The Apple supply chain seems full of positive noise

We may not see these kind of queues again, post-COVID — but parcel delivery seems busy

Apple appears relatively positive, requesting its suppliers make at least 90 million units of iPhone 14 even as key processor partner, TSMC, announces record July revenue in a year in which revenue is up 41% from a year ago so far.

There’s a spirit of optimism within the darkness

This news follows several super-positive financial reports from across the AAPL supply chain, and while most of these announcements are tempered by some overall concern at the ongoing collapse, Apple’s partners, at least, seem optimistic, even as consensus around tech stocks declines.

Hon Hai/Foxconn recently told us it expected sales to remain on track this year.

While Apple continues to be unable to meet demand for its newly introduced MacBook Air, Morgan Stanley analyst, Erik Woodring, notes continued weakness across the rest of the PC market, with vendors cutting component manufacture and inventories growing.

The analyst predicts PC sales will decline 17% year-on-year.

Now, we know Apple’s Mac and iPad sales have not been as strong as Apple hoped, but new products are coming down the pipeline and the story the company tells is that this is a challenge of production and supply logistics, rather than one of demand.

Apple doesn’t have a demand problem?

(It’s the same story that impacted MacBook assembler, Quanta Computer, which saw profit halve as its key Shanghai site was locked down and workers rebelled out of frustration with it all).

“In terms of testing the demand, you can’t really test demand unless you have the supply. We were so far from that last quarter that we have an estimate of what we believe demand was, but it is an estimate.

“We recognize how the industry is doing, we think that we’ve got a great story with the Mac, getting M1 out and now M2 out, we have a very strong offering for the back to school season and we’ll see how we do this quarter. We’ll report back in October,” Apple CEO Tim Cook said.

While inevitably constrained, the Apple market continues to grow.

 I imagine Apple had hoped to be growing faster, but it has successfully won customers over and is benefitting from this interest in a beleaguered market. It is building market share while others see decline.

Jamf shared this slide during its last call

Apple currently plans another strong iPhone launch

When it comes to the iPhone, Bloomberg states:

“Apple Inc has asked suppliers to build at least as many of its next-generation iPhones this year as in 2021, counting on an affluent clientele and dwindling competition to weather a global electronics downturn.”

Now, we can’t be totally certain that’s what Apple thinks, as that does sound like an opinion-led statement to me. However, we can anticipate Apple’s loyal customer base will stick with the company, particularly as it continues to deploy easy ways to purchase its products. Consider those briefly available zero interest deals in the UK or the BNPL service it plans in the US as prompts for purchasers.

The fact that it is winning converts in fast-emerging markets is also a positive factor.

[Also read: Apple’s ‘unceasing’ iPhone sales seemed to surprise analysts]

The bottom line?

Apple expects iPhone sales to keep pace with those last year,. That should translate into strong profits even if circumstances do dent rapid growth. Given the overall industry is expected to decline, this should also translate into giving Apple a larger share of the overall market. That’s a good position for recovery should circumstances improve.

Are you ready for the next act?

Of course, as the company focuses on services and as we expect plots the path to release of its brand new AR platform in 2023, the company will be hoping to add a little zest to future revenue, even as others see decline.

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