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Tech giants Apple, Samsung and Intel reported record earnings last week. Other companies, such as Lam Research, weren’t so lucky, reporting lower-than-expected numbers and declining sales. But if there’s one thing these companies can agree on, it’s that supply chain disruptions are here to stay.
On Thursday, Samsung reported an all-time quarterly record with fourth-quarter revenue of 76.6 trillion won ($63.4 billion), which the company says was partly due to the increase of its sales of high-end smartphones, smart TVs and home appliances. Gross margins declined due to lower memory prices, according to the company.
During its earnings call, executives provided Samsung’s business outlook for 2022, forecasting growth in several areas, including memory, components and finished products, based on the expected recovery in global computing demand. Executives, however, acknowledged that component shortages are likely to persist well into 2022.
Jin-Man Han, senior vice president of Samsung’s semiconductor business, said while overall revenue increased, its fourth-quarter standalone memory demand server performance declined from the third quarter. due to ongoing global supply chain issues, a slight increase in ASP and one-time special incentive payments. The company is also experiencing COVID-19-related impacts on its DRAM business as well as sluggish customer demand for SSDs due to construction disruptions caused by component shortages.
Apple also hit records on Thursday with first-quarter revenue of $123.9 billion, an all-time high for the company and an 11% year-over-year increase. Analysts’ estimates initially forecast Apple’s first-quarter earnings of $118.5 billion and projected mid-single-digit revenue growth for iPhone and Mac, which Apple beat with a 9-year increase. and 25% in these areas, respectively.
The company has struggled to meet its growth expectations for its iPad product category, citing severe supply constraints due to the pandemic. Down 14% year-on-year, the company’s iPad sales hit $7.25 billion, down from the company’s estimate of $8.18 billion.
Apple’s outlook on supply chain challenges for the coming year, however, looks more optimistic than Samsung’s. Luca Maestri, Apple’s chief financial officer, said that while the company still expects significant supply constraints, it predicts the severity of the shortage will lessen for its March quarter.
“First, we expect a record March quarter. We expect solid year-over-year growth,” Maestri said. “But … we still expect supply constraints important, but lower than what we saw in December.”
Observers are not so optimistic about Apple’s future. Analysts at Stone Fox Capital Advisors have warned that Apple is heading for flat growth even though its stock is currently valued at 28 times forward EPS targets.
“Apple was one of the biggest beneficiaries of the technological advancement of the last year and growth rates are slowing now,” said Stone Fox Capital. “My investment thesis remains bearish on the stock as second-quarter 2022 earnings guidance confirms that the gravy days are over for the company.”
Intel’s fourth-quarter earnings report also beat analyst expectations and the company’s forecast, bringing in $20.5 billion, $1.3 billion higher than its forecast and $17.62 billion. billion more than analysts’ estimates. The company’s most lucrative line of business, its Client Computing group, was down 7% year-over-year, however, according to FactSet. Intel CEO Pat Gelsinger said the drop in business was partly due to supply constraints, but says it’s not a concern because it scars its customers and PC makers who modify their quarter-to-quarter sales.
Gelsinger, however, acknowledged the effect the supply shortage has had on Intel’s business, particularly with respect to increased channel inventory despite ongoing shortages.
“Now the inventory position is where we’ve just been at historically low inventories for an extended period, just to catch up with demand. And so, we would say some of that is only reaching inventory levels that even approach what we would consider normal for a company of this size,” Gelsinger said. “So a lot of those challenges have really led to, I’ll just say, supply issues across the customer base. So as we approach next year, we hope to see some of them start to moderate and adopt more normal behavior in the industry.
Supply shortages appear to have hit other businesses harder. Lam Research’s December 2021 quarter revenue was $4.23 billion, below analyst estimates of $4.41 billion, according to FactSet. Shares of the company also fell 6% in late trading on Wednesday after the release of its report.
Not to mention its 2022 outlook dissatisfied with analyst forecasts. The company expects third-quarter revenue of $3.95 billion to $4.55 billion, barely meeting the analyst average of $4.49 billion.
During his earnings call, Lam Research President and CEO Tim Archer explained a host of supply chain disruptions attributed to its less than positive results.
“During the December quarter, unexpected delivery delays, primarily for components from a critical vendor, emerged in the last two weeks of the quarter, leaving us with insufficient time for a full recovery despite the diligent efforts of our supplier and our global operations team,” says Archer. “The resulting shipment delays resulted in revenue falling below the midpoint of our guidance range.”
Archer also said he expects the latest omicron strain to negatively impact freight and logistics operations, as well as exacerbate skilled labor shortages.
“We continue to experience significant shortages of certain components and parts, including semiconductors. As a result, revenue levels in our March quarter will be constrained by production constraints in our global supply chain.”