Apple CEO: Silicon Shortages And C-19 Lockdowns To Hurt Sales By Up To $8 Billion

Apple is warning that lockdowns of factories in Shanghai due to COVID-19 and industry-wide silicon shortages will hurt its sales by between $4 billion to $8 billion in the next quarter.

On an earnings call, CEO Tim Cook said the "constraints are primarily centered around the Shanghai corridor" but "on a positive front, almost all of the affected final assembly factories have now restarted."

Cook added: "So the the $4 billion to $8 billion range reflects various ramps of getting back up and running. We're also encouraged that the COVID case count that's been reported in Shanghai has decreased over the last few days."

This challenge will "affect most of the product categories," said the Apple boss.

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Shanghai has been under strict lockdown for the past month, and this led to the closures of factories. These facilities are starting to open again using so-called closed loop systems, including Apple supplier Foxconn, and have created a white list of vendors they will prioritize production for – with the iPhone maker among them.

Reg readers may have noted elongated lead time for Macs, stretching out to June now. Cook said it has "lots of customers that we want to get the new Macs to, and so we're working hard on them."

"They are a result of the combination of the COVID disruptions and the silicon shortage that we've talked about before. And when we might remedy that, I don't – we're not really forecasting when we can be out of the silicon shortage, so that would be a difficult answer. I think the COVID piece of it I hope is a transitory kind of issue. And so I would hope that it would get better over time."

The tech industry spent years trying to streamline supply chains, and Cook said: "In this business you don't want to hold a ton of inventory."

"And so you want to work on cycle times and so forth to do things very quickly and take strategic inventory in places where you need to buffer for interruptions and so forth. And so we're constantly thinking about where those places are. In today's world it's not really possible for us to have buffer on silicon. And so, today silicon rolls off the fab and it is into a final assembly plant very, very quickly and we try to make that as short a time as possible."

The sales impact for the coming quarter cast some shadow over the most recent full quarter, Q2 ended March 26 2022 [PDF], in which total revenues for Apple shot up 9 percent year-on-year to $97.27 billion. This includes: a 5 percent rise in iPhone revenue to $50.57 billion; a 15 percent hike in Macs to $10.43 billion; $7.6 billion in iPads, down 2 percent; $8.8 billion for Wearable, Home and Accessories, up 12 percent; and a 17 percent leap in Services to $19.8 billion.

All this while juggling supply constraints due to silicon, albeit a far less substantial challenge than the one confronting the company now.

Apple is not providing guidance for the current financial year. ®