Apple shares drop, due to widespread chip shortage

Chip shortage is the reason, along with other reasons

Electronics giant Apple Inc. shares dropped by 4% on Tuesday, October 12 due to ongoing global computer chip shortage. This drop wiped off approximately $81 billion from the company’s market capitalization.

Earlier with the launch of iPhone 13 models like iPhone 13 mini, iPhone 13 pro and iPhone 13 pro max, Apple claimed to make 90 million units of the smartphone by the end of 2021. However, Apple has now stated that the total will be less than 10 million units.

Semiconductor manufacturing have been down considerably as the major manufacturers are struggling to meet the demand and increase their supply. Earlier, Intel’s chief executive Pat Gelsinger warned that the worst is yet to come. He told BBC media that it will be “a year or two before supplies return to normal”.

COVID-19 pandemic created a surge in sales of electronic products from cars, laptops, gaming consoles to household appliances, creating a shortage of semiconductor chips. Manufacturing a chip takes months and involves giant factories, dust free rooms, multi-million dollar machines etc. All these constraints along with ongoing situations led to increased production time to meet the demands.

Other factors may include the tense relationship between US and CHINA, since many US companies do business with Chinese companies. As a result of recent blacklist of Chinese companies by US, this had added to the situation.

This shortage will severely disrupt the supply chain and will constrain the production of many industries in 2021 and will potentially continue to 2023.