The Apple share price dropped to 1.3% on October 12 after reports about Apple reducing the number of iPhone 13 production due to the global shortage of semiconductor chips. The tech giant had previously expected to produce 90 million iPhones by the end of 2021. However, according to the latest reports, Apple is likely to cut its total production target by 10 million units.
Chip suppliers of Apple also saw a drop in their share prices because they were unable to deliver enough units in the given time. It’s not the problem with Apple only but the entire tech industry has been suffering the impact of chip shortage.
Apple Share Price Drop Does Not Mean Panic Selling
Production delays are usually short-term issues which is why financial experts have been advising the investors to refrain from panic selling. This drop in the Apple share price is temporary and will revert as soon as the first spell of iPhone 13 comes out.
Panic selling can make sense when the company’s phones start to catch fire or stop working entirely due to serious manufacturing issues. Such issues can take longer and the company can suffer major financial losses.
Right now, there is apparently a problem of supply and demand regarding this semiconductor chip that is affecting a lot more devices than just the iPhone.
Tech Industry in Crisis Due to Chip Shortage
Just like the Apple share price, other tech companies also saw drops due to chip shortage, such as Intel, the world’s largest chipmaker. Millions of technological products including cars, smartphones, and even washing machines need a computer chip to run, known as semiconductors. Many popular electronic devices are in short supply because the supply of these semiconductors is unable to meet the demand. At one point, customers cannot find their desired product and, on the other, manufacturers have been waiting on delivery of the components.
This is why it is still nearly impossible to get the latest Sony PS5, which depends on the elusive chip too. Other than that big car brands like Ford, Volvo, and Toyota, are either holding or producing new items very slowly. Apple had also previously warned in June that supply chain production problems could happen due to which iPhone supply might be affected. The company will reportedly post its latest earnings on October 28.
What is Happening with the Chip?
The global chip shortage reportedly set in motion subsequently with the COVID-19 pandemic and lockdowns. While the world was shut down, many factories were closed resulting in the unavailability of supplies needed to manufacture semiconductor chips. On top of that, increased demand from the end consumer put overwhelming pressure on the supply chain. Orders started to pile up way more than manufactures were able to complete.
In addition to manufacturing issues, ports around the world were also shut down for months due to COVID. According to reports, hundreds of containers remained on China Yantian port, from where 90% of the world’s electronics go through. Even the transportation industry was unable to handle the burden while facing labor shortages simultaneously.
There are many opinions about the causes of chip shortage. The most popular ones are attributed to the manufacturers made who bad decisions when the pandemic started. Most of them predicted that the economy would freeze for a long time so they canceled orders for chips. When the pandemic caused explosive demand for consumer electronics, there wasn’t enough to supply. Even the car companies stopped making their own chips to meet other consumer demands.
Experts have estimated that equilibrium could be reached by 2022 or early 2023.