In the past few months there has been a widespread shortage of chips that has impacted a wide variety of industries as nearly every product category today requires technology. While Apple (NASDAQ: AAPL) is known for using its deep pockets to block supply prematurely, sometimes years in advance. Not even the Cupertino-based tech giant is immune to the industry’s problems.
The iPhone maker’s supply chain was hit by the COVID-19 pandemic last year, and the chip shortage in 2021 could even hamper iPhone production.
Why semiconductor shortages could even hit Apple
South Korean tech conglomerate Samsung operates a chip manufacturing facility in Austin, Texas, which was badly affected by the polar vortex that hit the Lone Star State last month and crippled its power grid. Samsung had to stop chip production due to power outages, and the factory is idle, according to mid-February Nikkei Asia.
This single manufacturing facility accounts for an estimated 5% of the world’s semiconductor supply for 12-inch silicon wafers, and Samsung is a key supplier to Apple for a wide range of components. The bottleneck now threatens the production of smartphones and PCs, including Apple’s all-important iPhone, which made up half of the company’s sales in 2020.
In particular, Samsung manufactures chips with which OLED displays and image sensors can be operated in this plant. All four iPhone 12 models that Apple launched in 2020 are equipped with OLED displays, as Apple has steadily pushed the introduction of display technology in recent years.
Samsung is working on bringing the facility back online, but has not yet provided a schedule for it, according to the report.
The silver lining for AAPL Stock
The good news for Apple is that the bottlenecks are not expected to affect smartphone production until the second quarter, which is less financially important to the company compared to the third and fourth quarters when new iPhone models are typically launched is.
The iPhone 12 was slightly delayed in 2020 due to supply chain disruptions due to the public health crisis. This year, however, the “iPhone 13” lineup is not expected to suffer from the same delays. Well-known Apple analyst Ming-Chi Kuo still believes the iPhone 13’s schedule for 2021 remains on track and the device is expected to hit the market in September.
Contract chip makers like Taiwan Semiconductor (NYSE: TSM) have made efforts to increase manufacturing capacity to alleviate global bottlenecks and meet overwhelming demand from numerous sectors.
Hopefully the foundry industry can strike a balance between supply and demand within a few months, especially as vaccine distribution accelerates and macroeconomic conditions recover.
Apple typically starts mass producing the latest iPhone models in the summer before the phones launch in the fall. As a result, the company still has a few months to address possible component restrictions related to the launch of its flagship product.
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