Key facts
- Apple's inventory has nearly doubled to $11.1 billion due to supply chain constraints.
- The company is facing significant challenges in securing advanced memory nodes for its chips.
- iPhone and Mac sales grew 22% and 29% respectively year-over-year.
- Apple reluctantly raised prices for Macs and iPads.
- Apple stock dropped 6% in after-hours trading.
Apple is significantly increasing its inventory levels as it anticipates worsening supply chain constraints, particularly for advanced memory chips essential for its iPhones and MacBooks. CEO Tim Cook described the situation as a "hundred-year flood" impacting memory pricing and production costs, leading to a reluctant increase in prices for Macs and iPads.
Despite reporting its strongest June quarter ever with robust iPhone and Mac sales growth of 22% and 29% respectively, Apple's inventory has nearly doubled to $11.1 billion from $5.7 billion last September. This marks a shift from its previous strategy of minimizing on-hand inventory. Cook indicated that supply constraints are expected to increase sequentially, with limited flexibility in the supply chain to address the issue.
Other major hardware companies, including Meta, Samsung, Microsoft, and Sony, have also raised prices. The anticipated supply challenges and a projected slowdown in revenue growth to 9%-11% year-over-year, compared to previous quarters' 16% growth, led to a 6% drop in Apple's stock in after-hours trading. The company's hardware engineering chief, John Ternus, is set to take over as CEO in September, potentially facing a challenging period.