Tech

Apple and Tesla are the latest victims of chip shortages

The lack of chips is about to hit the iPhone.

Apple Ltd

AAPL -1.23%

And Tesla Ltd

TSLA 0.24%

It is set to begin to feel the effects of significant disruption to the global supply of microprocessors. This shows that even some of the largest and most supplied companies can no longer avoid the semiconductor crisis.

iPhone makers warned on Tuesday that smartphones will be subject to supply restrictions for the three months leading up to September. This has contributed to slowing the company’s growth compared to its 36% revenue growth in the last quarter. Be careful when Apple is preparing to announce the latest iPhone this fall.

Tim Cook, CEO, told analysts on Tuesday: Public conference call.

While most smartphone competitors struggle to get parts, iPhone revenue increased 50% in the previous quarter. Similarly, Tesla recorded record profits in the last quarter, when car deliveries more than doubled year-on-year as other automakers struggled to produce.

Still, Tesla CEO Elon Musk raised new concerns on Monday, potentially affecting his long-awaited cybertruck pickup, which was set to go into production later this year. Suggested that. To that end, “to extend to a meaningful amount of delivery to our customers, we need to resolve the chip shortage,” he said.

In April, Apple warned that iPad tablets and Mac computers could miss $ 3-4 billion in revenue as a result of a chip shortage. However, with the mitigation measures, the effect was not as bad as expected. Chief Financial Officer Luca Maestri said the impact was primarily limited to the iPad, with an impact of less than $ 3 billion. “There were no real problems with the iPhone in the June quarter,” he said.

“We have an incredible operational team, who work very closely with our supply partners and do our best with many components considering the global situation.” He said.

The global chip shortage is affecting the time it takes to get a car out of the parking lot or buy a new laptop. The WSJ will visit a manufacturing plant in Singapore to see the complex process of chip manufacturing and how one manufacturer is trying to overcome the shortage.Photo: Edwin Chen of The Wall Street Journal

The April-June results of the April-June tech giant in Cupertino, California show that Cook’s career in its huge size and supply chain management is a more serious turmoil that iPhone makers are facing other smartphone makers. This is a case study of how it helped to avoid.

For many years, Patrick Moorhead, president of technology company Moor Insights & Strategy, has used that power to invest billions of dollars in suppliers to guarantee assembly line space and provide the parts needed for the iPhone. .. And in the absence of such an arrangement, he said he was willing to pay more to the supplier to ensure that he received the parts he needed.

However, there is not much you can do with these steps. “The iPhone’s explosive growth in the previous quarter helped the company leverage its reserves. [calendar] The second quarter, which targets the third quarter, “he said. “There is probably no investment that could change anything in the third quarter, and in some cases the fourth quarter.”

Maestri warned analysts on Tuesday that the impact of supply constraints would create a bigger earnings blow, including both the iPhone and iPad. Broadly speaking, Cook added that Apple’s supply constraints are “diversity that others think they’re seeing,” partly because of higher-than-expected demand for products. Stated.

At the end of last year, Apple announced the first iPhone with 5G cellular capabilities, which helped support its record growth. Getting a chip with the latest technology wasn’t a problem, Cook said. “Legacy nodes are where supply constraints were on silicon.”

Prior to Tuesday’s results, FactSet surveyed analysts that iPhone sales increased 49% this quarter compared to last year and device revenues increased 36% next year compared to 2021. I predicted.

Analyst estimates are underpinned by a whisper network of supplier sources that Apple said it would look bullish in fiscal year 2022. As Apple increased production of the next iPhone prior to its planned launch in the fall, some suppliers received component orders or production forecasts. People familiar with the issue said the second half of 2021 would be consistent or relatively strong with what Apple has shared in recent years. Apple’s orders have shown to suppliers that the company does not expect iPhone production to be significantly impacted by a chip shortage, they said.

Maestri said on Tuesday that Apple expects double-digit sales growth this quarter from the previous year’s sales of $ 64.7 billion.

The iPhone comes with a wide variety of chips. For newer models, it is likely to include a 5G modem and memory chip, most importantly the A-series Bionic processor, which receives and executes commands from the user.

Apple designs and outsources manufacturing to Taiwan Semiconductor Manufacturing Ltd

Taiwanese plants. The deal makes Apple TSMC the largest customer and accounts for approximately 25% of the foundry’s revenue. Apple has booked TSMC’s production capacity many years in advance because it plans the expected demand for TSMC.

This year, Apple plans to release four new iPhone models with screens similar to last year’s lineup, people familiar with the matter said. In 2020, Apple released the iPhone 12 Mini, iPhone 12, 12 Pro, and 12 Pro Max.

The chip shortage first hit the big automakers who canceled their chip orders last year and underestimated how quickly demand would recover after a coronavirus infection. Demand for electronic devices and Internet services that rely on chips to process information has also surged from the telecommuting economy, putting additional strain on the industry.

More TSMCs earlier this year as global automakers in the United States and Europe asked TSMC to prioritize orders, forcing chip makers to negotiate with other clients to free up autochip manufacturing capacity. Faced with the pressure to manufacture automotive chips.

People familiar with the issue said TSMC had reassigned some of its automotive chip production capacity, but the move had no serious impact on Apple. TSMC said it did not comment on specific customers.

Tesla managed the shortfall by finding an alternative chip, rewriting the software over the course of a few weeks, and getting it to work in the car, Musk said.

“It was a very intense effort to find new chips, create new firmware, integrate with the vehicle and test it to keep it in production,” he said.

Chip executives do not believe that the imbalance between supply and demand will soon be resolved. Chip maker Intel Corp. Pat Gelsinger said last week at rival Advanced Micro Devices Inc. Lisa Su, CEO of the company, said supply chain tightness will continue until later this year. , It should improve next year.

Write to Tim Higgins at Tim.Higgins@WSJ.com, Yoko Kubota at yoko.kubota @ wsj.com, Yang Jie at jie.yang @ wsj.com

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Apple and Tesla are the latest victims of chip shortages

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