Apple warning to suppliers that demand is lower than expected for new iPhones has rattled its shares, down 3% in premarket trading Thursday morning. However, the broader market was up with the Dow rising 600 points.
Apple, as per a Bloomberg report, was aiming to make up for the shortfall in 2022 when supplies improve, but the company has now informed vendors that it may not end up getting the necessary orders from customers. It said Apple had already brought down the orders for the year to 80 million from the earlier target of 90 million as it has been grappling with the semiconductor shortage issues, like most other technology companies. The global semiconductor shortage and the Covid-19 situation has made it difficult for mobile phones companies like Apple to get all its raw materials in time and in enough quantity.
Apple CEO Tim Cook, during the company’s fourth quarter earnings call in October, said the supply constraints on iPhones, iPads and Macs had already cost Apple about $6 billion. He had said supply issues would continue into December. Cook had said Apple was working feverishly to boost iPhone 13 supplies.
But analysts expect Apple to report growing revenues for the quarter after it booked more than $100 billion in revenue for the first time in the holiday 2020 quarter. Wedbush analysts Daniel Ives and John Katsingris forecast a strong holiday sales period for iPhones boosting their Apple AAPL, -0.61% price target to $200 from $185 on growing confidence of the iPhone 13 cycle into 2022. “Checks on iPhone 13 sales continue to be much stronger than expected with our belief Apple is now on pace to sell north of 40 million iPhones during the holiday season despite the chip shortage headwinds,” they said.
Ahead of the holiday season, Apple had introduced new products including a new version of AirPods and a redesigned MacBook Pro. It should be noted that the iPhone remains Apple’s most profitable product.