Apple's inventory jumps as memory chip costs squeeze its margin outlook
Apple expects memory costs to keep rising, and its inventory and purchase commitments are growing to match.
Apple's fiscal fourth-quarter earnings showed inventory rising to $14.54 billion, up 31.1% from $11.09 billion in the prior quarter and 154.3% from $5.72 billion a year earlier, driven largely by stockpiling of memory chips. The company forecasts a 45% to 46% gross margin for the December quarter, down from 47.9% in September, with CEO John Ternus warning that memory costs will rise further and that the benefit from carried-in inventory will shrink over time. Apple says its manufacturing purchase obligations grew by $33 billion between June and September, and COO Sabih Khan did not rule out more device price increases. Weak iPad results, with $6.2 billion in revenue against $6.7 billion expected and down 10% year on year, were blamed on supply constraints even as iPhone and Mac sales beat estimates.
Why it matters
For people who follow the technology industry, Apple's results show that the cost of memory chips is now large enough to shape the financial outlook of the world's biggest device maker. Apple is holding far more inventory than a year ago, has committed billions more to future component purchases, and expects gross margin to fall from 47.9% to between 45% and 46% for the December quarter, largely because of memory prices. Its leaders have also not ruled out further device price increases, which would pass some of that cost on to buyers.
Matters or hype?
Does this story matter, or is it hype? Vote before you see what everyone else said.