As we told you earlier today, Apple reported an extremely strong fiscal first quarter and that included a 23% year-over-year increase in Phone sales. Apple sold $85.27 billion worth of iPhones during the fiscal first quarter of 2026, and strong demand for the device remains. That comes from someone who just might know a thing or two about iPhone sales, Apple CEO Tim Cook.
Apple is finding it harder to obtain enough APs built on TSMC's 3nm process node
Cook said on Thursday that Apple is dealing with strong demand but low supplies of iPhone models. Cook said that its inability to access more advanced node SoCs from TSMC is what is keeping Apple from having more iPhone units on hand to sell. The particular chips that Cook has been talking about are the A-Series application processors (APs) manufactured by TSMC using its 3nm process node. Cook says that Apple is working on improving its access to these APs and doesn't want to make any projections past March.
Apple finance chief Kevan Parekh told analysts that during the current quarter, Apple's total revenue will rise 13% to 16% year-over-year "which comprehends our best estimates of constrained iPhone supply during the quarter." While this quarter's supply issue deals with advanced node AP production, another problem that is on the horizon came up during the earnings call on Thursday evening.
Strong demand for memory chips used in AI data centers is causing tech firms to deal with shortages and higher prices
Strong demand for memory chips from AI data centers has not only caused prices for memory chips to skyrocket, it also has become harder to find these chips leading to a memory shortage. Cook was asked by analysts several times during the earnings call about Apple's access to memory chips; while he admitted that Apple will be hurt by higher memory prices, he did say that he is looking at "a range of options." But that is all Cook would say about the memory shortage that has taken place due to the heavy demand for AI memory chips from AI data centers. "As always, we’ll look at a range of options to deal with that," Apple's CEO said.
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Apple is no longer TSMC's largest customer as it has been replaced by Nvidia. | Image credit-TSMC
Apple is looking for additional advanced node capacity from TSMC and while in the past Apple might have received some favors from the foundry since it was TSMC's largest customer, that is no longer the case if you believe NVIDIA CEO Jensen Huang who says that his company has replaced Apple as TSMC's largest customer. Analysts forecast that Nvidia will give TSMC approximately $33 billion worth of business this year or 22% of the foundry's 2026 revenue. Analysts say that Apple will generate $27 billion worth of revenue for TSMC in 2026 giving the tech giant an 18% slice of the TSMC pie.
Rising prices for memory chips will have a larger effect on Apple this quarter than last
Apple forecasts gross profit margins in the current quarter to be in a range between 48% and 49%. For the fiscal first quarter, Apple reported gross profit margins of 48.2%, whch means we might or might not see Apple improve its gross margins this quarter. While rising memory chip prices had a "minimal effect" on Apple in the fiscal first quarter that ended in December, for the fiscal second quarter ending in March, the higher costs of memory chips will have a bigger effect on Apple.
Tim Cook had an interesting stat that he revealed during Thursday's call. Apple had figured that it would need to source 19 billion chips from the U.S. for 2025 and ended up buying 20 billion chips that were made in the USA. Of that large number of U.S. made chips purchased by Apple last year, it is estimated that only tens of millions of them came from TSMC's operation fab in Arizona.
You might recall last year Apple said that it would spend $600 billion in the U.S. over five years. A large percentage of those funds are earmarked for companies that manufacture chips in the U.S. which includes TSMC.
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Alan, an ardent smartphone enthusiast and a veteran writer at PhoneArena since 2009, has witnessed and chronicled the transformative years of mobile technology. Owning iconic phones from the original iPhone to the iPhone 15 Pro Max, he has seen smartphones evolve into a global phenomenon. Beyond smartphones, Alan has covered the emergence of tablets, smartwatches, and smart speakers.
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