Apple Set to Cut iPhone Production Goals Due to Chip Crunch

Apple Set to Cut iPhone Production Goals Due to Chip Crunch

According to a new Bloomberg report, Apple is expected to cut its projected production targets for the iPhone 13 family in 2021 by up to 10 million units. According to “people familiar with the situation,” this is due to long-term chip shortages that are now affecting the company’s most recent flagship smartphone line.

The ongoing Global chip shortage has affected cars to phones and now it has even reached Apple, this time affecting its most precious revenue generator the iPhone.

Apple had originally planned to produce 90 million iPhone 13 family models by the end of the year, but that number will now have to be reduced to around 80 million.

Part of the reason for the lower number is that Broadcom and Texas Instruments (TI) are reportedly unable to deliver enough components on time. Apple purchases display chip components from TI, while Broadcom has been a long-time supplier of wireless components. The main issue with TI is a chip that powers Apple’s OLED display, but other suppliers are also experiencing component shortages.

Apple’s strong purchasing power in the industry has kept it relatively insulated from the ongoing chip shortage in the electronics industry, but that is no longer the case. Demand will continue to outstrip supply throughout next year, and possibly beyond, according to major chipmakers, so this is not a situation that will improve anytime soon.

After Bloomberg reported the news, Apple shares fell as much as 1.6 per cent to $139.27 in late trading. Through Tuesday’s close, the stock had gained 6.6 per cent this year. In after-hours trading, Broadcom and TI both fell.

Apple’s ability to ship new models to customers has already been hampered by the shortages. The iPhone 13 Pro and iPhone 13 Pro Max were released in September, but orders placed on Apple’s website will take about a month to arrive. The new devices are also “currently unavailable” for pickup at a number of the company’s retail locations. Similar delays are being experienced by Apple’s carrier partners.

Current orders are expected to ship in mid-November, so Apple may still be able to deliver the new iPhones in time for the holiday season. The year-end quarter is expected to be Apple’s most profitable yet, with revenue of around $120 billion. That’s an increase of about 7% from a year ago, and more than Apple made in a single year a decade ago.

Earlier the brand struggled with keeping up the demands for its new Apple Watch Series 7 and other products. Broadcom does not have its own manufacturing facilities and instead relies on contract chipmakers such as Taiwan Semiconductor Manufacturing Co.(TSMC) to manufacture its products. Texas Instruments manufactures some chips in-house but also outsources others. Apple is a TSMC customer; in fact, it is the company’s biggest. Apple’s A-series processors are made by the company, but there don’t appear to be any shortages at the moment.

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