The largest technology companies in the world are working effectively with chips. But their capabilities offer them some protection from the semiconductor manufacturing shortage that is affecting other industries, at least for now.
How much protection will be shown in the upcoming Q1 earnings reports.
Apple,
AAPL -0.25%
Microsoft,
MSFT 0.48%
Amazon.com,
AMZN 0.60%
FB -0.53%
and google parents
alphabet
Aco 0.05%
are very different companies, but to some extent they all sell their own devices with processors ranging from smartphones to smart speakers to virtual reality headsets. And all of them run huge networks of huge data centers to provide cloud software, e-commerce and social networking services, as well as movies, TV shows and video games.
But the lack of chip production, industries like automobiles is unlikely to see much in Big Tech’s March quarter results. According to consensus estimates by FactSet, strong double-digit growth in both revenue and operating income is expected for the five aforementioned companies in the quarter compared to the same period last year. In fact, the five are expected to grow sales by an average of 29% – quite an feat considering the group’s combined sales will be close to $ 300 billion in what is usually the slowest quarter of the year.
That The Group’s operating income is expected to outperform sales growth, indicating that analysts are not forecasting additional cost pressures that could result from component shortages, for example. The big five technicians are expected to increase operating income by an average of 43% year-over-year to a total of around $ 61.5 billion.
How does Big Tech do it? Because of the financial and operational influence of the world’s technology giants, they generally come first with manufacturers of chips and other critical components. And chips like the central processors for smartphones, PCs, and data centers are priced much higher than many of the chips found in cars, which can cost less than $ 1. As a result, chip manufacturers are prioritizing the production of these high-end chips.
Business in the higher priced categories has remained strong this year. IDC reports that first quarter PC sales increased 55% year over year to nearly 84 million units.
Nvidia,
NVDA -1.39%
On Monday, investors announced that the results for the fiscal quarter ended May 2 are higher than the previous outlook, which forecast a 72% increase in sales for the period. Smartphone sales tend to decline sharply from a seasonal high in the fourth quarter, but chipmakers do
Taiwan semiconductor manufacturing
TSM 0.41%
said in its own report for the first quarter on Thursday that it has seen « milder smartphone seasonality ». than in years? The past.
Even so, the risk of big tech exposure remains as the chip manufacturing shortage is expected to continue into next year. This is especially true for Apple, which has 82% of its revenue from hardware products for the past four quarters. The company is reportedly reducing production on some Mac and iPad lines due to the shortage. Microsoft was struggling with severe production restrictions for its new Xbox video game consoles back in the December quarter, and these devices are largely sold out by mid-April.
Tech companies like Apple, Google, and Amazon are also developing their own internal processors for products and data centers. However, these chips still require foundry capacity from manufacturers such as TSMC and
Samsung.
Intel
also enters the foundry game and plans to build two new chip manufacturing facilities in Arizona dedicated to this endeavor. However, building new chip factories takes two to three years. TSMC also noted that some of its key new facilities won’t be operational until 2023, so Chief Executive Officer C.C. Wei to predict that « this year and next, I still expect the capacity tightening to continue ». It’s a long time before the world’s tech titans hover over the battlefield.
Appeared in the print edition of April 17, 2021 as « Chip shortage has not yet met Big Tech ».
Ref: https://www.wsj.com
