On this Friday of a rather tension filled week here in the United States, Supply Chain Matters wanted to briefly revisit some of other prior blogs because of noteworthy new developments.

In mid-October we highlighted for readers the long-anticipated product launch of the new lineup of Apple’s iPhone product family to include the 5G technology enabled iPhone 12 models.

With the unveiling of four new iPhone 12 models with starting price points ranging from $699 to up to $1099, Apple’s goal to convince existing iPhone customers that these are the models with the most compelling new technology, and the time to upgrade. Investors further had high expectations related to revenue and unit sales volumes for this holiday fulfillment quarter.

Apple iPhone 12 supply chain challenges

We observed that planning and managing iPhone product demand actually involves five different models when considering the refresh design of the lower cost, 4.7-inch model iPhone SE that was announced in the direct shadows of the pandemic’s effect back in March. With four new iPhone 12 models, at separate price points, and in four different color choices, Apple’s sales and operations as well as supply network planning teams have to execute a synchronized supply network and product demand fulfillment response. The reality that the COVID-19 had delayed the formal product launch for several months was an added challenge along with delivery availability of two specific models, iPhone 12 mini and the premium priced iPhone 12 Pro had to delayed until next week to build up the production and inventory pipeline.

Compounding this year’s iPhone product release refresh are the ongoing extraordinary challenges occurring among global logistics and transportation providers, especially the airlift segment.

 

Reports of Component Shortages

This week, reporting by Nikkei Asia, Business Insider, Bloomberg and other Apple focused media outlets now indicate that Apple is dealing with select component shortages.

Bloomberg, citing people with knowledge,  reported that the company is grappling with a shortage of power consumption control chips in iPhones and other devices. The report noted that power consumption components are especially important in the new Apple 5G models which have to utilize more power. While it was unclear to what extent the shortage would limit model availability, the report indicated that chip suppliers were likely to prioritize Apple’s supply needs, likely at the expense of other smartphone manufacturers.

Nikkei Asia reported this week (Paid subscription or metered view) that that Apple has been hit by supply constraints not only in power consumption chips but also lidar components used for depth-sensing imaging functions. Noted was that Apple was reallocating some components intended for iPad model production to the iPhone 12 Pro in light of the fact that sales of this model have been much stronger than previously anticipated. Reportedly, an informed source indicated to Nikkei that the allocation shift has affected an overall 2 million units of iPad of previously planned production.

Many publications have indicated that online orders for the iPhone 12 Pro 128 GB model were being quoted as 20 days for U.S. market delivery on Apple’s web site, while availability in China have been quoted as 2 to 3 weeks.

Bloomberg had noted that Apple CEO Tim Cook recently acknowledged in a conference call with analysts that supply constraints related to the iPhone 12 and the iPad but did not go into specifics.

Even more interesting in this week’s Nikkei report are indications that the company has placed robust orders for older iPhone models to try to make-up for shortages in the new 5G lineup. That reportedly includes supplemental orders for more than 20 million of iPhone 11, iPhone SE and iPhone XR smartphones to be available from October thru the end of this year’s holiday buying period. An executive level source indicated to Nikkei that sales momentum for the iPhone 11 remains exceptionally strong.

A further backdrop to these developments has been Apple’s recent report of fiscal fourth quarter financial performance at the end of October indicating that iPhone sales were down more than 20 percent year-over-year. Of particular concern was that China focused iPhone sales declined 28 percent year-over-year. Apple further declined to provide guidance for the current holiday quarter. In its reporting, Nikkei indicated the ongoing U.S. and China tech war and the U.S. crackdown on rival smartphone and telecommunications provider Huawei Technologies might be a factor for Apple’s 5G sales in China.

 

Added Note

Our previous takeaway for readers was that  Apple’s product and supply chain management aggressiveness culture seems alive and well, willing to test what others may be reluctant to do. That also includes pivoting to the realities of a pandemic induced delayed product launch.

With these added revelations, Apple’s sales and operations teams are indeed active and pulling out all of the available options to insure that expected business outcomes are delivered for this year’s holiday quarter.

Then again, this has always been the drama and the playbook for Apple.

 

Bob Ferrari

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