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Chip shortages, lockdowns to hit sales up to $8 billion • The Register

Apple warns that factory closures in Shanghai due to COVID-19 and industry-wide silicon shortages will hit its sales by $4 billion to $8 billion in the next quarter.

On an earnings call, CEO Tim Cook said “the constraints are mainly centered on the Shanghai corridor” but “on a positive front, almost all affected final assembly plants have now restarted”.

Cook added: “So the range of $4 billion to $8 billion reflects various ramps to restart. during the last days.”

This challenge “will affect most product categories,” said the Apple boss.

Shanghai has been under strict confinement for a month, which has led to the closure of factories. Those facilities are starting to reopen again using so-called closed-loop systems, including Apple supplier Foxconn, and have created a whitelist of suppliers they will prioritize production for – with the iPhone maker among them.

Reg readers may have noted an extended delivery time for Macs, which extends into June now. Cook said he has “many customers we want to offer the new Macs to, so we’re working hard for them.”

“They’re the result of the combination of the COVID disruptions and the silicon shortage that we’ve talked about before. And when we might fix that, I don’t – we don’t really anticipate when we might run out of silicon shortage, so that would be a difficult answer. I think the COVID problem, I hope is a transitory problem. And so I hope it will get better over time.

The tech industry has spent years trying to streamline supply chains, and Cook said, “In this industry, you don’t want to hold a ton of inventory.”

“And so you want to work on cycle times and so on to do things very quickly and strategically inventory where you need to protect yourself from interruptions and so on. And so we’re constantly thinking about where where are these places in the world it’s not really possible for us to have a stamp on the silicon and so today the silicon comes out of the factory and it’s in a final assembly plant very, very quickly and we try to keep it as short as possible.

The impact on sales for the upcoming quarter casts a shadow over the last full quarter, Q2 ended March 26, 2022 [PDF], in which Apple’s total revenue jumped 9% year-on-year to $97.27 billion. This includes: a 5% increase in iPhone revenue to $50.57 billion; a 15% increase in Macs to $10.43 billion; iPad $7.6 billion, down 2%; $8.8 billion for apparel, home and accessories, up 12%; and a 17% jump in services to $19.8 billion.

All this while juggling supply constraints due to silicon, although this is a much smaller challenge than the one the company now faces.

Apple does not give any indications for the current financial year. ®