China pumps Apple profits but chip shortage woes remain

Photo: EPA

Strong financial results in China and positive outlook linked to 5G iPhone upgrades fueled a massive profit driven rally for Apple, Reuters reported. The conglomerate announced better than expected returns from sales and launched a new buyback programme. But the company noted that global semiconductor chip shortage would affect the expected market performance of iPad and Mac and may result in several billions of dollars losses.

Fiscal second-quarter sales to China nearly doubled and results topped analyst targets in every category, led by $6.5 billion more in iPhone sales than predicted and Mac sales about a third higher than estimates. Apple also announced a $90 billion share buyback. Apple Chief Executive Tim Cook said on an investor call that Apple avoided a chip shortage in the fiscal second quarter by burning through supply buffers. In the fiscal third quarter, the shortage could cost the company $3 billion to $4 billion in revenue, said Chief Financial Officer Luca Maestri.

The shortfalls “affect primarily the iPad and the Mac,” Cook said. He added that Apple competes against other industries for chipmaking capacity in those older factories and "it's very, very difficult" to predicted when shortages will end, he said. Maestri noted he expects revenue for the quarter ending in June to grow by "strong double digits" year over year but a steeper-than-usual decline in revenue between its fiscal second and third quarters because of a later iPhone 12 launch. Apple had cruised through the coronavirus pandemic as home-bound consumers stocked up on electronic devices and signed up for paid apps and services for fitness and music, and sales shot up even higher as Apple released 5G iPhone models last fall. For the fiscal second quarter ended 27 March, Apple said sales and profits were $89.6 billion, compared with estimates of $77.4 billion.

In the fiscal second quarter, Macs and iPads benefited from consumers working from home and remote learning. On top of those trends, Cook said Apple customers were responding strongly to the company's M1 chip, its first in-house processor for Mac computers. Apple said iPhone sales were $47.9 billion compared with analyst estimates of $41.4 billion. Sales of Macs and iPads were $9.1 billion and $7.8 billion, respectively, compared with FactSet estimates of $6.8 billion and $5.6 billion. Apple's sales in the greater China region during the fiscal second quarter, which included the busy Lunar New Year shopping season, were up 87.5% to $17.7 billion, compared with a 57% rise in the previous quarter.

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