“Three months ago, Apple CEO Tim Cook blamed”supply restrictions”And a crisis in the acquisition of high-end chips to build devices for a revenue of $ 6 billion.
And yet, the iPhone maker’s rapid growth has continued unabated. Earlier this month, it became the first company to achieve a market capitalization of $ 3 tons – a landmark moment, even though Apple’s shares have fallen since then.
As the Silicon Valley giant prepares to report its latest earnings statement on Thursday, Apple is again expected to deliver its biggest quarterly revenue and profit.
But while the coronavirus pandemic has increased demand for devices like Macs and iPads, it has also helped cause a global supply chain crisis that is holding back even greater financial growth at the world’s largest listed company.
During its last earnings call in October, Cook said “the impact of supply constraints will be greater during the December quarter” – a line interpreted to mean more than $ 10 billion.
Apple is struggling with the same issue that shaken global industries from petrochemical suppliers to consumer brands. Travel restrictions and shipping bottlenecks disrupted “just in time”Supply chains designed to keep company inventory to a minimum, while using short-term, flexible contracts that can be quickly adjusted to changes in demand.
Still, consensus estimates among analysts suggest that Apple’s revenue will rise by 6.5 percent to $ 119 billion in the last three months of 2021, a typical buffer period covering the holiday season, with iPhone sales expected to reach $ 67.4 billion. make out. Net profit is expected to rise by 8 percent to $ 31.1 billion, which will be a record quarter for any company.
Pervinder Johar, CEO of Blume Global, a platform for end-to-end supply chain visibility, said companies like Apple face two key problems: logistical delays that have not improved in recent months, and a semiconductor shortage that will take months, if not years, to resolve.
The U.S. Department of Commerce this week urged Congress to consider federal aid to chipmakers. It found that demand for chips increased by 17 percent in 2021 compared to two years earlier. However, supply did not keep pace with this growing demand.
Johar said the perception that Apple is prioritized by top-tier vendors, such as Taiwan’s TSMC, does not take into account the fierce competition for components such as Dell and HP, as well as the cloud computing giants Microsoft, Amazon and Alphabet that drive big data. centers.
“These are all trillion dollar companies competing for supply,” says Johar, who previously managed global supply chain systems at HP.
“So Apple may be a $ 3 billion customer, but the components that go into servers are higher quality and more expensive than the things that go into consumer devices.”
The Trade Secret Newsletter is the FT’s must-read email on the changing face of international trade and globalization. Written by FT trading specialist Alan Beattie, it’s delivered to your inbox every Monday. Sign in here
Electric carmaker Tesla, whose own navigation of the chip shortage has been praised in recent months, warned on Wednesday that its factories are likely to run below capacity “through 2022” due to supply constraints.
Alan Day, founder of State of Flux, a London-based sourcing consultant, added that as a well-known brand, Apple has only “limited merit” when it comes to securing the components it needs.
“The Apple brand definitely makes people dance,” he said, but manufacturers some levels in the supply chain will not know they are feeding Apple.
“The biggest things they can hit and where they may have little control over are on their suppliers’ suppliers,” he said, referring to unpredictable issues such as the “availability of labor as people decline with Covid.”
Since Cook made his projection that supply chain issues will create a barrier to revenue, the situation has not improved, says Bindiya Vakil, CEO of Resilinc, a California-based group that tracks more than 3 million components to provide supply chain card services.
Vakil added the Omicron coronavirus variant merely contributed to new risks along with Russia-Ukraine tensions, port delays, the upcoming Chinese New Year and the Beijing Winter Olympics. “The only thing that is a relief is that the holiday season is over,” she said.
Over the past quarter, Resilinc has highlighted 1,915 supply chain issues for its customers in the high-tech industry, ranging from mine closures, legal action and factory fires. Such issues increased by 53 percent compared to the same period a year earlier and are well above a five-year average of 397 incidents.
Analysts at Raymond James said the supply chain restrictions for Apple include camera modules and power components made by Texas Instruments. They also note that iPad offerings are “deliberately limited. . . to store components for iPhone ”.
Yet Apple’s hardware shortage problems are being offset by its fast-growing service business.
The unit, with gross margins above 70 percent, has more than 745 million customers for games, media, iCloud storage and warranty support. In the fiscal year ending in September, the services unit discussed $ 68.4 billion in revenue, with analysts forecasting 19 percent growth in the quarter ended December.
Wedbush, an investment bank that is positive about Apple, believes the services unit could be valued at $ 1.5 billion – half its peak valuation earlier this month, before the share fell by 12 percent.
“Apple will most likely still report a sample quarter, which is beyond its previous quarterly revenue record. [last year], ”Says Neil Cybart, an independent analyst at Above Avalon who predicts revenue of $ 127 billion. “However, reported results could have been even stronger.”
#techFT brings you news, commentary and analysis on the major companies, technologies and issues that shape this fastest moving sector of specialists based around the world. click here to get #techFT in your inbox.