Apple bows to supply crunch in sign of worsening global crisis      

Tech giant has joined a growing list of household names from Toyota to Samsung forced to cut back on business because of a global shortage of semiconductors

Apple is now likely to slash its projected iPhone 13 production targets for 2021 by as many as 10m units. 

Apple, the world’s most valuable company, has finally joined a growing list of household names from Toyota to Samsung forced to cut back on business because of a global shortage of semiconductors.

Apple is now likely to slash its projected iPhone 13 production targets for 2021 by as many as 10m units. 

For months, while supply chain shocks rocked the electronic, carmakers, and even commodities industries, Apple remained the one company that could secure the chips needed to keep selling its latest range of products, due to its well-managed supply chain and the prestige of meeting its exacting standards.

But the recent setback for Apple has dashed any hopes the supply-chain crisis was easing.

“If this is happening to the most powerful company,” it could happen to anyone, said Neil Campling, an analyst at Mirabaud Securities. 

Given “they have huge power in terms of their ability to source semiconductors as such a key customer, then everyone else will be having greater issues than they are”.

Supply disruptions worsening

Apple’s scaleback is a clear sign the supply disruptions that have wreaked havoc around the world are worsening, which may jeopardise the outlook for the post-pandemic economic recovery. Almost all major manufacturers have been impacted both by a lack of key materials such as semiconductors, but also an inability to get finished goods into the hands of consumers.

US President Joe Biden is set to focus on transportation bottlenecks, with the congested Port of Los Angeles planning a 24 hours a day, seven days a week effort to confront the squeeze on goods. Moller-Maersk said it had to divert some ships from the UK’s largest container port because of congestion tied to a trucker shortage. 

“Recent rumblings from chip producers suggest that the problems are expected to persist,” Deutsche Bank strategists said. 

That “will make central bank decisions even more complicated over the coming weeks as they grapple with increasing supply-side constraints that push up inflation whilst threatening to undermine the recovery”. 

Apple had expected to produce 90m new iPhone models this year, but is now telling manufacturing partners the total will be lower because Broadcom and Texas Instruments are struggling to deliver enough components, said sources. 

The shortage of semiconductors stems mainly from years of under-investment coupled with a failure to gauge the explosion in demand for connected devices. 

Even industry insiders were caught by surprise. ASML chief executive Peter Wennink, whose company sells the machines that enable most cutting-edge chipmaking, said in July it’s underestimated the growth of the semiconductor industry over the past 15 years. 

•Bloomberg