Home Business Apple braces for bleak holiday after chip crunch hits supplies

Apple braces for bleak holiday after chip crunch hits supplies

APPLE UNVEILS THE $1K iPHONE X

Apple braces for bleak holiday after chip crunch hits supplies

Apple is bracing for even bigger supply-chain problems during the holidays than it suffered last quarter, when product constraints cut sales by about US$6 billion.

After reporting disappointing fourth-quarter results that sent Apple shares tumbling, chief executive officer Tim Cook said that shortages in the current period will eclipse US$6 billion. Consumer demand has been strong, he said, and supplies haven’t kept pace. He attributed the crunch to the chip shortage and Covid-19’s impact — though the pandemic challenges have now mostly been resolved.

A lack of semiconductors is affecting “pretty much most of our products currently,” he said on a conference call last Thursday. “Demand is very robust.”

Fiscal fourth-quarter revenue amounted to US$83.4 billion, the tech giant said, missing estimates of US$84.7 billion. That represents growth of 29 percent from the year-earlier period, but that quarter didn’t include a new iPhone. Apple released the iPhone 13 in the last few weeks of the latest quarter, helping bolster sales.

The results spark fresh concerns about Apple’s ability to navigate the global supply crunch, which has wreaked havoc on the auto, tech and consumer-product industries. The company has a slew of new products that it needs to get into consumers’ hands before the holidays, a period that’s expected to set sales records. In addition to the iPhone upgrade, Apple has rolled out new watches, iPads, Mac computers and other items.

The shares tumbled as much as 5.3 percent to US$144.42 in late trading after the results were released. They had been up 15 percent this year through Thursday’s close.

Last quarter, Apple generated US$38.9 billion in sales from the iPhone — its flagship product — including purchases of the new and old models. That missed Wall Street expectations of US$41.6 billion.

Supply shortages hit the new models immediately after launch and persisted over the following weeks. Customers seeking to buy new iPhones, iPads, Apple Watches and Mac models have found that the products won’t be delivered until late November or even December.

The Cupertino, California-based company didn’t provide formal guidance for the current quarter, but analyst estimates compiled by Bloomberg are calling for revenue of about US$120 billion. Apple did say that all of its devices, except the iPad, would see year-over-year revenue growth in the quarter. Supply challenges will be too much for the iPad to achieve growth, Cook said.

Apple generated US$9.2 billion in Mac revenue last quarter, up 1.6 percent year over year, which was also below estimates. Apple released new MacBook Pros earlier this week, too late to be counted in the fourth-quarter results. Instead, the company relied on sales of last year’s MacBook Air and MacBook Pro models in addition to iMacs that were announced in April.

The iPad, meanwhile, did better than expected. It generated US$8,25 billion in the quarter, up 21 percent from last year. Wall Street had called for US$7.2 billion. Apple launched new versions of the iPad mini and entry-level iPad during the quarter. It also announced new iPad Pros models in April.

The wearables, home and accessories division — a unit that includes the Apple Watch, Apple TV, AirPods, Beats headphones, the HomePod and other items — produced US$8.79 billion during the quarter. That was up 12 percent from a year earlier but below the average estimate of US$9.28 billion.

The business had a difficult comparison with last year’s numbers. In September 2020, the company released the Apple Watch Series 6, but this year’s Series 7 didn’t go on sale until the current quarter.

Services revenue climbed 26 percent to US$18.3 billion, despite global economic reopenings that jeopardized growth. With people going back to work and school in-person, there were concerns that they’d have less time to consume entertainment services. Analysts had projected US$17.6 billion. – Bloomberg

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