Apple is likely to cut back on the production of its much awaited iPhone 13 because of the ongoing global chip shortage. It had originally planned to produce 90 million iPhones in the last quarter of 2021, but has cut the number by 10 million (about 11%) due to chip issues.
As such, shares in Apple fell 1.2% in after-hours trading – reflecting broader falls in the US stock market and in Asia, especially because of fears that ongoing supply chain problems will set off a rampant inflation and hit growth. The company had forecasted slowing revenue growth in July as chip shortage had started to hit its ability to sell Mac and iPads.
Tim Cook, Apple CEO, had warned on the company’s Q3 earnings call that it might see chip supply issues, noting that “we’ll do everything we can to mitigate whatever set of circumstances we’re dealt with.” Industry experts believe Apple will eventually manage to get production up, but the slashed manufacturing estimate means there are difficult times ahead. The Guardian said it is the latest sign of the serious bottlenecks affecting the flow of global trade as the chaotic economic recovery from the depths of the COVID-19 pandemic causes a shortage of energy, components, finished goods, labor and transportation.
A Bloomberg report highlighted that with its massive purchasing power and long-term supply agreements with chip vendors, Apple has weathered the supply crunch better than many other companies, leading some analysts to forecast that iPhone 13 models released in September would have a strong sales year as consumers looked to upgrade devices for 5G networks.
Apple gets display parts from Texas Instruments, and Broadcom is its longtime supplier of wireless components. One Texas Instruments chip in short supply for the latest iPhones is related to powering the OLED display. Apple is also facing component shortages from other suppliers.