Supply-chain disruptions continue to wreak havoc on the production processes of different companies across the globe, Apple being the latest company to experience the challenge first hand. The disruptions interrupted Apple’s ability to produce new iPhone 13s, resulting in a production shortfall of 20%.
As the company continues to fall short of its production targets going into the holiday season, Apple cites supply chain restrictions and power regulations as the core causes of its failure to meet its targets. This has caused a noticeable anomaly in the Apple process as the company’s suppliers would typically be increasing production during this time to meet the expected holiday season demand- at the moment, it looks like most suppliers have either drastically reduced production or ceased it completely.
“Due to limited components and chips, it made no sense to work overtime on holidays and give extra pay to front-line workers,” said a supply-chain manager.
In the September quarter, Apple previously dealt with two supply-chain problems: The first was brought on by the industry-wide chip shortage that has affected many global companies. The second was a result of the shutdown of manufacturing plants all over Southeast Asia due to the shutdown the Covid-19 pandemic.
In a report released by Nikkei Asia, information about how the supply-chain bottlenecks and power restrictions in China have forced suppliers such as Foxconn, Pegatron, and other Apple suppliers to produce less, not more.
For the company to experience shortfalls in the critical holiday season were experienced even as Apple (ticker: AAPL) attempted a different strategy of prioritizing components for the latest version of its flagship device, which is also its biggest revenue earner.
As far as production shortfalls go, Apple took even worse hits in its production of iPads, whose volumes fell as low as 50% below production targets. This shortfall was partly due to the reallocation of specific components to other more profitable products.
Production forecasts for older versions of the iPhone dropped by 25% as Apple struggled with a tumultuous electronics supply chain. The tensions between the U.S and China are at the core of the supply chain problems over crucial technology.
The supply-chain issues have forced the tech giant to reconsider its production targets for 2021 and scale back on the planned production of a number of its core products. Apple had adjusted its production targets by as large as 10 million to 12 million fewer iPhone 13 units than the 95 million it had earlier planned to produce before the close of the year.
Apple shares rose 0.7% in premarket trading on Wednesday.