Apple expects semiconductor shortage to cut Q2 revenue by up to $4 billion

Apple develops new face shield for coronavirus pandemic, ships 1 million weekly.

Apple reported that its revenue expanded by 54 percent year-over-year during the fiscal second quarter recently. That income spike, driven by strong interest in its iPad tablets and Mac computers, pushed its March period sales of almost $90 billion.

However, the corporation estimates that the global semiconductor shortage will cut up to $4 billion off its FQ3 income.

CEO Tim Cook explained its inability to source adequate quantities of “legacy node” components would affect its manufacturing operations. Following his comments, the Silicon Valley Giant’s recently refreshed iPad Pro series began experiencing available issues.

Apple Versus the Chip Crunch

Since late last year, various industries have struggled with insufficient quantities of electronic components.

Multiple leading vehicle manufacturers have temporarily idled their factories due to the supply crunch. AlixPartners, a consulting firm, predicts the bottleneck will cost the auto industry $60.6 billion this year. As the crisis worsened, it affected many sectors, including the home appliance, HVAC, and construction fields.

However, Apple has seemingly avoided the worse of the shortage because of its large and comprehensive supply chain.

Though it no longer discloses how many devices it sells, Counterpoint Research noted it shipped 81.9 million smartphones in Q4 2020. It also recorded a 79 percent spike in iPad purchases and a 70 percent jump in Mac sales last quarter.

But the bottleneck has become so severe that it is affecting the world’s most valuable technology corporation. Apple said that the component shortage would cut between $3 billion to $4 billion off its fiscal third-quarter earnings.

The company did not specify which electronic parts are at the core of its sourcing difficulties. Based on Cook’s comments, its troubles are not related to the self-designed M1 CPUs that power its computing products. The executive’s reference to “legacy nodes” indicates that Apple does have enough PMICs on hand to continue its normal manufacturing operations.

Its supply constraints likely contributed to the staggered release of its recently refreshed iPad Pros. Bloomberg found that all 12.9-inch versions of the tablet have late June/early July delivery estimates, while the other iterations are expected to arrive in May.

What Happens Next

Since insufficient production capacity is the main cause of the global semiconductor shortage, it cannot be resolved anytime soon.

TSMC, the world’s top pure-play foundry, recently stated that its fabs are running at “over 100 percent utilization.” The corporation and its contemporaries are working hard to expand its output, but industry leaders predict the crisis will persist into 2022. That means some of Apple’s newest computing hardware could be hard to find for the foreseeable future.

If that is the case, the bottleneck might affect the launch of the next-generation iPhone.

The semiconductor shortfall has already interfered with Qualcomm’s ability to meet demand for its smartphone chips. Samsung, the fabless manufacturer’s primary foundry service partner, has struggled to fabricate enough mobile components for its clients. Consequently, some handset vendors that utilize its offerings have commented that they will need to reduce their device shipments.

On the other hand, Apple’s strict management of its supply chain has limited its exposure to other massively disruptive events.

The Big Tech firm faced significant part shortages during the early months of the COVID- 19 pandemic but got back on track by the fall. It could execute a similar rebound in the first quarter of 2022. After all, it expects to report double-digit growth in the summer despite losing billions of dollars in sales.


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