Apple's iPhone hot streak will run into global chip shortage

Apple reported a blowout quarter on Tuesday, pushed by gross sales of iPhones, which have been up 50% yearly to $39.57 billion in gross sales.

That adopted the March quarter, the place iPhone gross sales have been up 65.5% yearly, and Apple’s vacation quarter, the place gross sales have been up 17% to $65.60 billion.

The iPhone is on a hot streak pushed by final yr’s launch of the iPhone 12, which is the primary important iPhone redesign since 2017. Current iPhone customers are upgrading to the primary iPhone with 5G, and many individuals are switching from an Android cellphone, Apple CEO Tim Cook mentioned on Tuesday.

But Apple now faces a problem that has ensnared everybody from recreation console makers to automotive corporations to Microsoft‘s PC enterprise: An industry-wide shortage of chips and different elements.

Apple CEO Tim Cook attends the opening of the brand new Apple Tower Theater retail retailer at Apple Tower Theatre on June 24, 2021 in Los Angeles, California.

JC Olivera | Getty Images

On Tuesday, Apple CEO Tim Cook warned silicon “supply constraints” will have an effect on gross sales the iPhone in addition to the iPad.

Cook mentioned that the shortages aren’t within the high-powered processors that Apple has manufactured for its units, however in what’s known as “legacy nodes,” or chips that do on a regular basis capabilities like driving shows or decoding audio, and might be manufactured utilizing older tools.

“The majority of constraints we’re seeing are of the variety that I think others are seeing, that I would classify as industry shortage,” Apple CEO Tim Cook mentioned on a name with analysts.

In the case of different element shortages, he attributed it to demand outstripping Apple’s personal forecasts.

“We do have some shortages in addition to that, that are 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.”

Apple had already warned that offer shortages would have an effect on the corporate within the quarter ending in June, however these shortages affected iPad and Mac, not Apple’s most necessary product. Apple had mentioned in April that the availability constraints may very well be a $3 to $4 billion drag on gross sales, however Cook mentioned in an interview on Tuesday that Apple was capable of navigate and scale back the affect to decrease than it anticipated.

“We were actually able to mitigate some of that, and we came in at the lower than the low end part of that range,” Cook instructed CNBC’s Josh Lipton.

On Tuesday, Apple did not give an actual vary for a way element shortages would have an effect on its September quarter, however CFO Luca Maestri mentioned the corporate expects them “to be greater than what we experienced during the June quarter.”

iPhone shortages will not doom Apple — it nonetheless expects slowing, “double-digit” progress over the $64.7 billion it reported in final yr’s September quarter. But the admission reveals that even Apple — with its prodigious provide chain, operations-expert CEO, and buying energy with suppliers, could have hassle getting components it wants to fulfill demand amid a global shortage.

Apple’s shares sank about 2% after hours following the earnings launch, regardless of the blowout quarter.