Apple and Intel give gloomy 2022 outlook amid supply chain crunchesLeigh Mc Gowranon April 29, 2022 at 07:36 Silicon RepublicSilicon Republic

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Apple and Intel both announced they expect weaker than expected quarters ahead, as supply chain issues in China and the global chip crunch take their toll on the tech giants.

While both companies had steady quarters, the ongoing war in Ukraine, supply chain issues in China amid a Covid-19 resurgence and chip shortages have impacted their outlook for the quarters ahead.

Apple

In its second quarter ending 31 March, Apple reported earnings of around $97.3bn, a 9pc year on year increase, while earnings per share were $1.52. Both of these results beat analyst estimates, according to Refinitiv.

“This quarter’s record results are a testament to Apple’s relentless focus on innovation and our ability to create the best products and services in the world,” Apple CEO Tim Cook said yesterday (28 April). “We are delighted to see the strong customer response to our new products, as well as the progress we’re making to become carbon neutral across our supply chain and our products by 2030.”

The tech giant is still seeing positive results from some of its major product launches last year, such as the including the iPhone 13 and the M1-powered Macs.

Apple’s iPhone business grew by 5pc in the first quarter, reaching $50.5bn, while the sale of Mac computers increased by 10pc to $10.4bn.

However, Chief Financial Officer Luca Maestri warned analysts that several challenges face the company for the quarter ahead, including supply constraints that could hit Apple sales by $4bn to $8bn. He added that Covid-19 lockdowns were affecting demand in China.

Maestri added that the war in Ukraine would affect Apple’s sales more in the next quarter, while Cook added that the company was “not immune” to supply chain challenges. Apple’s shares went down by around 2pc after the conference call, Reuters reported.

iPad revenue was down 1.92pc to $7.65bn, while Apple’s services accounted for $19.82bn in revenue, up 17.28pc.

Intel

Intel’s first quarter was in line with analyst expectations, with revenue declining 7pc year on year to $18.4bn. Earnings per share were $0.87, just higher than Refinitiv’s expectation of $0.81.

This marks a difference to 2021, when the US chipmaker reported the highest annual revenue in the company’s 53-year history, along with a record breaking fourth quarter result.

Pat Gelsinger, Intel’s CEO, said the first quarter was a “strong start” to the year that exceeded expectations. He added that the company has a “$1trn market opportunity” ahead, with its IDM 2.0 strategy, an evolution of Intel’s model announced last year.

“In the supply chain, lockdowns in Shanghai and the war in Ukraine have demonstrated more than
ever that the world needs more resilient and more geographically balanced semiconductor
manufacturing,” Gelsinger said in an earnings call statement yesterday.

The chipmaker has been working to create a resilient supply chain for its semiconductor manufacturing. Further investment is expected in the coming years as Intel plans to develop what could be the world’s largest semiconductor manufacturing site by the end of the decade.

However, shares for Intel dropped by around 4pc yesterday as the company gave a weaker than expected forcast for its next quarter, CNBC reported.

“The chip shortage cost the U.S. economy $240bn last year, and we expect
the industry will continue to see challenges until at least 2024 in areas like foundry capacity and
tool availability,” Gelsinger said in the earnings call.

Intel’s various business sectors saw an increase in the last quarter, with its Datacenter and AI Group increasing by 22pc, while its Network and Edge Group rose by 23pc year on year.

However, Intel’s Client Computing Group, which includes its PC chips, went down by 13pc at $9.3bn, below analyst expectations according to Refinitiv.

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