After a surprisingly strong quarter in which Apple’s revenue increased by 54% to nearly $90 billion, with double-digit increases in every product segment, Wall Street is still wondering whether the company will maintain its momentum for the rest of the year. Despite the fact that Apple hasn’t given official potential guidance since the outbreak began, CFO Luca Maestri stated that the company will expand in the quarter ending this June.
There were a few exceptions, however. Despite its legendary operations department, founded by CEO Tim Cook, which locks in essential components for years at affordable prices, it turns out Apple is struggling with the same microchip shortage, that has snarled businesses and industries around the world. Apple said on Wednesday that it expects third-quarter revenues to be $3 billion to $4 billion lower than they might be, if it weren’t for supply problems, primarily with its iPad tablets and Mac laptops and desktops. (Analysts polled ahead of Wednesday’s results expected Apple to record revenue of about $70 billion next quarter.)
Apple’s issue, according to Cook, is with “legacy node” chips, which use older manufacturing methods than the cutting-edge high-performance chips, that power Apple’s devices. Apple buys a lot of legacy node chips for functions such as transmitting data to screens, supplying power to cameras, decoding audio, and handling batteries, but Cook didn’t specify which parts were in short supply. “The majority of our problem is licencing those legacy nodes,” Cook said, adding that he didn’t know how much demand for production capacity there would be from rivals and other industries.
Finally, Apple sounded upbeat, particularly as compared to other industries, such as cars, which have been warning about chip shortages for months. Due to the microchip shortage, Ford, for example, announced on Wednesday that half of its second-quarter production would be lost. Apple stressed that demand is a factor in the current quarter’s supply shortages. In the most recent quarter, iPad sales increased by 79%, while Mac sales increased by 70%, indicating that there are many people interested in purchasing them. “If you look at Mac, for example, the last three quarters have been the best three quarters in the product’s history, right?”, said Maestri.
Apple, which buys large quantities of components each year and is a significant enough customer to remain a priority for chip manufacturers and designers, is one organisation that is designed to weather supply chain problems related to chips. Indeed, one of the reasons for Apple’s record-breaking second quarter is that the company experienced no supply shortages, according to Cook, who credits the company’s supply chain expertise. “How are we going to be able to do that? Many of your buffers and offsets end up being collapsed. This occurs in the supply chain. As a result, you’ll be able to sell a little more than we expected to sell at the start of the quarter”, added Cook.
