KEY POINTS
• Apple CEO John Ternus is reportedly planning small scale layoffs and project cancellations as the company seeks to operate more efficiently.
• Rising memory chip costs are putting pressure on Apple’s margins and limiting its ability to absorb higher component prices.
• Apple is reportedly seeking to avoid further significant price increases in 2027 if memory supply remains tight.
MAIN STORY
Apple is preparing targeted job cuts and project cancellations under new CEO John Ternus as the technology company responds to rising component costs and pressure on its business.
According to a Bloomberg report, Ternus is planning small scale layoffs across large teams and intends to cancel some projects as part of efforts to make Apple leaner.
The changes come as Apple faces a tightening memory chip market that has increased component costs and put pressure on profit margins.
The company has also faced weaker services revenue, which fell quarter over quarter in June for the first time since 2022, according to the report cited in the source material.
Apple had issued cautious revenue guidance for its current quarter in July, with the company citing difficulties in securing enough memory chips to meet demand.
Former CEO Tim Cook had warned that higher memory prices could persist, describing the situation as an unusually severe period of pricing pressure.
Apple subsequently raised some prices, while higher memory costs contributed to pressure on margins in its most recent quarter.
The memory shortage has been intensified by strong demand for high bandwidth memory and advanced DRAM used in AI servers. Major memory producers, including SK Hynix, Samsung Electronics and Micron, have committed much of their premium AI memory capacity through 2026 as technology companies expand their AI infrastructure.
The resulting supply constraints have pushed memory prices higher and strengthened the bargaining position of suppliers.
With supply expected to remain constrained into 2027, Apple could face continued pressure on its costs. The planned workforce reductions could therefore provide some cost relief while the company seeks to limit further increases in product prices.
Apple shares were trading higher on Wednesday, according to the source material.
THE ISSUES
- Apple’s cost pressure is being driven partly by the rising price of memory chips, a key component in its devices. Higher component costs can reduce profit margins when companies are unable or unwilling to pass the full increase to customers.
- The growing demand for memory from AI infrastructure is competing with demand from consumer technology companies, tightening supply and giving major memory manufacturers greater pricing power.
- Targeted layoffs and project cancellations could reduce Apple’s operating costs, but the reported measures also indicate that the company is reassessing how resources are allocated across its large teams.
- Apple’s pricing decisions could become more difficult if memory costs remain elevated. The company is reportedly seeking to avoid significant additional price increases in 2027 if supply constraints continue.
WHAT’S BEING SAID
“Money pressure is coming from 2 directions: a memory shortage is raising component costs, and services revenue fell quarter over quarter in June for the first time since 2022.”
– Rohan Paul, tech expert
“On the pricing front, we reluctantly raised prices, I would say. We did it because we’re in what I would characterize as a 100 year flood on the memory pricing, with exponential increases in memory prices.”
– Tim Cook, former Apple CEO
WHAT’S NEXT
Apple is expected to proceed with the reported targeted layoffs and project cancellations as Ternus seeks to reduce costs and streamline the company. The outlook for memory supply and pricing into 2027 will remain an important factor in Apple’s cost structure and pricing decisions.
BOTTOM LINE
Apple is responding to higher memory costs and pressure on its business with targeted workforce reductions and project cancellations under John Ternus. The measures could help contain costs if memory prices remain elevated, while the company seeks to limit further price increases.
