Global chip shortage crunches into Apple and Amazon earnings

29 Oct 2021

Image: © saiko3p/Stock.adobe.com

The two tech giants have missed analyst expectations in their quarterly earnings, with supply chain troubles ahead.

Tech earnings are being viewed closely by investors and enthusiasts alike right now, in a bid to gauge the effects of ebbing pandemic-related restrictions and the global chip crunch that rages on.

Apple and Amazon joined the ranks of Big Tech players Microsoft, Facebook and Google in sharing their latest quarterly results yesterday (28 October) – with both performing below expectations and forecasting headwinds ahead of the holiday season.

Apple

Future Human

Even though Apple missed analysts’ revenue estimates, its fourth-quarter growth was at a record high of $83.4bn – up 29pc from this time last year. Refinitiv had estimated revenue of $84.85bn.

Despite the record growth, supply chain issues cost the tech giant approximately $6bn, with CEO Tim Cook expecting the holiday quarter to take another beating due to ongoing shortages.

He told Reuters yesterday that the supply constraints were accompanied by pandemic-related manufacturing disruptions in south-east Asia. He added that while disruptions had since improved in October, the ongoing chip shortage is still affecting “most of our products”.

Apple has made some major product launches this year, including the iPhone 13 and the M1-powered Macs.

Even before the latest MacBook Pros were released, Apple’s Mac line of computers, with a particularly strong demand for the latest MacBook Air, reached record fourth quarter revenue of $9.18bn – up 1.6pc on last year.

iPhone revenues jumped 47pc to $38.87bn, while iPad revenue was up 21.4pc to $8.25bn. Apple’s services accounted for $18.3bn in revenue, up 25.6pc and marking a record high for the segment.

Amazon

Amazon also missed revenue estimates in its third-quarter results yesterday, reporting $110.81bn in earnings compared to Refinitiv expectations of $111.6bn.

This figure is up 15pc compared last year, but the growth rate slowed from a strong 37pc in the same period last year – due to reduced demand for online shopping as pandemic-related restrictions eased across the world.

Net income was slashed by almost half, standing at $3.2bn compared to last year’s $6.3bn, with the slowdown in online sales coinciding with supply chain issues.

“We’ve always said that when confronted with the choice between optimising for short-term profits versus what’s best for customers over the long term, we will choose the latter – and you can see that during every phase of this pandemic,” said Andy Jassy, Amazon CEO.

“In the fourth quarter, we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs.”

However, cloud computing business Amazon Web Services (AWS) saw strong performance, bagging $16.1bn in net sales – up 39pc from last year. Amazon subscription services such as Prime, Prime Video, Amazon Music and Kindle, among others, together saw a 24pc increase over last year and accounted for $8.15bn in revenue.

Jassy added that Amazon will do “whatever it takes to minimise the impact” of supply chain issues on customers and selling partners in the run-up to Christmas. “It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners,” he said.

Don’t miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic’s digest of need-to-know sci-tech news.

Vish Gain is a journalist with Silicon Republic

editorial@siliconrepublic.com