Apple iPhone production reportedly hit by chip drought

The global semiconductor supply crunch is showing no sign of abating with reports that Apple is having to cut its iPhone orders by 10 million.

The goss comes courtesy of Bloomberg and its anonymous sources. They reckon Apple is likely to cut its production targets for the iPhone 13 by up to 10 million units thanks to a lack of components from Broadcom and Texas instruments. That must especially wind Apple up as it has put such a priority on producing components such as its main processor itself, but a chain is only as strong as its weakest link.

The chip drought has been around for a while now, having initially seemed to be prompted by stockpiling following US embargos against Huawei and some other Chinese companies. But it has become clear that global supply chains in all sorts of areas are under strain as the consequences of shutting everything down for a year or so start to manifest themselves. Global interdependence and just-in-time supply chains have shown themselves to be very sensitive to exceptional disruption.

Apple’s share price was down a percent or so on the news, suggesting supply constraints had been priced into it, but maybe not to the extent of 10 million iPhones. Perhaps od even greater concern to investors is the lack of a light at the end of the tunnel, especially with the northern hemisphere winter approaching and with it the prospect of further Covid lockdowns.

In related news Nikkei recently reported that TSMC is set to collaborate with Sony to build a $7 billion chip fab in Japan, with the country’s tax-payers contributing half of the cost. Apparently it will make image sensors and automotive chips, serving as a reminder of quite how many industries are dependent on the semiconductor sector.

TSMC is the world’s dominant chip fab and is based in Taiwan, which lives under the constant threat of Chinese interference or even invasion. Consequently it has been going out of its way to geographically diversify, helped by the strategic priority placed on semiconductors by many countries. This Japanese move, if it happens, will be significant but the fab won’t start making chips until 2024.