Apple Says Chip Production, Not Demand, Is Limiting iPhone Supply as It Raises Guidance

Apple reported fiscal first-quarter results well above Street forecasts and issued March-quarter revenue guidance of 13%–16% year over year, but executives stressed that production capacity — not end-market demand — is the binding constraint on iPhone unit availability. The company traced the shortfall to limited access to leading-edge process nodes required for its A- and M-series system-on-chips, a concentration of capacity at Taiwan Semiconductor Manufacturing Company that has been absorbing elevated orders tied to AI-infrastructure builds. Apple said gross margin for the March quarter should be roughly 48%–49%, a sign of underlying profitability resilience tempered by sensitivity to rising component costs. Management acknowledged that memory-price inflation had a modest impact in the most recent quarter and cautioned it will be a more visible headwind in the coming quarter, while giving only high-level descriptions of procurement approaches. Executives highlighted efforts to diversify sourcing — including stepped-up purchases from U.S.-based facilities, reporting about 20 billion U.S.-sourced chips last year versus an earlier internal target of 19 billion — and emphasized the priority of securing more advanced-node wafer slots. That dynamic is unfolding alongside an industry response: TSMC has reported verification of stronger AI-driven demand from major cloud customers and signaled a material capex increase to expand leading-edge logic and packaging capacity, including faster build-out in Arizona. A recent U.S.–Taiwan trade arrangement lowering tariffs and anchoring Taiwanese investment into the U.S. also improves the economics of onshore expansion, but capacity additions will take quarters to materialize and will not immediately erase the current bottleneck. Analysts pressed Apple on memory supply and the extent to which AI-driven data-center buying is crowding out consumer SoC production; management reiterated its focus on securing advanced-node capacity rather than detailing tactical memory purchases. For investors, Apple’s guidance implies near-term revenue upside if it can convert latent demand into shipments as fabs add capacity, but the timing and execution risk remain the key variables. For suppliers and fabs, the situation heightens competition for scarce wafer slots and strengthens the strategic case for accelerated capital spending and localization. Operationally, Apple faces trade-offs between absorbing higher component costs, passing them through to customers, or accelerating upstream contracts and investments to lock future capacity. The company’s public stance remains cautiously optimistic: robust demand and constructive mitigation steps from both Apple and its foundry partners, yet no immediate fix to the advanced-node bottleneck.