Apple Said To Be Shrinking iPad Production In Favor Of iPhone, Forced By Component Shortages

Apple Inc AAPL reportedly severely reduced its production of iPad tablet computers in order to assign scarce components to its iPhone smartphone line.

What Happened: Production of iPads was down 50% from the planned output for the past two months, reported Nikkei Asia.

The Tim Cook-led company also resorted to sourcing parts from older iPhone production lines to feed its iPhone 13 supply chain, Nikkei reported, citing people familiar with the matter.

Both devices share a number of components including core and peripheral chips, and according to Nikkei, this allows the Cupertino, California-based tech giant to move supplies from one production line to another.

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Why It Matters: Apple’s move to shift components to the iPhone while trimming iPad production is a sign that the semiconductor crunch is hitting the company harder than previously revealed, as per Nikkei.

The iPhone maker is reportedly placing a priority on iPhone 13 output because Apple forecasts a more robust demand for the iPhone versus the iPad in Western markets as they begin to recover from the ongoing coronavirus pandemic. Europe and America make up for 66% of the tech giant’s revenue.

“Apple's most important and critical ecosystems are all surrounding iPhones, its iconic product. To add one more point, iPads do not have that strong seasonality like its flagship iPhones, which are always launched in autumn,” said Brady Wang, an analyst with Counterpoint Research, reported Nikkei.

Last week, Apple's revenues of $83.4 billion were shy of a consensus estimate of $84.55 billion as a component shortage took its toll on the company’s performance.

Wedbush analyst Daniel Ives noted that a “supply chain black cloud” impacted every sector and Apple wasn’t immune either. The analyst described the supply constraints as transitory.

Price Action: On Monday, Apple shares closed nearly 0.6% lower at $148.96 in the regular session. The shares declined 0.35% in the after-hours session.

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