Supply chain disruption heavily affect Apple and Amazon revenue
Big tech companies continue to feel the pinch of the supply chain disruption with both Apple and Amazon missing forecasted revenues. Disruptions include a shortage of supply chips and also logistical issues, especially with ports globally facing increasing traffic and consequent delivery delays.
According to Reuters reports, the supply chain disruption cost Apple US$6 billion in sales during the company’s fiscal fourth quarter. The amount missed Wall Street expectations, and chief executive Tim Cook said that the impact will be even worse during the current holiday sales quarter.
Speaking to Reuters, Cook also said that the supply chain constraints were caused by pandemic-related disruptions in Southeast Asia. He added that they have seen significant improvement recently in those facilities. Apart from that, the persistent chip shortage is also affecting most of their products.
Apple had already informed customers to expect delays for new Apple products. The company is also now actively developing its own chips, as a means to deal with the global chip crisis.
“We’re doing everything we can do to get more (chips) and also everything we can do operationally to make sure we’re moving just as fast as possible,” said Cook.
For Amazon, CNBC reported that the company’s shares dropped more than 4% after reporting weaker than expected results for the third quarter. Amazon also delivered disappointing guidance for the critical holiday period.
“In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs—all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners,” said Andy Jassy, Amazon CEO in a statement.
The company has taken steps to shore up its supply chain amid the global challenges, by adding new shipping ports and boosting its fleet of planes and trucks. Earlier this month, Amazon announced plans to hire over a quarter million permanent and seasonal employees nationwide, in part to help deal with the holiday shopping rush.
Interestingly, Microsoft, Google, and Facebook posted huge profits this week as well with Twitter the only other tech giant facing huge losses due to a lawsuit settlement.
At the same time, Adobe recently released its online shopping forecast for the 2021 holiday season. The list revealed that online spending in this season is expected to hit US$910 billion globally, an 11% growth year-over-year (YoY). Adobe also expects over US$4 trillion to be spent globally in all of 2021 – a new milestone for e-commerce.
“We are entering a second holiday season where the pandemic will dictate the terms. Limited product availability, higher prices, and concerns about shipping delays will drive another surge towards e-commerce, as it provides more flexibility in how and when consumers choose to shop,” said Patrick Brown, the vice president of growth marketing and insights at Adobe.
With the holiday season looming, the supply chain disruption needs to be solved soonest possible. Otherwise, companies like Amazon and Apple could face much more losses. As both companies working on solutions, the only hope now is for consumers to have some patience in their products.