At the Q2 2021 earnings call, Apple confirmed the likely impact of the prevailing global chip shortage on iPad and Mac production in the next quarter. Discussing global supply constraints, Apple CEO, Tim Cook, and Chief Financial Officer, Luca Maestri said that the company is likely to see a revenue decline from March quarter to June quarter will be “greater than in prior years” and the silicon shortage will affect iPad and Mac, primarily.
The company expects that the “supply constraints will have a revenue impact of $3 to $4 billion in the June quarter. We expect the gross margin to be between 41.5 and 42.5%. We expect opex to be between 11.1 and $11.3 billion.”
When the electronics industry faced a computer chip shortage in 2020, it was reported that Apple will not be affected by it because the company orders its components in advance. However, as the shortage persists, the situation for the Cupertino tech giant has changed. Several industries are impacted by silicon shortage which is due to several factors like COVID-19 global coronavirus, sanctions against Chinese technology giants, trade wars, poor anticipation of demand, and climatic changes. Taiwan is facing an acute water shortage and a harsh winter storm in Texas, U.S.
Global chip shortage will impact Apple’s iPad and Mac production in Q3 2021
In the Q&A session of the earnings call, Apple CEO, Tim Cook explained how the company has been able to safeguard it self from the current global chip crisis.
You just beat by a substantial margin on the top line in the March quarter. I’m curious what went in your favor to be able to secure that kind of supply that you were able to beat by, I think it was $11 million or so? And then I had a follow-up.
We did not have a material supply shortage in Q2. And so, how were we able to do that? You wind up collapsing all of your buffers and offsets. And that happens all the way through the supply chain. And so, that enables you to go a bit higher than what we were expecting to sell when we went into the quarter 90 days ago. Tim Cook
Cook also clarified that the supply constraints and the current health crisis will impact the supply and not the demand of iPad and Mac.
I know there’s a lot of moving parts, Tim, but with the economy sort of reopening here in the US, and you mentioned about supply constraints possibly on the Mac and the iPad. I was curious if I can get your thoughts, maybe just color-wise, on what you would expect for those two categories, Macs and the iPads in the second half of this year.
Well, we don’t predict or rev guide to product-level detail. We’re not even guiding to the top level at this point because of COVID. And so, I’ll sidestep that question. But I would point to Luca’s point earlier about the shortages and those shortages primarily affect iPad and Mac. So we expect to be supply gated, not demand-gated. – Tim Cook
Furthermore, when asked his prediction on when the current supply chain would end and how the industry would overcome this crisis, Cook said that his issue is on legacy nodes that are across other industries. So, he would have to “know the true demand from each of these players and how that’s going to change over the next few months.” He added that they have a good hold of demand and will do their best to overcome the production hurdles.
In addition, Apple Chief Financial Officer Luca Maestri explained the reasons for the estimated $3 to $4 billion revenue decline in Q3, 2021. But at the same time, he too was optimistic that the supply constraints will not impact iPad and Mac demand.
Yeah. So when you look at our normal seasonality, and you’ve mentioned a percentage there that is really an average of several years, what we’re saying is that we believe that the sequential decline this year is going to be higher than that. And it’s a combination of the two factors, right? One is the timing of the launch and then the very high demand for iPhone during the March quarter. And the 3 to 4 billion supply constraints that we mentioned.
Yes, and the constraints come from the semiconductor shortages that are affecting many, many industries, and it’s a combination of the shortages, as well as the very, very high level of demand that we are seeing for both iPad and Mac. For Mac, for example, if you just — just to keep it into context, the last three quarters of Mac have been the best three quarters ever in the history of the product, right? So we are experiencing an incredible level of demand, which certainly is favored by working from home and learning from home environment, but also by the incredible amount of new products and innovation that we put into the products that we launched during the last couple of quarters.
Apple published a very promising Q2 2021 earnings report. For the quarter starting from January 1 and ending on March 31, 2021, the company saw a record-breaking $89.6 billion revenue with 54% year-over-year growth. Across Apple’s product line-up and service saw growth and set new revenue records. Read the complete Q&A earnings call session here.