As generative AI drives up hardware demand, Apple is facing an even tighter supply of memory chips. Company management stated in the latest earnings call that supply chain flexibility is limited, and supply constraints will increase significantly in the coming quarter, pushing up manufacturing costs for products such as iPhones and Macs.
Inventories rose to $11.1 billion
Apple called the quarter ending in June its strongest June quarter ever. iPhone sales grew 22% year-over-year, and Mac sales grew 29% year-over-year, both exceeding market expectations. However, while demand remained high, the supply of key components did not keep pace.
Financial reports show that Apple's inventory reached $11.1 billion, nearly double the $5.7 billion in September last year. This means the company is preparing for potential supply disruptions by stockpiling inventory in advance.
Advanced storage nodes become a bottleneck
This change also deviates from Tim Cook's long-standing low-inventory strategy. Apple is known for its meticulous supply chain management and typically tries to keep inventory levels as low as possible. The significant increase in inventory now reflects the company's more cautious assessment of supply shortages.
Apple's most pressing issue right now is securing more advanced storage nodes for its self-developed chips. This type of memory is used in A-series and M-series chips, and related products cover iPhones and Macs.
Growth is expected to slow down in the next quarter.
During the conference call, Cook said the company still expects demand to remain high, but the impact of supply constraints will be significantly amplified sequentially due to reduced supply chain flexibility. He also stated that Apple is already seeing very clear supply constraints, and there is limited room in the existing supply chain to fix the problems.
Apple expects revenue to grow 9% to 11% year-over-year in the next quarter. This guidance is lower than the company's year-over-year growth of about 16% in the past few quarters, and also indicates that supply issues may be beginning to suppress shipments. As a result, Apple's stock price fell 6% in after-hours trading.
Additional information:Apple called the quarter ending in June its strongest June quarter ever, and John Tenus is expected to take over as CEO in September.
