- Apple CEO Tim Cook said the company is paying more for shipping costs than he expected.
- Cook warned that the iPhone and iPad could be impacted by the computer chip and silicon shortages.
- Experts predict the shipping container shortage will only get worse in the months to come.
- See more stories on Insider’s business page.
Apple CEO Tim Cook warned supply constraints and high shipping costs could impact holiday sales for the company.
“We’re paying more for freight than I would like to pay,” Cook said during the company’s quarterly earnings call on Tuesday.
Over the past year, shipping costs have surged. Earlier this month, the cost to ship a 40-foot (12.19m) boxload of goods from Asia to the US neared $US10,000 ($AU13,580) – up 229% from this time last year. As many shipping containers wait to dock at backlogged ports and trucking companies struggle to find enough drivers to haul the goods on the ground, the price of transporting commodities has become increasingly competitive.
Transportation costs have pushed consumer prices higher at stores and restaurants as major companies struggle to maintain their margins. While shipping rates are at multi-year highs, experts say transportation costs have not yet hit their peak.
“Our ships are still getting held up by severe … Covid quarantines,” CEO and founder of shipping company Berge Bulk James Marshall told CNBC. “If anything, we see that congestion [getting] worse with the delta variant and more problems with … Covid infections … [It could lead to] “a significant tightening of the market in the second half of the year.”
During the company’s earnings call on Tuesday, Cook told investors that supply constraints, in particular the global chip shortage and constraints on silicon, could further impact iPhone and iPad availability in the fall. Cook hearkened back to the company’s previous report in April, when he said he expected the semiconductor shortage to cost the company between $US3 ($AU4) billion to $US4 ($AU5) billion.
“We were able to mitigate some of those constraints during the June quarter, and so we came in at a number that was slightly below the low-end of that range that we accorded at the beginning of the quarter,” Cook said. “But we expect that number to be higher for the September quarter.”
The CEO pointed out that the products with “legacy node” chips such as the iMac and iPad are the devices that would be primarily impacted, by the chip shortage, while the iPhone could also see some impact from silicon supply constraints.
The affected chips employ traditional manufacturing lines used by other automakers and tech companies that are also scrambling to procure semiconductor chips. The computer chips are involved in anything from cars to televisions, gaming systems, and home appliances. Rising demand from the work-from-home boom paired with COVID-19 shutdowns in the supply chain have made the chips an especially valuable commodity.
In the past, Apple has been able to avoid any major impact from the shortage due to the fact that the company began producing its own chips last year. On most of its other products, Apple uses high powered computer chips that are not impacted by the shortage.
The CEO did not specify which semiconductor parts were in short supply or when the transportation and chip issues would be resolved.
Overall, Apple reported a blowout quarter on Tuesday, driven by sales of iPhones, which were up 50% annually to $US39.57 ($AU54) billion in sales.