Apple warned on Thursday that it continues to struggle with supply chain disruptions as it ramps up for an expected holiday shopping crunch following the release of its iPhone 13, new iPads, Apple Watches and Mac computers.
Apple said that iPhone sales jumped nearly 47% in the three months ended Sept. 25, as consumers snatched up the new iPhone 13. But Apple said its sales could have even been higher if not for the continued spread of the coronavirus pandemic, which has disrupted businesses across the globe. For Apple that led to a more limited number of products it could make and ship to customers.
Apple CEO Tim Cook said the company missed out on as much as $6 billion in revenue as a result of constrained supplies, primarily driven by silicon chip shortages and manufacturing disruptions. “We are optimistic about the future, especially as we see strong demand for new products,” he told analysts on a conference call.
Still, even though the company expects supply constraints to continue through the holidays, CFO Luca Maestri said he expects Apple to set new sales records during the holiday shopping season.
Apple’s financial disclosures add to a growing tapestry of information about the world economy amid the pandemic. The pandemic upended what turned out to be fragile supply chains around the globe when it ripped through manufacturing and shipping hubs at the beginning of last year. Now, as the holiday shopping season begins, questions remain about potential supply shortages.
In response, large retailers such as Target, Best Buy, Amazon and even Macy’s have begun rolling out early Black Friday deals before Halloween in an effort to draw people to shop now.
As for Apple, many of its newly launched products are already on back order, with the company quoting shipping times for new iPhones into November and new Macs into December. That all speaks to how much Apple’s struggled to keep up with demand.
It also likely helps that Apple’s fiscal fourth quarter included launches for highly anticipated products, including a more rugged $399 Apple Watch Series 7, updated $329 entry-level iPad, and redesigned $499 iPad Mini. The biggest release though was the series of iPhone 13 models, starting at $699.
The company said it tallied $38.8 billion in iPhone sales, up from $26.4 billion the same time a year earlier. Some of that can be attributed to quirks of the calendar. Apple released its iPhone 12 last year a few weeks later than usual, and as a result, its iPhone sales took a hit. This year, Apple stuck to its typical schedule of releasing new iPhones in September.
All told, Apple said it notched profits of $20.5 billion, up 62% from the same last year. That translates to $1.24 per share in profit, off $83.36 billion in overall revenue, which itself was up more than 28% from the $64.7 billion reported last year. But it was below analysts’ average estimates, which were $1.24 per share in profits on nearly $84.9 billion in revenue, according to surveys published by Yahoo Finance.
“It’s difficult to predict COVID,” Cook said. He added that he believes Apple’s still in a “materially better” position than it was earlier this year.
Apple’s stock closed regular trading up 2.5% to $152.57 per share. The stock’s risen nearly 18% so far this year, valuing the company at more than $2.5 trillion.
The tech industry’s supply issues stretch back more than a year. Initially, industry executives said, many companies lowered orders for products out of fear for decreased demand when the pandemic was just starting last year. That, mixed with waves of illness and manufacturing shutdowns, led to supply shortages as people ramped up online shopping.
Chip shortages have extended well past the tech industry too. It’s kept Sony from being able to produce enough of its PlayStation 5 consoles to meet demand. But it’s also kept Ford from being able to make its F-150 trucks.
Read more: Why your iPhone may never be “Made in America”
Apple’s Cook said that most of the supply shortages it’s facing are among older chips, though the company didn’t say which products or chips in particular it’s referring to. But he did say that getting enough newer chips isn’t as much of an issue.
“What we’re doing is working with our partners, and making sure that they have supply,” he said. Apple’s reworked some of its manufacturing, he added, to have as many products ready for chips as possible. That way, a chip can roll off the manufacturing line, into a product and shipping “as fast as possible.”
By the numbers
Apple said it set a record for Mac sales at nearly $9.2 billion, up slightly from the $9 billion a year earlier, despite the struggles it’s faced to get products to customers.
Apple said its success is primarily driven by the company’s new M1 chips, microprocessing brains designed by the teams that work on the iPhone. These chips, which were first released last year, have been well received by reviewers, who say they’re able to perform well when compared to previous Mac computers. Apple had relied on Intel chips to power its computers for about 15 years.
“After nearly a year, I can say the Intel-to-M1 transition has been relatively smooth,” CNET reviewer Dan Ackerman wrote of the new Mac computers. “The best thing I can say about the M1 chip is that it’s largely transparent to the everyday MacBook Air user, which is exactly what you want from a big under-the-hood change like this.”
Apple’s iPad sales jumped 21% to $8.2 billion. Its segment called “wearables, home and accessories,” which includes the HomePod Mini and Apple Watch, jumped more than 11% to nearly $8.8 billion. Services revenue, including from the company’s $5-a-month Apple TV Plus service, rose 26% to nearly $18.3 billion.
Apple said nearly a third of its revenue now comes from developing countries. Sales in Greater China nearly doubled to $14.5 billion from the year earlier, while sales in the Americas jumped 20% to $36.8 billion, Europe rose 23% to $20.8 billion, and Japan ticked up 19%. Revenue from the rest of Asia Pacific rose 25% to $5.2 billion.