In this Supply Chain Matters news capsule update, we highlight a published report, citing informed sources, and indicating that Apple iPhone demand appears to have slowed.

 

Background

In early October, Supply Chain Matters alerted readers to a report indicating that consumer electronics icon Apple was facing the need to cut its planned 2021 production targets for the newly released iPhone13 because of semiconductor processor and device shortages.

At the time, Bloomberg reported that the Apple iPhone13 production targets could be trimmed by as many as 10 million devices in Q4 because of prolonged semiconductor chip shortages.

The consumer electronics and smartphone provider had initially planned for the output of 90 million units of the new iPhone model. Reportedly, the company was communicating to its supplier network that the previously planned output will likely be reduced. At the time, Bloomberg further reported that wireless chip supplier Broadcom and OLED display chip provider Texas Instruments encountered challenges in being able to deliver needed chip supply.

In early November, we updated readers to a report that Apple had initiated a supply allocation plan regarding ongoing limited supplies of needed semiconductor devices for the iPhone 13. Nikkei Asia, citing multiple informed sources, reported that Apple was internally prioritizing allocation of key processors toward iPhone 13 production output at the expense of Apple iPad and older iPhone models.

Such a component allocation plan was similarly initiated in 2020 to support the initial production volumes for the then Apple iPhone12.

 

Newest Report

Yesterday, citing people familiar with the matter, Bloomberg reported that Apple was informing suppliers that demand levels for the iPhone line-up had weakened “signaling that some consumers have decided against trying to get the device.”

This latest Bloomberg report indicates that Apple’s plan was to make-up this quarter’s 10-million-unit shortfall in 2022, when demand was expected to improve. Reportedly, the company is now informing suppliers that the added 10 million in supply orders will not be supported in added production orders.

This report stresses that Apple is still on track for a record holiday season but cautions: “But it won’t be the blockbuster quarter that Apple- and Wall Street, had originally envisioned.”

According to business broadcasting network CNBC, word of weak demand on top of the known supply chain issues sent shares of Apple down 3 percent in pre-market trading but managed gain back losses at today’s closing.

 

Added Supply Chain Matters Perspectives

Supply Chain Matters readers were likely not taken aback by this ongoing series of Apple developments. If there were any global company that would be able to overcome the ongoing global shortages of semiconductor devices, it would have been Apple.

CEO Tim Cook himself warned investors during the last financial performance that this final quarter would surely be challenging from a supply network perspective and would possibly cost the company upwards of $6 billion in lost revenues.

The Bloomberg report makes additional note that Apple’s key suppliers such as TSMC and Foxconn have also warned of softening smartphone demand in this current quarter.

What is noteworthy is that Apple is coming to grips that overall demand for the company’s most feature loaded, and expensive smartphone is not appearing to be as originally planned. That raises the question of whether the ongoing semiconductor allocation plan taking shortage semiconductor inventory from new iPad and older iPhone models will take an additional financial toll in this holiday quarter. Apple consumers may have already encountered out-of-stock or elongated lead time messages associated with their other products.

The company’s next financial report reflecting on this holiday quarter will indeed bear watching. However, there is no need to fret since Apple will likely garner a whole lot of additional services and content revenue to make up the difference.

Once again, the takeaway is that in 2021, many companies, super big and small, remain impacted by these ongoing global supply chain disruptions.

Welcome to reality.

 

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