Apple's pre-Christmas nightmare

Apple is experiencing the effects of the chip crisis as iPhone production declines, and insufficient supply is on the market.

Photo by Hiroko Oshima

In early October 2020, when most Chinese were on the Golden Week holiday, equipment factories Apple Increase operating capacity again. This is the stage when most of our partners such as Foxconn Or Pegatron has to work day and night to supply enough iPhones to the market.

But this year is different. Workers at the factory iPhone Rest and not overtime. For the first time in more than a decade, iPhone and iPad assembly was halted for several days due to supply chain constraints and restrictions on electricity use in China, sources told Nikkei.

"Due to the limited number of components and chips, there is no reason for the factory to give workers overtime on holidays to pay them more," the supply chain director said. "This has never happened before. The golden week in the past has always been the busiest time when units increase production and assembly."

Apple introduced iPhone 13 and iPad New in September, a month earlier than 2020. However, the company has to reduce production by millions compared to its original plan, thus possibly missing out on billions of dollars in this year's procurement period. In many countries, it's too late to choose an Apple product as a gift.

Every year, Apple makes the consumer electronics industry jealous. The company launched no less than 200 million iPhones, 20 million MacBook50 million iPads and more than 70 million AirPods a year, most of which are sold out.

However, in this year's peak sales season, especially at Christmas, Apple is having a real nightmare. Supply chain sources revealed that in September and October, iPhone 13 production fell 20 percent from previously planned. This happens even though Apple has priority for component transfer It was used to make older iPads and iPhones for the iPhone 13. Over the same period, the reallocation of shared parts caused iPad production to drop by about 50% compared to the plan, while older generations of iPhones also decreased by 25%. As of early December, the company had produced between 83 million and 85 million iPhone 13s, failing to meet its 95 million target.

Apple declined to comment.

Butterfly effect

Looking inside the iPhone 13 Pro Max, a complex electronic device with more than 2,000 components, Nikkei says the difficulties with Apple exist. The manufacturing bottleneck doesn't come from expensive components like processors, 5G modems or OLED displays. Instead, it's a tiny peripheral component that usually attracts little attention.

The components missing from iPhone 13 production are energy management chips from Texas Instruments, Nexperia receivers and connected chips from Broadcom. These chips are not only for iPhones and consumer electronics, but also for computers, data centers, household appliances, and cars. "The entire semiconductor industry is unable to meet demand. The prolongation of the supply of raw materials caused a significant delay in production," nexperia said in a statement.

Apple and its manufacturing partners have faced problems recently, such as a camera module factory that was shut down due to Covid-19, or China's restrictions on energy use. "Even if 99 percent of the components are available, without one or two components, you can't start the product finishing process," said an executive at Apple's top supplier.

CEO Apple Tim Cook acknowledging that supply constraints have caused the company to lose About $6 billion. and the number of losses may increase in the last quarter of the year.

Based on the current situation, Apple warns consumers around the globe may not be able to give gifts to their loved ones at Christmas if they order an iPad from now on. The reason is that the delivery period has been extended to mid-January 2022. With the iPhone 13 Pro and 13 Pro Max, waiting times in many places are being shortened to 1-2 weeks instead of 4-5 weeks as before.

Like Apple, many other companies are suffering from the chaos caused by a lack of chips. Switch gaming console production is 20% short of Nintendo's original production plan. Xiaomi admits chip supply constraints have forced it cut it produces 20 million smartphones.

"We've never seen ourselves face such challenges," said Jason Chen, President and CEO of Acer. "Decades of experience in the industry is not enough. No one has had any experience dealing with this complex problem before and no one knows how to handle it properly."

"There are 4,000 components on the motherboard's printed circuit board. Even if we respond quickly by redesigning and looking for alternatives, the problem keeps coming up," said Emily Hong, CEO of Wiwynn, which makes servers and data centers. Meta, Microsoft and Amazoninform.

Apple has long been a priority for suppliers. In addition to its strong global management team, Apple is not expected to have much difficulty before the chip crisis. But in fact, Covid-19 in Southeast Asia almost makes the company "unable to catch up". For example, iPhone component factories in Vietnam resumed production in October, but faced another problem: labor shortages. Many workers returning home during the period of separation have no intention of returning to work after the restrictions are lifted.

Despite the difficulties, Wall Street analysts expect Apple to still make a profit of $30.8 billion in the final quarter of the year, up 7 percent from the same period last year, though revenue could fall.

Via Nikkei Asia

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