Apple supply chain in spotlight as world runs out of semiconductors

From Bloomberg’s “Chip Shortage Spirals Beyond Cars to Phones and Consoles” posted early Monday:

Auto and electronics makers that cut back drastically in the early days of the outbreak are now rushing to re-up orders, only to get turned away because chipmakers are stretched to the max supplying smartphone giants like Apple Inc.

This week, Qualcomm Inc.’s Cristiano Amon, head of the world’s largest mobile chipmaker, flagged shortages “across the board,” citing the industry’s reliance on just a handful of players in Asia…

Carmakers appear in direst straits and have spurred the U.S. and German governments to come to their aid — General Motors Co. this month was forced to mothball three North American plants and Ford Motor Co. is bracing for a 20% drop in near-term output.

But more industries have lately copped to shortages, emphasizing how Covid-19 and a boom in a new breed of 5G-ready smartphones like the iPhone 12 is exacerbating a shortage of capacity plaguing the entire consumer industry. Chip shortages are expected to wipe out $61 billion of sales for automakers alone, but the hit to the much larger electronics industry — while tough to quantify at this early stage — could be far larger.

My take: When the chips are down — and automakers are shuttering factories — will Apple’s massive cash flow and locked-up production capacity look like unfair advantages?

16 Comments

  1. Tommo_UK said:
    Answer to PED: anticipating supply constraints, pre-purchasing or laying out capital to build out partners fabs is not an uncompetitive advantage in the legal sense but just unfair – simply because Apple plan 3-5 years ahead.

    7
    February 8, 2021
  2. bas flik said:
    this also hurts apple. 12 pro models still no availability. normally we also buy at higher prices from traders in europe but they as well have no supply. so something is going wrong. covid broke the supply chain.

    2
    February 8, 2021
  3. Arthur Cheng said:
    Well, these industries planned poorly, and now they are going to blame someone else?

    6
    February 8, 2021
    • John Konopka said:
      Exactly. No one held a gun to their head to make them set production targets. This is like thinking that you can always go to the supermarket and milk will magically be on the shelf. Maybe these end users were used to having the suppliers bid for their business. Now the shoe is on the other foot and they aren’t handling it well.

      2
      February 8, 2021
  4. bas flik said:
    tnanks to computer power all supply chains are tight. no plings of stock. just in time delivary. this is nice when the sun shines but when its getting icy it fires back at you. all the advantages of tight supply becoming disadvantages. Covid ruined the supply chain world wide. The art of making money is a tough one and Apple is the real artist.

    5
    February 8, 2021
  5. Tommo_UK said:
    12 Pro Max 256GB finally available through networks in the UK on contract for 1-3 day delivery (Apple store had them for weeks for off-network direct purchase). Still no sign all of 512GB models.

    The tsunami wave of pre-orders yet-unbooked high end models will hit the next quarter’s iPhone sales number and ASPs like a rocket one they’ve shipped and been booked. Higher margins too and MacBook sales boosted too. I”m not worried long term. Short term there’s just a jungle of Japanese knotweed to plough through thanks to witless speculation and gung-ho reporting which could muddy the water until the next report. TP raises seem unlikely at this point given the car-hysteria popping and supply chain rumours about to start appearing in such-trusted-resources as Digitiimes and Business Insider.

    3
    February 8, 2021
  6. Roger Schutte said:
    Right now in the US, 12 Pro Max 256 Gray can be ordered at Apple.com today for delivery tomorrow. 12 Pro 256 Gray is 7 – 14 days for delivery.

    1
    February 8, 2021
    • Bart Yee said:
      Too bad the US versions are less likely to work correctly in the EU, Bas could probably resell them even with a markup. Much like the past Chinese entrepreneurs who bought in New York, California, etc. Apple Stores, brought them back to Hong Kong and smuggled them into China at profit.

      0
      February 8, 2021
  7. Jerry Doyle said:
    As the world runs out of semiconductors impacting a plethora of different industries forcing them to close plants, shut down factories, lay off workers, forgo sales of goods, thus reducing further their revenues during a pandemic, then all this could affect negatively a global struggling economy attempting to rebound. This will strike an economic blow to the Biden’s administration at a suffering and dreadful period when his team is attempting to jumpstart the economy in creating new jobs and full production. I see more political unrest and need for continued economic stimulus. The other thing I see is the need for some investors to revisit their portfolios to decide which equities have the most exposure to the need for semiconductors.

    1
    February 8, 2021
    • Gregg Thurman said:
      This will strike an economic blow to the Biden’s administration

      Maybe. It could also reinforce the necessity for his $1.9 Trillion relief package.

      6
      February 8, 2021
      • David Emery said:
        I’m not sure a global semiconductor shortage will have that much impact on economic policy. Now it might well slow down imports of both materials and finished products (which would be good for the balance of trade.) But any economic policy response would take years to have real impact.

        But this will cause corporations to take a harder look at their global supply chains and the risks of “just-in-time”.

        1
        February 8, 2021
  8. Mark Visnic said:
    @PED. will Apple’s massive cash flow and locked-up production capacity look like unfair advantages?
    I thought it; You thought it. Therefore, someone in the financial media or on the hill could say it but, at the end of the day, good credit, reliable payment in scale, and excellent vision/planning isn’t actionable.

    2
    February 8, 2021
  9. Fred Stein said:
    Apple has an unfair advantage. They’re smart and focused. Surely top management thought about this possibility in summer 2020 (see the bloomberg article). Surely the top management at automotive companies did not focus back then.

    When (no longer if) Apple enters the AV/EV market, they will have many other “unfair advantages”.

    4
    February 8, 2021
  10. Fred Stein said:
    More:

    Jan 14, 2021, WSJ reports that TSMC increased CAPEX for 2021 by about 47% to $25B – $28B. Good news for Apple and TSMC.

    Considering how many chips and sensors there are in a car, Apple, with TSMC’s help, gains an unbeatable advantage in ‘beyond just battery powered’.

    3
    February 8, 2021
  11. Michael Goldfeder said:
    Once again, Apple is way out in front of the pack given that Tim Cook wrote the book on supply chain management. Oh wait! Is that going to be considered another “unfair advantage” for Apple?

    2
    February 8, 2021
  12. Bart Yee said:
    Just as Roger Penske, Mark Donahue, and Bruce McLaren proved long ago in the 60’s and 70’s, long term thinking, solid engineering, and peerless preparation and execution of business and racing plans gives one an “unfair advantage”. While everyone has been playing checkers and maybe chess, Apple has been building better and better chessboards and redefining the entire game environments. Apple has also been redefining the supply game rules and relationships while everyone else has simply worried about inventory and delivery.

    There’s nothing inherently unfair in business, Either you think faster, better, farther out, see opportunities where others retreat, lead instead of follow, capitalize on instead of shrink, or you don’t. Apple takes calculated measures, not risks, because by the time the decisions are made, the risk is minimized. Even the iPhone 12 mini, even if it proves to be a sales disappointment, will be a positive. Why? All those scarce semiconductors destined for mini production can now be moved over to higher margin larger iphone 13 models and Apple saves on the small OLED display.

    1
    February 8, 2021

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