Apple sees the chip crunch hitting popular iPhones

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Supply constraints will hurt iPhone sales, Apple said on an earnings call. CEO Tim Cook said legacy chips are the most affected, not top designs such as the A14 Bionic processor.

Apple is vulnerable to the chip shortage, putting it in the same company with automakers and game console providers, among others.

On a Tuesday earnings call with analysts, Apple CFO Luca Maestra warned of silicon “supply constraints” that will primarily affect sales of iPhones and iPads, according to a Seeking Alpha transcript.

As with other industries, the chip shortage is not with late-generation processors like the Apple-designed A14 Bionic with a 16-core neural engine that runs in the iPhone 12 Pro.  Instead, CEO Tim Cook said, the shortage is for legacy chips, the type that are used to drive such things as displays and decode audio.  These legacy chips can only be manufactured on older chip manufacturing equipment which Fierce Electronics and others have noted are in short supply.

“The majority of constraints that we’re seeing are of the variety that I think others are seeing, that I would classify as industry shortage,” Cook said.

Some other component shortages, he said, were due to demand that has outstrip Apple forecasts. “We do have some shortages in addition to that, that are where the demand has been so great and so beyond our own expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those,” he said.

Cook’s warning came as Apple reported a very strong June quarter with $39.57 billion in sales of iPhones, up nearly 50% annually. Total revenues were $81.41 billion compared to analyst estimates of $73 billion and were up 36% year-over-year.

The second quarter included customers upgrading old iPhones and Android customers buying their first iPhones, Cook said, with a double digit increase in both types.

The second quarter could have been better if not for the chip shortage affecting primarily Mac and iPad, Cook told CNBC. Apple CFO Luca Maestra said component shortages will be greater in the September quarter than in the June quarter and didn’t estimate the impact of chip shortages specifically.

“In terms of supply constraints and how long they will last, I don’t want to predict that today,” Cook told analysts. “We’re going to take it sort of one quarter at a time.”

Last week, Intel CEO Pat Gelsinger said the chip shortage is likely to continue until at least 2023 and lead to revenue losses for Intel and others. “While I expect the shortages to bottom out in the second half, it will take another one to two years before the industry is able to completely catch up with demand,” Gelsinger said in an earnings call.

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