Apple faces up to $8 billion in losses from supply chain constraints

Apple cardboard computer boxes on conveyor belt in factory
Supply chain constraints could slow Apple's growth.

Despite strong numbers for this quarter, the iPhone maker forecasts growing supply chain pains for its gear and components.

Apple posted robust numbers for its second quarter, with revenue up by 9% year-on-year and operating profit up by 9%. The company rode on its services business (including advertising), strong iPhone sales, and over 19% growth in North America, its biggest market by revenue. However, supply chain constraints triggered by the Shanghai lockdown could affect its performance going forward, the firm warned, with an estimated hit of $4-8 billion. 

The iPhone maker's services business grew 17% year-on year to reach nearly $20 billion. Apple reported that it now had around 825 million subscribers to its services, including App Store, Apple TV+, Apple Music and cloud services. The company added 165 million of them in the past 12 months, and it reported and generated $75 billion in services revenue. 


While North America was a strong performer, other markets performed less strongly. China was hit by surging Covid cases, Europe grew by 5% and Japan decelerated in the second quarter. Overall, however, Apple executives contended the company had a strong quarter.  

"We set an all-time revenue record for services and March quarter revenue records for iPhone, Mac, and wearables, home and accessories," CFO Luca Maestri said in a media statement. "Continued strong customer demand for our products helped us achieve an all-time high for our installed base of active devices.”

Elsewhere, its core iPhone business continued to chug along, growing 5.5% year-on-year to reach $50.5 billion, while Mac revenue went up over 14% to $10.44 billion. Apple's iPad unit continued to be impaired by supply chain challenges, with revenue dropping nearly 2%. "We grew in each of our product categories except iPad, which remains significantly supply-constrained throughout the quarter," CFO Maestri told analysts. 

The supply chain overhang was a challenge for all of Apple's businesses. "I want to acknowledge the challenges we are seeing from supply chain disruptions driven by both Covid and silicon shortages to the devastation from the war in Ukraine," CEO Tim Cook told analysts. 

This story first appeared on Campaign Asia-Pacific.

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