Nikkei Does Deep Dive Into Apple’s ‘Nightmare Before Christmas’ Supply Chain Issues

At the beginning of October when device production typically ramps up, Apple cut iPhone and iPad assembly for several days because of supply chain constraints and “restrictions on the use of power in China,” reports Nikkei.

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In a detailed report on Apple’s ‌iPhone‌ production woes, Nikkei says that Foxconn, Pegatron, and other Apple suppliers ramped down on production for the first time in more than a decade, with workers getting time off rather than overtime hours as is typical.

“Due to limited components and chips, it made no sense to work overtime on holidays and give extra pay for front-line workers,” a supply chain manager involved told Nikkei Asia. “That has never happened before. The Chinese golden holiday in the past was always the most hustling time when all of the assemblers were gearing up for production.”

According to Apple CEO Tim Cook, supply constraints around the time of the ‌iPhone‌ launch cost Apple more than $6 billion. Cook cited chip shortages as one of the reasons for the supply issues, and while Apple uses leading edge nodes that are not affected by ongoing issues with chip availability, other manufacturers that create components for Apple devices have been impacted.

October reports said that Apple cut its 2021 ‌iPhone‌ production goals by more than 10 million units after Broadcom and Texas Instruments were unable to deliver enough components. The lack of even a single tiny component for the ‌iPhone‌ can impact production, and there are a lot of moving parts for Apple to deal with.

Nikkei did a deep dive into Apple’s supply issues, interviewing more than 20 industry executives to see what went wrong. Apple reallocated components from iPads and older iPhones like the iPhone 12 to the new iPhone 13 models, but production was still 20 percent short of where Apple wanted to be because of power restrictions in China, lockdowns in Vietnam and Malaysia, and supply bottlenecks caused by skyrocketing demand for chips.

The reallocation hit ‌iPad‌ production hard and Apple produced 50 percent fewer devices than planned, with shortages on the tablets lasting well into November. With many ‌iPad‌ models in short supply, customers who order now won’t be able to get a device in time for Christmas as delivery already extends into January.

According to Bloomberg, Apple recently informed its suppliers that interest in the ‌iPhone‌ is slowing ahead of the holidays, which could be due to the long wait times for new devices in September and October. Apple planned to make up for the supply constraints in early 2022 when manufacturing issues were ironed out, but Bloomberg claims Apple may not end up getting the necessary orders from customers.

Sources that spoke to Nikkei painted a different picture, and said that Apple has asked suppliers to reaccelerate ‌iPhone‌ production in November, December, and January. An Apple component supplier told Nikkei that Apple has reassured them that demand has persisted and that Apple has postponed orders to a later period because of supply constraints, so it’s not clear which take is accurate.

Nikkei‘s full exploration into Apple’s supply chain and what led to the company’s current situation with chip shortages and production delays is well worth reading.

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