Apple had seemingly avoided the chip shortage for months, but the company’s fortunes have now changed. Also: Get a glimpse of Meta’s upcoming rival to the Apple Watch, and plans for Apple’s mixed reality headset come into focus.

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The Starters

Tim Cook was a bit defensive.

On Apple Inc.’s quarterly earnings call Thursday, the chief executive officer was quick to tell investors and analysts that the company’s product shortages aren’t the result of a “fundamental error that we’ve made” and that its supply chain strategy didn’t create the current troubles. 

Instead, he laid the blame on suppliers. While Apple designs its products in-house and relies on contract manufacturers like Foxconn Technology Group to assemble its devices, it’s dependent on hundreds of global suppliers to provide it with the parts and chips that make up an iPhone, iPad, Apple Watch or other device.

If only one chip or part is in tight supply, Apple can’t build and ship that device. There lies the problem—not Apple’s scrutinized manufacturers in China, Cook seemed to imply.

It’s not surprising to see Cook defend Apple’s supply chain strategy. After all, he was the one who helped forge the partnership with Foxconn and build its supply chain empire two decades ago.

If it were not for the current problems, Apple would have reported a record $90 billion for its fiscal fourth quarter. And instead of missing analyst expectations for total sales—as well as falling short in revenue from the iPhone, Mac and accessories—it probably would have had a clean sweep of beating Wall Street forecasts.

On the call, Cook cited two main causes for Apple’s woes: supply chain problems related to Covid-19 and the chip shortage, which itself was created in part by Covid-19. Cook says the former was resolved this month, while the latter is an ongoing threat. 

While the impact to the previous quarter was a whopping $6 billion—more than half of what Apple makes quarterly from the Mac—the holiday quarter is where the company will really get hit. 

Cook said that the impact on revenue will be greater than $6 billion during Apple’s fiscal first quarter, which includes the holiday season. But he also said sales would hit an all-time record, surpassing the $111 billion the company posted a year ago. Analysts had been estimating that Apple would record about $120 billion in revenue this quarter, but they’ve begun to pull down their estimates. The average projection is now about $118.5 billion. 

The timing of the supply problems is especially poor because Apple has one of its strongest product lineups in years, and now its sales engine is sputtering for reasons that it says are out of its control. 

For consumers, meanwhile, the shortages have resulted in unprecedented wait times across the board. That includes Mac and Apple Watch delays lasting until December and backlogs for the iPhone 13 Pro until the end of November. 

The Bench

A picture of Meta’s Apple Watch rival leaks in its own app. We’ve known for some time that Meta Platforms Inc., formerly Facebook, has been working on a smartwatch to take on the Apple Watch and other wearables. Now we know what it may look like. An official rendering of the device was discovered, with the help of developer Steve Moser, inside of the company's own Facebook View app for managing its glasses in partnership with Ray-Ban.

Setting aside the intrigue of how the image leaked, let’s take a look at what we now know about the device: It will have rounded corners, stainless steel edges, a large touch screen, detachable straps and, most notably, a front-facing camera.

I’ve already seen many users say they would never put a camera from Meta on their wrists given the ongoing privacy concerns with the social network. That issue may ultimately hamper the device, but I do believe someone will eventually nail videoconferencing from the wrist and make it a must-have feature—whether that’s Meta, Apple or another company. 

Meta gets the jump on Apple’s mixed reality headset with its own device. Facebook’s Connect conference was filled with hazy aspirations, marketing slogans and technologies that may never see the light of the day. But at the end, before announcing its name change, then-Facebook did manage to debut a new hardware device that could be quite compelling: a mixed reality headset.

The product doesn’t have an official name (it goes by the codename “Project Cambria”), but the company said it will be more powerful and pricier than the existing Quest 2. While the Quest 2 has a black-and-white passthrough mode for some augmented reality features, the new headset will have a mixed reality focus with a color passthrough mode. In other words, when you look through the headset to the real world, you’ll see a more lifelike version of it. 

Also incoming are better optics and displays and a bevy of new sensors to build more realistic avatars of its users. The Quest has been fairly successful as a VR headset, and, despite concerns about Meta, I think this new device will be a hit. Meta isn’t saying when it will go on sale other than sometime in 2022, but this device is going straight after Apple’s first mixed reality headset.

Apple is planning to unleash its own pricey device with advanced chips, displays, sensors and avatar-based features as early as next year. 

All this adds fuel to Apple’s feud with Meta. Between the Meta watch and dueling headsets—as well as the war of words around privacy and app-store policies between Cook and Meta’s Mark Zuckerberg—the clash between the companies could be a major tech story of 2022.

Post Game Q&A

Q: Will Apple’s upcoming headset play games or just focus on augmented reality?
Q: What’s going with Dropbox and Apple Silicon?
Q: What’s my best bet for getting the new MacBook Pro without waiting a month?

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