Apple has a supply problem

Reuters quoted Luca Maestri’s Chief Financial Officer, Apple said the Russia-Ukraine conflict caused them to stop selling in Russia. This decision caused a significant drop in sales in the last quarter. He also noted that supply-chain issues would result in a $4 to $8 billion drop in sales, “significantly larger” than the previous quarter.

According to Maestri, the company’s supply is heavily concentrated in Shanghai, causing production activities to be severely affected when the local government implements distancing measures to combat the epidemic. In addition, the shortage of chips also continues to be the reason why the development prospects are not as expected of the company in the coming time.

CEO Tim Cook confirmed that nearly every Apple product assembly plant in China has reopened after the recent closure. However, the company is not sure when the chip shortage will end. He hopes the problems related to Covid-19 in China are only “temporary and with time, things will get better”.

“We were all looking for clearer indications of what was going on in China,” said Louis Navellier, chief investment officer at Navellier & Associates.

Apple announced revenue for its fiscal second quarter of $97.3 billion, up 8.6% year-over-year and above analyst expectations. Worldwide iPhone revenue was $50.6 billion, up 5.5%, and services revenue also increased 17% to $19.8 billion. However, Chief Financial Officer Maestri warned that Apple’s services growth will decline sharply in the next quarter.

Meanwhile, iPad sales fell 2% to $7.65 billion due to supply chain constraints. Apple investors also braced for the fact that users will reduce spending on technology devices in the context of inflation, rising oil prices, and other products and staples also going up.

In China, iPhone sales in the first quarter of 2022 fell 23% compared to the last quarter of last year, according to Counterpoint Research. Just three months ago, the iPhone was the best-selling brand in the country with a 21.7% market share. Now, it has lagged behind Vivo and Oppo with 17.9% market share.

Ivan Lam, senior analyst at Counterpoint Research, thinks that Apple’s decline is partly due to Covid-19 that has slowed user spending momentum. “I don’t think next quarter’s data will improve much. Continued lockdowns will affect consumer spending,” he said. While other experts believe that Apple will continue to face many supply risks in the context of uncertainty about China’s epidemic prevention policy.

CEO Tim Cook declined to comment on the troubles Apple is facing, but said: “Frankly, right now our main focus is on suppliers.”

Khuong Nha (according to Reuters)