As businesses report their financial performance for the first quarter of 2022, Supply Chain Matters continues with highlights of select bellwether firms that can be considered a relatively good indicator of ongoing industry supply chain challenges and how senior executives view the remainder of 2022.

Highlighted in this update are Amazon, Apple and Intel.



Yesterday, Online platform provider Amazon reported its first quarterly loss in over seven years while delivering sober messages related to increased costs associated with online retail.

Further weighting down financial results was Amazon’s ongoing equity stake in Rivian Automotive, which has ongoing supply chain challenges hindering production start-up volume goals.

News of the operating loss caused the company’s shares to decline upwards of 12 percent in this morning’s trading.

While total revenues increased 7 percent in the January-to-March quarter, the provider incurred a $3.8 billion loss compared to a $8.1 billion profit in the year-earlier quarter.

Reporting on the latest Amazon financial performance, The Wall Street Journal cited March data from Mastercard SpendingPulse  indicating that March marked the first month since the pandemic began where E-commerce sales declined, and in-store sales rose.

Among the messages communicated from the latest Amazon financial results were:

Online retail shipping volumes declining 3 percent on a year-over-year basis, noted as the largest drop since 2016. Once more, executives forecasted that the online retailer could incur either another loss of upwards of $1 billion or profit amounting to $3 billion in the current quarter, which is quite a range.

CEO Andy Jassy indicating in a statement: “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges.” He further alluded that Amazon would improve by addressing cost inflation pressures and the online provider’s supply chain.

CFO Brian Olsavsky elaborated that the online retailer incurred $6 billion in incremental costs related to productivity loss, inflation and situations where warehouse capacity exceeded market demand levels. He further declared that the company is no longer constrained by labor and capacity. That statement is being interpreted by some as an indication that the online provider now has an overbuilt logistics network.

From our lens, this is a likely signal that supply chain related cost control take center stage in the coming months.

Bloomberg noted it its reporting that Amazon incurred $112.7 billion in total operating expenses, including $20.3 billion in fulfillment outlays during the March ending quarter.

Last week, the online platform provider announced that it was adding a “fuel and inflation surcharge” to the fees charged to hosted sellers, which takes effect today. The added surcharge is reported to average 5 percent of current fulfillment fees. In a communication to hosted sellers, Amazon stated: “In 2022, we expected a return to normalcy as Covid-19 restrictions around the world eased , but fuel and inflation have presented further challenges.

The company further announced that it will open its Buy with Prime logistics and delivery services to other retailers, similar to FedEx or UPS. This expanded service offering will initially start by invitation to certain Amazon merchants. Amazon Prime members will thus be able to order items on other retailers owned web sites using payment and shipping information from their Amazon account, with fulfillment occurring from the online provider’s customer fulfillment and logistics network. This added service also comes with an added fee for retailers electing to utilize this program.

The online retailer additionally faces added labor cost challenges as workers among additional customer fulfillment warehouse facilities continue efforts to seek to unionize. Recently, the online provider’s higher incidents of worker injuries in 2021 came to light.




Yesterday, consumer electronics icon Apple reported the best quarterly financial performance in the company’s 46-year history. The headline was muted however, by indications of ongoing supply chain disruption for the company’s hardware product focused businesses.

Total quarterly revenue rose 9 percent to $97.3 billion, far exceeding equity analyst expectations. Total profit was reported as just over $25 billion, compared to $23.6 billion in the year earlier quarter.

Reportedly, iPhone sales increased 5 percent to $50.6 billion while sales of the company’s iPad declined 2.1 percent to $7.6 billion. Mac computer sales rose 15 percent to $10.4 billion. Sales of wearable and accessories reportedly rose 12 percent to $8.8 billion but came short of analyst expectations.

Beyond the lucrative financial performance were indications from senior executives that ongoing supply chain constraints are having an impact on the ability to add to unit sales.

CEO Tim Cook indicated to investors: “I want to acknowledge the challenges that we are seeing from supply chain disruptions driven by both Covid and silicon shortages, to the devastation from the war in Ukraine. We are not immune to these challenges.”

Cook further acknowledged that similar to the previous holiday quarter, sales of company’s iPad tablet were hindered by “very significant supply constraints.” Cook did qualify that: “supply constraints were significantly lower than what was experienced in the December quarter.”

Our readers will recall that in the December ending quarter, a limited supply of semiconductor processors caused Apple’s supply chain teams to allocate available supply to the premium iPhone line-up.

Apple CFO Luca Maestri forecasted that supply chain constraints could impact revenue in a range of $4 billion to $8 billion in the current June ending quarter. Maestri further hinted that suspension of product sales across Russia, and muted sales within across mainland China would likely impact current quarter performance.

Regarding the ongoing situation in China, CEO Cook told analysts that almost all of affected contract manufacturing assembly factories have now restarted.  Cook declined to estimate when the semiconductor supply constraints  might end.

As noted in our prior update related to conditions in China, these factories have to operate under local restrictions that require factory workers to not be able to leave the factory campus, and to be subject to frequent testing.



Global semiconductor producer Intel reported an overall decline in first quarter sales.

March ending quarterly revenues fell upwards of 7 percent to $18.3 billion and missed analyst expectations. Net income was reported as $8.1 billion.

Intel CFO David Zinsner indicated to analysts that semiconductor chips to support personal computer sales had declined 13 percent in the quarter to a value of $9.3 billion. He further provided a muted outlook for the current second quarter, indicating that continued slower PC sales and uncertainty related to ongoing lockdowns in China, along with the effects of the Russia-Ukraine conflict could provide more material impacts to chip sales.

Intel CEO Pat Gelsinger indicated that the semiconductor chip shortage will last longer than expected, likely into 2024. “In part, that’s a supply statement because we have seen that equipment shortages are really impinging the ability of the industry overall to ramp supply at the pace we earlier thought.”

The above statement does contrast with that provided recently by executives at Samsung Electronics that indicated that chip demand could continue to exceed supply for the remainder of 2022, but new factory capacity could alleviate supply shortfalls in the 2023 period.


Added Supply Chain Matters Insights

As bellwether companies continue to report Q1 financial performance, some consistent themes are evident.

The ongoing lockdowns across China’s major manufacturing regions, the country’s disrupted logistics and hampered transportation capabilities will have a significant impact in 2022 if conditions do not improve over the next few weeks.

Inbound cost inflation manifested by higher supply, logistics and transportation costs now seem to be translating to across-the-board price increases for end products. This is not a healthy trend from an economic policy perspective and could lead to more discernable signs of a recessionary economic downturn fueled by higher and unsustainable prices in the economy.

Executive comments reinforce added supply chain related concerns, and especially that the global-wide semiconductor device shortages are not likely to improve this year.

For the global-wide transportation and logistics industry, we sense that higher rates and added surcharges related to energy or congestion will indeed have a more lasting effect on businesses and causing meaningful shifts in materials sourcing strategies in the coming months. The fact that Apple is now having to communicate upwards of an $8 billion potential impact to product sales because of Covid impacts across China may well be disclosed by a number of other companies. The need for supply network resiliency and added agility is becoming far more persuasive.

Bob Ferrari


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