China Sales Boost Apple Profits As Chip Woes Loom

Apple said on Tuesday that a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth, sending its shares lower.

Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4 percent growth rate in the just-ended third quarter. Growth will also slow in Apple's closely watched services business, they said.

Earlier in the day, Apple reported third-quarter sales and profits that beat analyst expectations as consumers bought premium versions of its 5G iPhones and signed up for its subscription services. China sales grew 58 percent to US$14.76 billion in the quarter, which ended June 26.

Apple's strongest sales growth came from China, where Apple chief executive Tim Cook said that customers are buying up accessories such as the Apple Watch to pair with their iPhones.

"It wasn't just iPhone. We set a new quarterly record for Mac, for wearables, home and accessories, and for services" in China, Cook said. "It was our strongest geography."

In a conference call with investors, Apple executives also said that while the impact of the chip shortage was less severe than feared in the third quarter, it will get worse in the fourth, extending to iPhone production.

During the investor call, Cook said that chips affected by the shortages are made with older technology but are still needed as supporting parts to make the company's flagship device, the iPhone.

"We do have some shortages," Cook said, "where the demand has been so great and so beyond our own expectation that it's difficult to get the entire set of parts within the lead times that we try to get those."

Shares of Apple, whose valuation has more than doubled in about three years to nearly US$2.5 trillion, were down 1.7 percent to US$144.24 in after-hours trading after the call. (Reuters)