Has the PC market slowdown finally hit the Mac?

The PC industry slowdown may finally have caught up with Apple, if the latest slice of industry gossip is to be believed. A new report emanating from Korea says Apple suspended production of its M2 series processors — the chips used in the MacBook Pro, MacBook Air and Mac mini — in January.

Feeling the pressure?

The report says third-party companies that work with processors supplied by TSMC for packaging had to cease production in January and February because orders slowed so much. It adds that while production began again at some point in February, it did so at “half the level of the previous year.”

It’s worth noting that Apple hit new Mac sales records at the same point last year and saw record Mac revenues for its March quarter. In the context of industry decline, it would be hard for Apple to maintain such momentum.

Speaking during Apple’s last financial call, Apple CEO Tim Cook warned that the PC market is going through challenging times. “The industry is contracting,” he said.

And while Cook is confident Apple silicon gives the company a strategic advantage moving forward, he warned: “I think it will be a little rough in the short term.”

Slow chip production may have been deliberate

Given it couldn’t avoid the slowdown, Apple appears to have tried to navigate it. Industry watchers will recall that last fall there was speculation Apple would introduce M2 Pro and M2 Max powered Macs at the tail end of 2022. In the end, these new Macs (MacBook Pro and Mac mini) didn’t make an appearance until January 2023.

It’s plausible Apple built up stock of the processors expecting they would be used in these machines in advance of an earlier release, but then delayed their introduction to spice Mac sales in the first calendar quarter of 2023.

If that were the case, a slowdown in manufacturing of new processors would make some sense, as the company would presumably have plenty of processors on hand for that launch.

This cadence means production of new processors would inevitably be affected, particularly if Apple does plan a move to M3 Macs later this year. That’s not to say everything in the Apple Mac garden is rosy. We know the company is also being impacted by the industry downturn, as it has already alerted us to the fact.

Apple has already predicted decline

Apple CFO Luca Maestri said of that quarter: “For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year, because of challenging compares and macroeconomic headwinds.”

Mac sales fell 29% by revenue year-on-year in the company’s last calendar 2022 quarter, the company said in February. The segment declined from $10.8 million in the December 2021 quarter to $7.7 million in calendar Q4 2022. While that’s bad news, the flip side is that Apple’s market share in comparison to other PC vendors continues to rise.

The company confessed to three main inhibitors to Mac sales:

• Apple shipped its first M1 Pro and M1 Max Macs in October 2021 to an enthusiastic reception.
• Global macro-economic challenges emerged.
• Foreign exchange fluctuations continue.

Down for now, but room to grow

Apple is expected to introduce the industry’s first 3-nanometer computers with the M3 Macs we expect it will announce at WWDC in June. These are expected to provide significant performance and power efficiency advantages that build on those delivered with M1 and M2 systems. In terms of computational performance per watt, Apple will have a strategically important story to tell.

The 15-in. MacBook Pro may be among the first Macs to receive the upgrade, but I see the uptick in Mac sales becoming really visible once the chip makes its way into the MacBook Air, given it’s probably the company’s most popular PCs right now. So, will the move to M3 Macs help stimulate greater sales?

In the absence of stimulus payments during a global economic slowdown it seems unlikely we can expect fresh records from the company, at least, not yet.

It is also possible that many of the company’s keenest Mac users have already invested in the M1 or later Apple Silicon Macs and may not yet feel the need to upgrade them, given even the M1 Mac mini remains as capable a Mac as anyone needs for most tasks.

But the fact that professional users can now look forward to significant performance improvements every 12 months in their Macs is a huge step forward for Apple. It gives the company confidence that whatever short-term headwinds Mac sales may face, the move to its own silicon gives it a unique offering in a market in which, even while sales may contract, it continues to grow.

(As the PC industry grew 6% over the last few years, Apple’s Mac share climbed 60%.)

A few supply/demand challenges along the way are unlikely to significantly derail that. And may also give the company a little time in which to reconfigure its Mac manufacturing supply chain more fully into India and Vietnam.

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