Apple is positioning itself aggressively against Android and Windows competitors by launching lower-cost devices while maintaining stable pricing, even as component costs surge across the global electronics industry.

In early March, the company introduced its first budget laptop, the MacBook Neo, priced at US$599. Earlier, it had launched the iPhone 17e at the same starting price, matching its predecessor. The pricing strategy surprised analysts, who had expected higher price points given the sharp rise in memory and storage costs.

The move signals Apple’s intent to turn industry challenges into a competitive advantage, using pricing as a tool to capture market share from rivals struggling with rising input costs.

Despite mounting pressure from increasing prices of memory chips and storage components - key elements in modern devices - Apple has chosen to absorb part of the cost burden. While this may compress profit margins, it is expected to impact competitors more severely, particularly manufacturers in the mid-range segment.

Chinese smartphone brands, including Xiaomi, Oppo and Honor, are likely to face pricing pressure, potentially forcing them to raise prices. This could narrow the gap between their products and Apple’s offerings, giving consumers stronger incentives to switch to the iOS ecosystem.

“Apple is moving into attack mode. They see the memory crisis as an opportunity to gain share,” said Francisco Jeronimo, Vice President at IDC. “All other smartphones in this price range will have to increase prices,” he added, noting that the shift could accelerate migration from Android to iOS, and from Chromebooks or traditional PCs to Mac devices.

To offset thinner margins on entry-level products, Apple may adjust pricing on its premium lineup. Analysts suggest that future high-end models, including the anticipated iPhone 18 series expected later this year, could carry higher price tags, similar to recent increases seen in MacBook Pro and MacBook Air models.

In China, Apple is expected to leverage the iPhone 17e to compete directly with mid-range Android devices. Flexible installment programs, such as 24-month payment plans, could further enhance its appeal in this key market. Japan and the US are also seen as strong growth markets for the device, building on the success of earlier models.

Apple has also doubled the base storage capacity of the iPhone 17e compared to its predecessor, adding value for consumers but further increasing cost pressures.

According to IDC, the global smartphone market is expected to experience its steepest decline on record this year, with shipments projected to fall by 13% due to rising costs and memory shortages. The surge in demand for AI servers, which rely heavily on similar components, has driven up prices for both memory and storage chips.

The impact is expected to be most severe in the low-end Android segment, where profit margins are already thin. PC and Chromebook markets face similar challenges, with shipments forecast to decline by 11%.

Apple executives acknowledge that the company is not immune to these pressures. During its latest earnings call, CEO Tim Cook noted that “memory prices in the market are increasing significantly,” and warned that the financial impact would become more evident in the coming quarters.

Bernstein Research estimates that production costs for the upcoming iPhone 18 Pro Max could rise by as much as 25%, driven by higher expenses for memory, storage and processing components. Even so, analysts believe Apple remains in a strong position to capitalize on the situation.

“Amid an unprecedented memory shortage, Apple has a unique opportunity to take share from lower-end Android manufacturers that cannot secure sufficient supply,” wrote Bernstein analyst Mark Newman in a recent note to clients.

Du Lam