Apple may lower iPhone production target due to chip shortage

Published: Oct 13, 2021 07:36

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Apple (141.51,-1.30,-0.91%) could cut its 2021 iPhone 13 production target by as much as 10 million because of chronic chip shortages for its flagship products, according to people familiar with the matter.

Apple had expected to produce 90 million new iPhone models in the last three months of this year, but people familiar with the matter said the company is now telling manufacturing partners that total production will be reduced as Broadcom (Broadcom Inc.) and Texas Instruments (188.48,-4.89,-2.53%) (Texas Instruments Inc.) are trying to deliver enough components.

Apple is one of the world's largest chip buyers, but even with strong purchasing power, it is grappling with supply disruptions that have wreaked havoc on industries around the world. Leading chipmakers warn that demand will continue to outstrip supply for the whole of next year or beyond.

Apple gets display components from Texas Instruments, and Broadcom is a long-time supplier of wireless components. Apple also faces parts shortages from other suppliers.

Apple and other companies did not respond to requests for comment.

Apple shares fell more than 1% after the news, and shares of Broadcom and Texas Instruments also fell in after-hours trading.

There are signs that the global chip shortage crisis is worsening. Lead times in the chip industry-the gap between chip orders and deliveries-rose for the ninth month in a row, reaching a record average of 21.7 weeks in September, according to Susquehanna Financial Group.

The chip shortage has affected Apple's ability to deliver new models to customers. The iPhone 13 Pro and iPhone 13 Pro Max went on sale in September, but Apple's website shows that shipments will not be delivered until about a month after the reservation, and several retail stores also say "offline delivery is not available at this time." Apple's carrier partners have seen similar delivery delays.

Current iPhone orders show shipments around mid-November, so Apple can still deliver the new iPhone to consumers in time for the critical holiday season. The market expects the year-end holiday season to be Apple's biggest sales blitzkrieg to date, generating about $120 billion in revenue. That will be 7% more than a year ago.

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