Chip shortage already hits Apple; It will be worse at Christmas, warns Tim Cook

Reuters.- Supply chain problems cost Apple $ 6 billion in sales during the company’s fiscal fourth quarter, which fell short of Wall Street expectations, and CEO Tim Cook said the impact will be even worse in the Christmas quarter.

Cook told Reuters on Thursday that the quarter ended Sept. 25 had “greater-than-expected supply constraints,” as well as pandemic-related manufacturing disruptions in Southeast Asia.

Although Apple had seen a “significant improvement” at the end of October in the Southeast Asian facilities, the chip shortage has persisted and is now affecting “most of our products,” Cook said.

“We’re doing everything we can do to get more (chips) and also everything we can do operationally to make sure we move as quickly as possible,” Cook said.

Shares of the company, which had risen about 15% this year, are down 5% to $ 146.5 in after-hours trading.

Also read: Apple will sell fewer iPhones due to the chip crisis: JP Morgan

The executive said the company expects year-on-year growth for the quarter ending in December. Analysts expect a sales expansion of 7.4% to $ 119.7 billion.

“We are projecting very strong demand growth year-over-year, but we also anticipate that we will be below demand by more than $ 6 billion,” Cook said.

Results for Apple, which is based in Cupertino, California, were mixed in a fiscal fourth quarter seen as a pause before big year-end sales.

Apple said fiscal fourth-quarter revenue and earnings were $ 83.4 billion and $ 1.24 per share, compared with analyst estimates of $ 84.8 billion and $ 1.24 per share, according to IBES data from Refinitiv.

The results marked a fiscal year end with sales above expectations, led by the iPhone 12 and strong demand for Mac computers and iPads to work and learn from home during the Covid-19 pandemic.

Apple had told investors in July that chip limitations would begin to affect its iPhone and iPad lines for the first time in the fourth quarter.

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Two disappointments from Apple

Apple fell short of expectations in two key categories. The firm said iPhone sales in the fourth quarter were $ 38.9 billion, down from estimates of $ 41.5 billion, according to Refinitiv data.

Cook said chips made with old technology remain the main supply constraint. Apple remains unsure if the shortage will ease after the holiday shopping season.

“Most of what we design are state-of-the-art (chipmaking) nodes, but all the products also have some components from older nodes. So the shortage will continue into the first (fiscal) quarter and we’ll see what happens next. It’s very difficult to predict, ”Cook told Reuters.

The company’s accessories business, which contains fast-growing categories like its AirPods wireless earbuds, stood at $ 8.8 billion, 500 million below analyst expectations, according to Refinitiv data.

The company’s services area – which contains its App Store business – had sales of $ 18.3 billion in revenue, up 26%, compared to analysts’ expectations of $ 17.6 billion.

Cook told Reuters that Apple now has 745 million paying subscribers to its platform, up from the 700 million it disclosed a quarter ago.

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Chip shortage already hits Apple; It will be worse at Christmas, warns Tim Cook

The Inside News Hyderabad