iPhone 13 helps Apple hit blockbuster earnings

"Apple's biggest quarter ever," is how Tim Cook describes the last three months of 2021.

As Apple recovered its seemingly miraculous ability to step deftly round the choppy waters of a supply chain crunch, Cook's company reported an all-time revenue high of US$123.9 billion for a quarter.

And for a tantalizing moment in early January, a market valuation of $3 trillion.

Figure 1: Late game advantage: iPhone 13s in Christmas stockings helped rocket Tim Cook's company to an unexpected revenue record and briefly, a $3 tn valuation.
(Source: Apple)

The revenue number, up 11% from a year ago, surpassed analysts' estimates by $5 billion and was also "better than we had expected at the beginning of the quarter," Cook told a conference call.

Not nearly as bad as it could have been, with chip shortages in the end largely affecting only iPad sales. In October, the company had slashed iPhone 13 sales targets by 10 million because of chip shortages.

And in fact, with net profits up a full 20% in the fourth quarter, not so very bad at all.

The cheery earnings news for Cupertino – which market watchers will be eyeing to judge if it extends to tech companies generally – comes as Apple's iOS 15.4 beta introduces an ability for users to unlock iPhones with Face ID while wearing a mask.

The new Face ID feature, which will be available as an option on the iPhone 12 and later, draws more on features around users' eyes.

Apple, Samsung vie in the major league play-offs

All this came during a tough fourth quarter when the global smartphone market was on meager rations.

Vaccination and reopening economies boosted sales in the first half of 2021. But then came the past three months, and Omicron and chip shortages dropped global smartphone shipments by 6.6% overall, to 356.4 million mobiles.

Even against this backdrop, Apple managed to dwindle down the difference separating it from market leader Samsung.

Apple's full-year market share increased to 18% in 2021 from 16% the year before, while Samsung clung tight to 20%, according to Omdia's market analysis.

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For the full year, Cupertino shipped 236.2 million units, up from 204.4 million the year before. By comparison, Samsung shipped 271.5 million, up from 256.3 million.

The fourth quarter, though, was Apple's turn to shine.

The release of the iPhone 13 in September pushed Tim Cook's company into the top spot for the last three months of 2021. Its market share leapt to 24% (next to Samsung's 19%) and it shipped 87 million smartphones (against Samsung's 69.1 million).

Further down the league tables, Xiaomi, vivo, and Oppo, in third to fifth places, each saw their shipments increase by over 20%.

And Huawei's spin-off Honor clinched eighth place in its first appearance, shipping 15 million units in the fourth quarter, against just 3.6 million in the first.

Just a touch of iPathos

If there was a downside in all this for Apple, it was iPad sales.

iPad revenues dipped 14% yearly, to $7.2 billion (an earnings miss, with analysts expecting $8.8 billion), amid "very significant supply constraints," said Cook.

"The issue with iPad, and it was a very significant constraint in the December quarter, was very much on these legacy nodes," though "we do see an improvement in the March quarter" coming, Cook added.

Inflation was raising the company's costs, especially in logistics, admitted Cook. He predicted however that the clunkiness of the component supply chain will get better in the spring quarter – but not go away altogether.

And if there's another big question underlying Apple's earnings, it's whither China.

Apple has the top four selling phones in urban China, where sales grew by 21% in the last quarter. But in December, the World Bank cut its 2022 prediction for China's GDP growth to 5.1%, which would be its third-slowest growth year since the late 1970s. Goldman Sachs cut its prediction to just 4.3% on January 11.

Meanwhile, Cook managed to dish out a bit of shade at Meta, by declining to use the word "Metaverse" when asked about Apple's plans for the metaverse.

Apple has never used "the word 'metaverse' in an ostensibly straight-faced manner," notes technology blogger John Gruber.

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— Pádraig Belton, contributing editor special to Light Reading