This doesn’t help a chip sector already in a correction and on the verge of breaking major technical support. (The iShares Semiconductor ETF (SOXX) fell 1.25% yesterday to $435. That’s well below the 50-day moving average at $459 and just slightly above critical technical support at the 200-day moving average at $431.)
Yesterday Bloomberg reported, based on conversations with unnamed sources, that Apple (AAPL) is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units because of prolonged shortages of the chips used in its newest smartphone model.
The company had expected to produce 90 million new iPhone models in the last three months of the year. But it’s now telling manufacturing partners that the total will be lower because Broadcom (AVGO) and Texas Instruments (TXN) are struggling to deliver enough components. Texas instruments supplies a chip used to power the iPhone’s OLED display. Broadcom is a key supplier of wireless chips. Broadcom doesn’t manufacture its own chips instead relying on production from Taiwan Semiconductor Manufacturing (TSM). Texas Instruments makes some of its owns chips but also relies on production from Taiwan Semiconductor.
Apple and Texas Instruments declined to respond to the Bloomberg story. Broadcom didn’t respond to a Bloomberg request for a comment.
The average time lag between order and delivery of a chip has hit a record 21.7 weeks, according to Susquehanna Financial Group. The time lag has increased for nine months in a row.
Earlier this year Apple warned that it would face supply constraints for the iPhone and iPad during the quarter that ended in September. The company blamed global chip shortages.
Current orders for the iPhone 13, which went on sale in September, are slated to ship around mid-November. That schedule would enable delivery in time for the holiday season. The stakes are very high for Apple. The fourth quarter is expected to generate about $120 billion in revenue. That would be up about 7% from a year earlier.
Apple shares were down 1.30% at the close yesterday, October 12. They fell an additional 1.35% in after hours trading. Today, October 13, they dropped 0.42%