Gene Munster: Apple lead times are 2 to 4 days worse than guidance suggested

From a note posted Monday to Loup Ventures subscribers:

Entering Black Friday we observed lead times at Apple for ten products in six countries that suggested the gap between demand and supply is slightly wider than what we would have anticipated given company commentary on the September earnings call. We revisited the lead times on Cyber Monday and found that while there were slight changes, the supply environment remains tight. What’s most important is demand for both Apple’s newest and previous generation products is strong, and to the extent the December quarter is negatively impacted from greater-than-expected supply chain bottlenecks, the March quarter will have a corresponding positive impact…

    • Typical lead times for new Apple products going into Cyber Monday are on average about 10 days.
    • Apple’s guidance calling for an $8B supply chain headwind in December would imply lead times entering Cyber Monday should be an average of 16 days.
    • Today, Apple is quoting an average of 18 days for seven new Apple product SKUs in 6 countries. That is a slight improvement from 20 days we observed last week…
    • If that 4-day lead time gap continues for the balance of the quarter, it would increase the supply chain effect in December to about $10B, compared to guidance of $8B.  The $2B delta is just under 2% of the Street’s $117B holiday quarter revenue estimate.

My take: Once again, what doesn’t get sold in the December quarter will surely get sold in March.

8 Comments

  1. Brian Loftus said:
    His analysis assumes Apple’s demand calculation was correct. For constrained products, every 10% unanticipated demand causes an extra 9 day lead time (if production was constant throughout the quarter). What he has identified is a larger demand/supply imbalance than anticipated. We will not know until the end of January if that was increased demand or decreased supply. All we know at this point is iPad production is being sacrificed for iPhone production.

    7
    November 30, 2021
    • Gregg Thurman said:
      Good points Brian.

      1
      November 30, 2021
  2. Gregg Thurman said:
    Why should we assume that demand for Apple products remains static compared to last year? Consumer demand for many other products are at all time highs leading to rapid price appreciation (I’m referring specifically to the housing market). In dealing with product scarcity, pricing for gas and food stuffs are up, as are shipping costs.

    Apple is dealing with a supply chain wherein production costs are set in contractual agreements. If supply chain pricing were flexible production quantity would increase. The result, however, would be chaos for the companies contracting for supply services.

    This isn’t a supply chain problem, it is the inevitable result of dramatically increased financial liquidity among consumers. More money means more spending. Translated that means more demand.

    The “cure” is more capacity, but it takes time to increase capacity, then producers are faced with the dilemma of will demand remain just as high when that new capacity comes online?

    This is what Powell has been telling us about inflation, once stimulus monies are spent demand will diminish and inflation will subside. It’s all a bubble caused by generous (especially the last one) stimulus payments, coupled with an elevated demand curve caused by holiday spending. Come March 2022 demand/supply equilibrium will be achieved (stimulus monies will have been spent) and inflationary pressures will greatly subside.

    It’s been said many times, but the media won’t acknowledge it, doing so would lessen the impact of their sensationalist reporting, but what doesn’t get sold during the December quarter will get sold in the March quarter, much like a pig being consumed by a snake, the demand/equilibrium imbalance will disappear.

    Today I’m predicting that Apple will set new revenue records during the December quarter of C2022, but lead times will return to normal. The difficult compares will occur in the March quarter of C2023.

    1
    November 30, 2021
  3. Gregg Thurman said:
    That last paragraph made me think of Saccocrap (much to my displeasure). He has a mantra he can’t let go of, much like a dog with a bone, and that is bad compares for FY2022 over FY2021. His failing with that mantra is his inability to comprehend the economic impact of all those stimulus dollars, and how long that impact will last.

    Being of short term the stimulus money will skulk around until another event (holiday spending) pries that money from consumer hands.

    If you’ll remember, initial stimulus monies were used to pay bills and necessities, with the balance finding its way to debt reduction and savings. Like a failed dam that accumulated buying power is being unleashed upon an I’ll-prepared supply chain.

    0
    November 30, 2021
  4. Robert Paul Leitao said:
    I’ll be buying one (1) Apple Watch this holiday season. It will eventually arrive. When? That’s not an issue. It will certainly arrive before the end of the March quarter. The point is, many Apple devices run on a semi-annual demand cycle. What orders aren’t fulfilled in the December quarter will be filled by the end of the March quarter. 91-day reporting periods are just too short to clock Apple’s forward momentum. No one uses an analog stop watch to track the speed of light.

    1
    November 30, 2021
  5. Kirk DeBernardi said:
    Does any one here really believe that lead times affect Apple’s sales one whiff?

    Things that are worth waiting for are worth waiting for.

    Some people just want things and will go anywhere and at anytime to get it. Others want experiences and know just where to go and will wait to attain it.

    1
    November 30, 2021
    • Robert Paul Leitao said:
      Kirk: Nice perspective.

      0
      December 1, 2021

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