From Debby Wu's "Apple Set to Cut iPhone Production Goals Due to Chip Crunch" posted Tuesday on the Bloomberg wire:
Apple Inc. is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units as prolonged chip shortages hit its flagship product, according to people with knowledge of the matter.
The company had expected to produce 90 million new iPhone models in the last three months of the year, but it’s now telling manufacturing partners that the total will be lower because Broadcom Inc. and Texas Instruments Inc. are struggling to deliver enough components, said the people, who asked not to be identified because the situation is private.
The technology giant is one of the world’s largest chip buyers and sets the annual rhythm for the electronics supply chain. But even with strong buying power, Apple is grappling with the same supply disruptions that have wreaked havoc on industries around the world. Major chipmakers have warned that demand will continue to outpace supply throughout next year and potentially beyond...
Apple shares slipped as much as 1.6% to $139.27 in late trading after Bloomberg reported on the news. The stock was up 6.6% this year through Tuesday’s close. Broadcom and TI also dipped in after-hours trading.
My take: If Apple earnings are around the corner, there must be rumors of production cutbacks.
Cue the bar graph (not specifically about Apple):
Yep, the same news outlet that STILL hasn’t retracted its bogus China-Spy-Chip story. Anyone taking a report from Bloomberg at face value deserves to lose money.
Yesterday I sold OCT 15 $148 Calls at 30c against my NOV 19 $140 Calls purchased the week before. Today I bought them back at 8c, then sold the OCT $146 Calls at 23c.
Tomorrow I’m going to buy these back, so I say let the rumors fly. Only idiots believe this horsesh*t.
Market manipulation ? Nah! /s
Me: “Market manipulation ? Nah! /s”
You: “How do you figure that Joe? The decline occurred after the markets Closed and the rumor was released.”
Kind of the point. Rumors during post-pre-markets allow for a far greater inpact on price since far fewer shares trade. Much, much easier to start a panic.
Or it could be just a coincidence…. Yeah, right.
The chart above says it all, there is an almost 6 month lead time between order and delivery. Any cuts, assuming this latest rumor is true, will impact the JUNE/SEPTEMBER quarters of next year, the two SLOWEST quarter of the year. As pointed out many times before, it would be natural that orders for those quarters would be lower than the current quarter. If there is a conspiracy afloat it would be the “man bites dog” spin that Bloomberg has put on a naturally occurring business cycle.
Same story, same time of year, same suspects.
Nothing here but a buying opportunity, also known as stealing candy from children, the same children that shouldn’t be allowed to trade unsupervised.
Besides myself, has anyone been trading AAPL’s current weakness (or plan to)?
Yeah, let’s hope you’re right. In early trading (4:11 AM pre-market) the Dow is up $1.00, the S&P is down a $1.00, and the tech heavy Nasdaq is up $14.00, all from yesterday’s regular session Close. It would appear that the markets have rejected Bloomberg’s bogus report.
So much for AH and pre-market wagging the dog. Both are nothing more than an expression of investor sentiment: in the moment, and sans new “news” have no bearing on what the next trade will be.
And yet, the premarket did open down and the tail did wag the dog….
This is an important point, one which Bloomberg fails to grasp. We know demand is high based on several surveys of prospective iPhone buyers from different demographic groups. Yet lead times are not consistent with major chip shortages.
Let’s claim that an iPhone is built from one hundred parts. One is from TI and one is from Broadcom (to follow the logical chain of the article, not to name any particular suppliers, because I guarantee I have no relevant knowledge: this is just an example attempt at explanation). The rest come from somewhere else.
Furthermore, let’s claim that the lead time for a TI or Broadcom part is 16 weeks (not impossible: 12 weeks to Fab the wafer from bare silicon, 2 weeks to test and outgoing inspect it, 2 weeks to get it from US shipping into the Chinese supply chain: shipping, customs, some bullsh!it over here, and some bullsh!t over there): it could happen, but 12 weeks is more likley. No matter. Let’s just claim “a long lead time”.
Now let’s claim that the lead time on one of the 100 parts (or even 50 of the 100 parts) is two weeks. Apple does the math and says: “12 weeks minus two weeks means we place no orders for the next ten weeks, because we do not want your inventory sitting on our shelves (I mean, you can build if you want to, betting on the come, but we won’t place any orders until then … but when we do, you had better be ready to meet them)”.
Poof, the orders to certain vendors disappear. But the demand for product is unchanged.
Some of my colleagues have said in the past that “you do not want to have Apple as a customer”. This makes me sad, but I still do not want to argue with an 800 pound gorilla.
I am NOT inside the Apple supply chain, I have no information worthy of an NDA, but I can put two and two together, and they add up to 90% … or whatever.
Tim Cook: “Our supply chain is incredibly complex”.
Y’all know the rest.
I believe Apple had already put those expected components into production plans and assembly. However, given fluctuations in Foxconn factory output due to China electricity restrictions, consistent production has been affected. It would be prudent for Apple to diversify iPhone production away from outage prone areas and move them elsewhere in China or other countries that are less affected or subject to other disruptions.
Now if component supply vendors have faltered or reduced availability sufficient to fully supply Apple’s expanded production needs, then some creative rearrangement of supply, or diversion from slower sellers like the mini or even iPads would be required to bolster supply for iPhones until more components are secured.
I suspect partial monthly or quarterly supply allocations may now become the norms, even for Apple, until either demand stabilizes (which isn’t likely given current demand trajectories), or supply somehow increases, which just doesn’t seem physically possible in any short 6-18 month timeframe given current foundry and fab status. Apple, like other industries, may now be between the rocks and the hard places.
Please pardon my technobabble language, I’ve been watching a lot of Star Trek lately while sweating out the Los Angeles Dodgers series tying win.
In a statement last year, Goldner said he had been under continued medical treatment following his (prostate) cancer diagnosis in 2014.
Board member and former CEO of marketing firm InnerWorkings Inc, Rich Stoddart, has replaced Goldner on an interim basis.
Goldner, 58, joined Hasbro in 2000 and was appointed CEO in 2008, the company said.”
And “Louisa Cheang Wai-man, the former Hang Seng Bank CEO, died last week at the age of 57, the lender said.”
We are lucky to enjoy the fruits of our investments and work in our later years. These two leaders didn’t get that chance. RIP to both and condolences to their families and colleagues.
Bloomberg’s creative writers provided little substance to their story but who needs facts anyway? The ongoing chip shortage is unlikely to cause many (any?) iPhone buyers to go with that ASUS or Samsung model. Apple garden dwellers patiently wait and buy the 13, or the 14 or the 15. Carriers will continue to juice this multi year 5G upgrade cycle. Nobody is going anywhere but we’ll all need patience.
What was really funny is that they actually showed me how to take a picture with it (believing I didn’t know how), and told me how they got a new battery for it for only $35. Until now I thought stories about iPhone users like these people were just rumors. I guess some rumors are true, no matter how outlandish.
What a load of horseshit.
FACT:
Apple never comments on production goals.
“In response to a query from Barron’s, Apple declined to comment on the report, which is sourced to “people with knowledge of the matter.”
With respect, I take issue with your headline “Report of Production CUT”. The word “cut”, which implies a change in forecasted demand, appears first of course in the Bloomberg article along with “slash”, exaggerations intended to sell articles.
Upon reading the article it is clear that at MOST, there are certain component shortages causing production delays, resulting in missing original end of year production targets. Problem is, numerous articles on Yahoo Finance and elsewhere already running with snippets like “Apple slashes production”, “ iPhone woes”, etc. etc. Happens every year of course, although slightly different this year as the source rumor is component shortages instead of Apple slowing production down as demand/supply equilibrium nears.
We should start calling this our “yearly buying opportunity”. Nothing more, nothing less.