and begins to wane with the second and third increases. If the entire product line is raising prices, with iPhone up $200, Mac up $200, iPad up $150, how long can consumers' psychological defenses hold? That is the real variable.

Disclaimer

This article is a summary and interpretation of the third-party brokerage report (Morgan Stanley, July 14, 2026) by Trend Research. The ratings, target prices, profit forecasts, and related judgments quoted in the article represent the opinions of the brokerage analysts and reflect the stance of their respective institutions, and do not represent the views of Trend Research, nor do they constitute any investment advice.

The market has risks; decisions need to be independent. This article should not be used as a basis for buying or selling any securities.