SEOUL, November 03 (AJP) - Apple’s stronger-than-expected September-quarter earnings showed iPhone demand holding up despite a global smartphone slump, but soaring memory chip prices are squeezing its margins just as the U.S. technology giant mounts its first foldable challenge to Samsung Electronics.
The South Korean rival has an unusual advantage in the contest. As both a smartphone maker and one of the world's largest memory chip producers, Samsung stands to benefit from the same chip price surge hurting Apple's profitability, even as its own handset business faces rising component costs.
Apple reported revenue of $114.5 billion for its fiscal fourth quarter ended Sept. 26, up 12 percent from a year earlier and above analysts' estimate of $113.39 billion.
Net income rose 12 percent to $30.7 billion, while diluted earnings per share climbed 14 percent to $2.10, beating Wall Street's forecast of $1.99. The results marked Apple's first earnings report under Chief Executive John Ternus, who succeeded Tim Cook in September.
iPhone revenue jumped 17 percent to $57.6 billion, surpassing analysts' expectations of $56.54 billion. Services revenue reached an all-time high of $31.6 billion, up 10 percent, while Mac sales surged 24 percent to $10.8 billion.
Apple shares fell as much as 4 percent in after-hours trading as executives warned that escalating memory costs would weigh on profitability.
"We grew strong double digits in the U.S. and Greater China to achieve September quarter revenue records," Ternus said during Tuesday's earnings conference call.
The resilience stood out against a shrinking global smartphone market.
Worldwide smartphone shipments plunged 20 percent from a year earlier in the July–September quarter, according to market researcher Omdia.
Samsung retained its top ranking with a 23 percent market share despite a 5 percent decline in shipments, while Apple followed closely with 22 percent, holding shipments flat from a year earlier.
The figures underscore Apple's growing strength in the premium segment even as consumers elsewhere delay upgrades or turn to cheaper devices amid rising prices.
The rivalry has intensified with Apple's entry into foldable smartphones, a category Samsung helped establish through successive generations of its Galaxy Z Fold lineup.
Apple launched its first book-style foldable, the iPhone Duo, on Oct. 23. The device arrived after the September quarter ended and therefore contributed nothing to Apple's reported iPhone revenue.
Nevertheless, executives described robust initial demand despite reports of cracked displays and other screen problems among early buyers. Apple has acknowledged display issues affecting a small number of devices and offered replacements.
"We've been thrilled with the early response from reviewers and customers, and we are working hard to get iPhone Duo into customers' hands as quickly as we can," Ternus said.
Chief Operating Officer Sabih Khan acknowledged that supplies remained tight.
"iPhone Duo is constrained as of today. The ramp is going well," Khan said. "But at this time, it's really hard to predict when supply and demand will be in balance."
Yet Apple's arrival has not necessarily come at Samsung's expense.
Domestic sales of Samsung's Galaxy Z Fold8 rose about 20 percent in the week following the Duo's launch compared with the preceding week, according to South Korean telecommunications industry sources on Tuesday.
The increase suggests Apple's entry may be drawing fresh attention to foldables rather than simply taking customers away from Samsung. Still, the short-term improvement is not enough to establish a lasting gain in market share.
Samsung has extended enrollment in its New Galaxy AI Subscription Club through Nov. 30 for eligible foldable models and stepped up year-end promotions to sustain demand.
Beyond the foldable rivalry, Apple's earnings call exposed another competitive dynamic that could work in Samsung's favor: an unprecedented surge in memory chip prices.
"What we're seeing with memory pricing right now is unprecedented," Ternus said.
Apple's gross margin stood at 47.9 percent in the September quarter, including a benefit of approximately one percentage point from tariff refunds. The company expects that figure to fall to between 45 and 46 percent in the December quarter, primarily because of rising memory costs, along with some expenses related to its rollout of Siri AI.
"We expect most of that decline to be driven by higher memory costs," Chief Financial Officer Kevan Parekh said.
Ternus warned that the pressure was unlikely to ease soon.
"Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase," he said.
Apple has already raised prices on several products, including Mac and iPad models in June and iPhones in September, partly to offset rising component costs.
"These price increases provided some offset," Ternus said, adding that Apple also benefited from inventories purchased at lower prices and falling costs for certain non-memory components.
But those inventories are dwindling, leaving Apple increasingly exposed to higher prices on new chip purchases.
The memory shortage is affecting supply as well as profitability.
"For the December quarter, we expect constraints on Mac and iPad primarily driven by memory, as demand has been higher than what we expected," Khan said.
Apple said its manufacturing purchase obligations increased by $33 billion between the June and September quarters as it moved to secure supplies. Executives did not disclose how much of the increase involved memory chips or confirm whether Apple had signed new long-term memory supply agreements.
For Samsung, the chip price surge presents a potential earnings windfall for its semiconductor division, even as it raises manufacturing costs for its own smartphones and consumer electronics.
Samsung and fellow Korean memory producer SK hynix are positioned to benefit from tighter supplies and higher prices, although actual gains will depend on product mix, contract terms and customer relationships.
Samsung's vertically integrated business gives it access to in-house memory production and potentially greater supply flexibility than rivals dependent entirely on external suppliers.
That does not necessarily translate into cheaper chips for its smartphone division, however, since internal supply arrangements remain exposed to market pricing and competing demand.
Apple also did not identify the suppliers responsible for its rising memory costs, making it difficult to quantify any direct benefit to Samsung.
The competition is extending into artificial intelligence, where Samsung has made Galaxy AI a central selling point for its premium smartphones.
Ternus highlighted Apple's redesigned Siri AI assistant, which expanded to Korean and several other languages in October.
Apple expects revenue to grow between 7 and 10 percent in the December quarter, potentially making it the company's biggest quarter on record despite mounting component costs.
For Samsung, the implications run both ways.
Apple's resilient iPhone franchise, foldable debut and expanding AI capabilities pose a growing challenge to its premium smartphone business. Yet the same memory shortage squeezing Apple's margins could bolster Samsung's semiconductor earnings.
The question is whether Samsung can turn its unusual position on both sides of the chip supply chain into a lasting competitive advantage without allowing higher component costs to undermine its own smartphone business.
Copyright ⓒ Aju Press All rights reserved.