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Apple’s Supply Chain Is Its Strongest Link

By 2022-01-27 No Comments

Apple sold 6% more iPhones than Wall Street projected in the latest fiscal quarter; shoppers waited at an Apple store in New York City late last year.
Photo: Victor J. Blue/Bloomberg News

Apple Inc.’s latest results prove the old adage about an 800-pound gorilla sitting wherever he wants—even if there doesn’t seem to be a chair.

In a market where even chip equipment makers can’t get enough chips, the world’s largest maker of consumer electronics found plenty. Enough, at least, to turn out better-than-expected sales across most of its product lines for its fiscal first quarter ended December. That helped Apple’s total revenue for the period rise 11% year over year to $123.9 billion. Analysts were expecting a…

Apple Inc.’s
latest results prove the old adage about an 800-pound gorilla sitting wherever he wants—even if there doesn’t seem to be a chair.

In a market where even chip equipment makers can’t get enough chips, the world’s largest maker of consumer electronics found plenty. Enough, at least, to turn out better-than-expected sales across most of its product lines for its fiscal first quarter ended December. That helped Apple’s total revenue for the period rise 11% year over year to $123.9 billion. Analysts were expecting a gain of only 7% for the quarter. Apple’s share price rose 5% following its results Thursday afternoon.

The company conceded that it did experience supply constraints during the quarter—more so than in the previous period. But no other company in the technology hardware business has Apple’s combination of financial and operational might. Hence, the company acquired enough components to sell $71.6 billion of iPhones during the quarter—6% more than Wall Street had projected. That is up only 9% year over year, but it still represents a strong surprise given belief that the record cycle sparked by the iPhone 12 would peter out. The iPhone 13, introduced during the fall, added some pricier new models with higher memory configurations.

Apple’s operational heft also allowed the company to manage its bottom line well at a time when many of its peers are spending extra to secure supply and transportation. Apple’s operating income jumped 24% year over year to $41.5 billion. That resulted in operating margins of 33.6%—the highest in nearly a decade.

The company expects supply constraints to ease in the current quarter ending in March. But it still injected a note of caution, projecting a deceleration from the revenue growth seen in the most recent period. That is roughly in line with what Wall Street already expected for the quarter. And the strong Mac sales, driven by Apple’s new line of in-house processors, likely has momentum; sales in that segment surged 25% year over year to pass the $10 billion mark for the first time ever in the December quarter.

But the 5G promotional bursts that helped drive the last iPhone cycle won’t repeat, leaving Apple’s largest product still likely to revert to low single-digit growth this year.

The bright side is that Apple’s procurement prowess is unlikely to leave many sales unfilled.

Write to Dan Gallagher at [email protected]

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