Apple Stock Could Get Hit By Semiconductor Shortages
There has been a widespread shortage of chips in recent months that has been impacting a wide variety of industries since just about every product category requires technology nowadays. While Apple (NASDAQ: AAPL) is known for leveraging its deep pockets to lock down supply ahead of time, sometimes years in advance, not even the Cupertino-based tech giant is immune to the industry’s woes.
The iPhone maker’s supply chain was impacted last year by the COVID-19 pandemic, and the 2021 chip shortage might even hinder iPhone production.
Why Semiconductor Shortages Could Even Hit Apple
South Korean tech conglomerate Samsung operates a chip fabrication plant in Austin, Texas, which was severely impacted by the polar vortex that slammed the Lone Star State last month and crippled its power grid. Samsung had to halt chip production due to the power outages, and the plant has been idling since mid-February, according to Nikkei Asia.
That single manufacturing facility is responsible for an estimated 5% of global semiconductor supply for 12-inch silicon wafers, and Samsung is one of Apple’s most important suppliers for a wide range of components. The bottleneck is now threatening production of smartphones and PCs, including Apple’s all-important iPhone, which represented half of the company’s revenue in 2020.
More specifically, Samsung makes chips that help power OLED displays and image sensors at that plant. All four of the iPhone 12 models that Apple launched in 2020 feature OLED displays, as Apple has been steadily ramping up its adoption of the display technology in recent years.
Samsung is working to bring the plant back online, but has not yet provided a timeline to do so, according to the report.
The Silver Lining for AAPL Stock
The good news for Apple is that the shortages are only expected to potentially impact smartphone production in the second quarter, which is relatively less important financially to the company compared to the third and fourth quarters when it usually launches new iPhone models.
The iPhone 12 was slightly delayed in 2020 due to supply chain disruptions caused by the public health crisis, but this year the “iPhone 13” lineup is not expected to suffer from the same types of delays. Prominent Apple analyst Ming-Chi Kuo still believes that the iPhone 13’s schedule for 2021 remains on track, with the device likely to launch in September.
Contract chip manufacturers like Taiwan Semiconductor (NYSE: TSM) have been scrambling to ramp production capacity to mitigate the global shortages and meet overwhelming demand stemming from numerous sectors.
Hopefully, the foundry industry can achieve supply-demand balance within a matter of months, particularly as vaccine distribution accelerates and macroeconomic conditions recover.
Apple typically commences mass production of the latest iPhone models during the summer ahead of launching the handsets in the fall, so the company still has a few months to address any potential component constraints related to its flagship product launch.
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