Jefferies downgrades Apple, says supply chain checks indicate a planned all-glass iPhone is canceled

TrendForce's latest analysis indicates that the upcoming iPhone 18 Pro model will face a significant 38% increase in production costs compared to its 2025 counterpart. This rise is primarily attributed to the escalating prices of memory components, which now account for a substantial 34% of the bill of materials (BOM). Historically, memory's share of the BOM has surged from around 10% a year ago to the current 34% in Q3 2026, and is projected to surpass 40% in the first half of 2027.

This shift signals a transition in cost drivers, with the application processor and display no longer dominating expenses. Memory price volatility is expected to persist, with the BOM cost for the 256 GB iPhone 18 Pro potentially rising further in 2027. To mitigate the impact of these rising costs, Apple may resort to lowering gross margins, a strategy previously employed for its MacBook launches.

This move could help maintain iPhone shipment volumes and market share without causing customer price sensitivity. Additionally, Apple might consider revising pricing for older iPhone models to offset the increased memory expenses. While Apple remains profitable, other Android smartphone manufacturers face a more challenging situation, potentially forced to absorb higher component costs through steeper retail price increases or exiting unprofitable product lines due to thin margins.