Chip Shortage Will Affect iPhone Production, Says Apple, Forecasts Slow Growth

Production of iPhones is likely to be affected by the global chip shortage, said Apple Inc on Thursday, while saying that sale of its Macs and iPads have been hit by the shortage.

The company also forecast slower revenue growth which sent its shares down.

There will be double digit growth in revenue for the current fiscal fourth quarter but will be lower than the 36.4% growth rate that the company reported for its just-ended third quarter, said executives of the company. In the closely watched services business of Apple is also expected to see slow growth, the executives said.  

The global chip shortage will be a problem for the company’s fiscal fourth quarter and hit its production even though the impact of the shortage was not as severe as the company had anticipated for the fiscal third quarter, said Apple executives in a conference call with investors.

For the third quarter however, Apple’s sale revenues and profits easily beast market estimates with consumers purchasing the premium versions of its 5G iPhones as well as signing up for its subscription services, the company said earlier in the day. For the third quarter which ended June 26, the company reported a 58 per cent growth in sales in China at $14.76 billion.

The company reported total revenue at $81.43 billion, primarily driven by the better-than-expected sale of its iPhone, which easily analyst expectations of $73.30 billion, according to IBES data from Refinitiv.

Profits of $21.74 billion or $1.30 per share as reported by Apple for the quarter also beat analysts’ estimates of $1.01 per share, according to Refinitiv.

The type of chips that are impacted by the shortage are those that are made with older technology butt are still important as supporting parts for the iPhone, said  Chief Executive Tim Cook during the investor call.

“We do have some shortages,” Cook said, “where the demand has been so great and so beyond our own expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those.”

Cook however did not comment on the question of whether the chip shortage could be extended into the first quarter for its next fiscal year – a time when the company typically experiences the biggest sale of iPhoines.

It is a possibility that chips are being stockpiled by Apple for its next generation of phones which does not augur well for its next generation of phones, said Angelo Zino, an analyst with research firm CFRA.

“Apple will want as many chips as it can get its hands on,” Zino said. “But when you couple that with the existing supply constraints, Apple is likely going to have a more difficult time meeting demand this year.”

Apple had told investors last quarter that the chip shortage could hold back sales by $3 billion to $4 billion.

“It wasn’t just iPhone. We set a new quarterly record for Mac, for wearables, home and accessories, and for services” in China, Cook said. “It was our strongest geography.”

(Adapted from MoneyControl.com)



Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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