Apple Inc. (AAPL.US) regained the top spot in China's mobile phone market in Q4 with a 28% increase in sales, but the memory shortage crisis may threaten profits.

According to Counterpoint Research, despite the worsening shortage of critical memory chips, Apple Inc. (AAPL.US) saw a whopping 28% increase in iPhone shipments during the holiday season, reclaiming its leading position in the Chinese market. The iPhone 17 series devices attracted many consumers, with Apple Inc. phones accounting for one-fifth of global shipments in the fourth quarter, while domestic brands like Huawei saw double-digit percentage declines. Overall, global smartphone shipments in the largest market decreased by 1.6%. In the annual shipment ranking, Apple Inc. lagged behind Huawei by a narrow margin, ranking second in the Chinese market, with both holding approximately 17% market share. Apple Inc.'s shipments in 2025 increased by 7.5%. However, its performance was not flawless, as the newly launched iPhone Air was delayed in China compared to other regions, and its sales were poor. Counterpoint analyst Ivan Lin stated, "The iPhone Air's performance was poor. Due to its late launch, as well as trade-offs made between thinness and feature configuration, it had a slow start." Furthermore, the resurgence in iPhone shipments was largely attributed to its integrated Apple Intelligence feature. In order to smoothly run edge-side large models, future iPhones (such as the iPhone 18 series) must be equipped with larger capacity of operational memory (RAM). Against the backdrop of soaring memory prices, Apple Inc. also had to increase the memory capacity per device (e.g. moving from 8GB to 12GB/16GB). This dual blow of "price increase + demand for increased capacity" is the biggest financial challenge that Apple Inc. faces in maintaining its market-leading position. However, despite the current dominance in market sales, the drastic fluctuation in memory chip prices is quietly becoming the biggest uncertainty factor affecting the future profit direction and product strategy planning for Apple Inc. From Apple Inc. to HP Inc. (HPQ.US), many consumer hardware manufacturing companies are under immense pressure. This is because their demand for expensive memory components has become an investment risk, and various signs indicate that this risk is difficult to reverse in the short term. Now, more and more companies are issuing warnings, alerting people to the various uncertain impacts caused by the semiconductor shortage for device data storage. This semiconductor shortage situation arose because memory chip manufacturers allocated more production capacity to high-end memory production for artificial intelligence chips needed by NVIDIA Corporation. This move directly led to continuous price increases for related memory chips, while small businesses that could not ensure long-term stable supply had their survival space further squeezed. Rob Thummel, senior portfolio manager at Tortoise Capital, said, "They're in a difficult situation. They basically have only two choices: either accept a decrease in profit margins, but the market won't like that; or raise prices to offset the higher memory costs, but this could damage demand." Tortoise Capital manages $9.1 billion in assets and operates an exchange-traded fund focused on artificial intelligence infrastructure. The surge in memory demand has led to what the technology research firm IDC calls an "unprecedented memory chip shortage," which the company believes is a "crisis" for device manufacturers because the shortage of supply has led to soaring chip prices. Counterpoint analysts wrote, "Looking ahead, memory prices are expected to continue to rise, with a 40% to 50% increase in the first quarter of 2026, followed by a further 20% increase in the second quarter of 2026." "Smartphone original equipment manufacturers are expected to optimize their product portfolios, especially by reducing low-end models to maintain profit margins." Therefore, for Apple Inc. just returning to the top, this means that its huge shipment volume will face severe material cost challenges, especially as the low-priced long-term supply agreements previously signed by Apple Inc. are coming up for renewal, new procurement negotiations will face premium pressure, not only testing the bargaining power of Apple Inc.'s supply chain, but also directly threatening the gross profit margin level of its product line. Last week, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR CEO Wei Zhijia emphasized the imbalanced impact of the memory shortage on the market, stating that high-end smartphones have been largely unaffected. All of Apple Inc.'s products are in the high-end market, demonstrating the strongest resilience. With its top market share and strong capital, Apple Inc. has the highest bargaining power when negotiating with chip giants like Samsung and Hynix. Although memory prices are rising, Apple Inc. has the ability to prioritize supply. In contrast, competitors further down the line may not only face higher prices, but also face the risk of "out of stock". This means that the shortage of memory chips may actually become a "moat" for Apple Inc. to further consolidate its leading position through its supply chain advantage. However, Counterpoint stated that the new round of consumer subsidies in China is helping to alleviate manufacturers' cost pressures. Nevertheless, overall, the dominance of iPhone sales proves its market dominance, while the news of memory chips reveals its profit risks. Whether Apple Inc. can maintain its position at the top in 2026 largely depends on how it will absorb the cost impact of this "memory cold wave".