The headlines for Apple’s latest quarterly financial performance point to the iPhone producer’s largest quarterly profitability performance in the company’s history.

Reported was a staggering $21.7 billion in profits amid total revenues increasing 36 percent to $81.4 billion. Obviously, such a performance was envious for any company. The fact that this performance came amid the global wide demand and supply shortfall surrounding semiconductor chips and processors is equally impressive. Sales for the company’s iPhone models totaled nearly $40 billion in the quarter.

However, the company cautioned that supply chain constraints would extend to the September quarter possibly slowing hardware sales growth.  CEO Tim Cook indicated a one quarter at a time approach, doing all what the company can do to mitigate supply network challenges.

CFO Luca Maestri indicated that the supply constraints in the Q2 quarter were in essence allocated to the company’s iPad product lineup and was less than $3 billion in revenue impact. That is likely because the consumer electronics icon has a design engineering strategy that leverages similar microprocessors across both iPhone iPad and certain Mac computer models allow supply management teams to allocate supply based on revenue and sales potential. Luca specifically indicated:

We have a phenomenal operations team, and they work very, very closely with our supply partners, and we try to do the best we can given the world-wide situation on a number of components.”

As our readers may be aware from our numerous prior commentaries specifically related to Apple, the company has long practiced a strategy for long-term investments and ongoing design collaboration with deemed strategic suppliers. Several years ago the iPhone maker initiated in-house design for microprocessors and partnered with Taiwan based global semiconductor fab producer TSMC for sophisticated micro-processor needs. The Wall Street Journal reports that Apple represents TSMC’s largest customer accounting for upwards of 25 percent of revenues. Among certain other key suppliers including memory and component supply, Apple has influential revenue influence.

So, while it is prudent and obligatory for Apple to inform investors of revenue and supply network challenges that can impact future performance, Supply Chain Matters would venture an opinion that given the current state of demand and supply imbalance for semiconductor and other key components, do not dismiss Apple’s influence and clout.

Readers may have noticed a more astounding headline from the latest reporting of high-tech companies that have benefit greatly from increased demand pre and post pandemic. That headline was that the combination of Apple, Google Alphabet and Microsoft alone produced more than $50 billion in profits this past quarter. That represents significant monetary resources, some of which can be additionally invested in long-term supplier relationships.

The takeaway is a reminder of the importance of further developing collaborative win-win supplier partnerships for key materials and the upmost importance of supplier risk management practices.

Bob Ferrari


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