Apple to make 10 million fewer iPhones due to microchip shortage

Apple is likely to slash production of its iPhone 13 by as many as 10 million units due to a global shortage in semiconductor microchips, a technology analyst says.

The next generation of the company's iconic smartphone is set to be released this fall, an event that is typically followed by a bonanza of sales.

But that bonanza will likely be smaller than normal as the ongoing shortage of microchips that has eaten into the supply of everything from cars to appliances, and even toys, is finally starting to hit the supply of iPhones.

Chip suppliers such as Broadcom and Texas Instruments have reportedly told the smartphone maker that they won't be able to deliver as many units as they said they could.

"IPhone demand doesn't appear to be an issue, and suppliers are likely still prioritizing its production. But Apple may have cut fourth quarter iPhone orders by 10 million from 90 million due to supply constraints," Bloomberg Intelligence technology analyst Woo Jin Hoo said in a note to clients.

With its massive scale and corresponding purchasing power, Apple has managed to weather the supply chain bottlenecks better than most companies. CEO Tim Cook was previously chief operating officer at the company, and he made the efficiency of the company's supply chain his top priority when he was in that logistics-focused role. That expertise is paying off now, but not even Apple is immune from the forces that have waylaid the entire tech industry.

The delay between ordering a semiconductor and receiving has risen to an all-time high of 20 weeks, according to Bloomberg.

The reasons for the lack of semiconductors are complex, but mostly boil down to COVID-19. The pandemic depressed demand for just about everything in 2020 and is still a factor as factories struggle to ramp up in 2021.

"Supply-side constraints and production curbs by chip suppliers have no easy fix, though we expect Apple to fare better than peers in terms of component sourcing," analyst Anurag Rana said.

Edward Moya with foreign exchange firm Oanda said the production cut is a "sign that the chip shortage is nowhere near over and that the iPhone supercycle is alive and well."

"Holiday shoppers that want to give the gift of iPhone 13 need to buy now."

Apple is still on track to sell 250 million iPhones around the world in 2022, even though industry experts say the semiconductor shortage could last into 2023.