Apple is faced with a COVID-19 pandemic-induced worldwide chip shortage that is continuing to hit iPhone 12 production, says a new Bloomberg report. So far, the Cupertino firm has had to deal with shortages of both power management chips and LiDAR components. Some fear the situation could get worse.
A number of industries have been hit by component shortages. The automotive industry is facing a shortage of semiconductors, resulting so far in approximately $61 billion in lost sales. Experts now fear that the consumer electronics sector could be hit even harder.
The Bloomberg report says that the coronavirus crisis created a perfect storm of reduced supply and increased demand.
The first hints of trouble emerged in the spring of 2020. The world was in the early throes of a mysterious pandemic, which first obliterated demand then super-charged internet and mobile computing when economies regained their footing. That about-face — in a span of months — laid the seeds for potentially the most serious shortage in years of the semiconductors that lie at the heart of everything from smartphones to cars and TVs
Apple, a major Qualcomm customer, said recently that sales of some new high-end iPhones were hemmed in by a shortage of components
“The virus pandemic, social distancing in factories, and soaring competition from tablets, laptops and electric cars are causing some of the toughest conditions for smartphone component supply in many years,” said Neil Mawston, an analyst with Strategy Analytics. He estimates prices for key smartphone components including chipsets and displays have risen as much as 15% in the past three to six months.
The automotive sector cut orders when the pandemic hit, as they anticipated a drop in vehicle purchases during the lockdown. By the time they began to ramp up production again, chipmakers were at capacity meeting demand from makers of smartphones, tablets, and laptops.
General Motors this month has idled three North American production facilities and Ford is expecting a 20% drop in near-term output.
Experts are expecting the situation to worsen, as the only way for chipmakers to increase production while already at full capacity is to build new production lines or new facilities. These processes typically take years.
While Apple is in a better position than most, as its sheer size allows it to demand favorable supply terms – such as dedicated production lines and priority supply – the Cupertino firm will still be faced with limits on what can be accomplished.