Apple and Nintendo feel chip shortage pinch tightening

Apple has cut back production of iPad tablets to allocate more components to the iPhone 13, a sign the global chip supply crunch is hitting the tech giant harder than previously indicated
Apple and Nintendo feel chip shortage pinch tightening

Apple is prioritising iPhone over iPad in the supply crisis.

Apple has cut back production of iPad tablets to allocate more components to the iPhone 13, a sign the global chip supply crunch is hitting the tech giant harder than previously indicated.

Production of the iPad was down half from Apple's original plans for the past two months, while parts intended for older iPhones were also being switched to the iPhone 13, according to a report.

Apple has weathered the supply crunch better than many other companies due to its massive purchasing power and long-term supply agreements with chip vendors, eating into its rivals' market share in the smartphone and tablet space in the third quarter.

However, Apple's CEO Tim Cook warned the impact of supply constraints would be worse during the current holiday sales quarter and the chip shortage is now affecting most of the company's products.

The iPhone maker is prioritising its flagship iPhone 13 output in part because it forecasts stronger demand for the smartphone than for the iPad, as western markets begin to emerge from the pandemic.

Moreover, a vacuum created by Huawei's exit from the market has shifted demand to players including Apple in China, which helped the company's sales in the last quarter. Apple posted a staggering 83% annual sales growth in China during the quarter.

The iPhone business, Apple's largest, raked in about $192bn (€166bn) last year. The iPad business, which dominates the tablet space with over a third of global market share, brought in nearly $32bn.

Nintendo Switch production down

Meanwhile, video game giant Nintendo plans to produce about 24m of its ‘Switch’ consoles for its current fiscal year, about 20% less than originally planned.

While demand for the new console is strong, the Japanese company has struggled to get enough semiconductors to make the machines. The company had originally planned to make about 30m consoles, a record high.

The new Switch got off to a rocky start last month during its debut, suggesting supply constraints were hampering the company’s biggest product launch in years.

A company spokesman confirmed the chip shortage was affecting production. He declined to comment on the reported 24m figure and said the company was assessing the magnitude of the impact now.

Nintendo said in May it was targeting sales of 25.5m consoles in the year ending March 2022, having sold 28.8m units in the prior period. Management had hoped to exceed that figure.

The new Switch model sports a more vibrant 7in OLED display along with a new flexible stand, more storage space and better speakers as well as an internet cable port.

Nintendo’s own flagship store in the Shibuya district of Tokyo implemented a lottery to determine who gets to buy the device.

Nintendo shares have dropped 24% this year amid concerns over the new Switch.

• Reuters and Bloomberg

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