Apple this week said that its performance in the second quarter of its fiscal 2026 would be constrained by the availability of processors made on TSMC's leading-edge production nodes, a type of announcement that the company has not made in years. Apparently, as AI accelerators based on some of TSMC's latest manufacturing processes ramp up, Apple believes it cannot secure enough capacity to produce more chips for its popular products.
Apple sets new business records, but warns about supply constraints
"On the supply side, I had made comments earlier about the constraint that we are seeing in Q2, that is reflected in the revenue guidance that Kevan [Parekh] gave earlier," said Tim Cook, chief executive officer of Apple. "The constraint, as I had mentioned, is due to the advanced node capacity, and it is really a result of growing so well in Q1 with — by 23% — and having less flexibility, partly due to that in the process, to increase it as much as we would like to increase it."
The company's chief financial officer, Kevan Parekh, emphasized that its guidance for next quarter is based on the company's 'best estimates of constrained supply,' meaning that things are dynamic.
"Beyond Q2, I do not really want to comment on supply [as] supply is a function of a lot of things in the industry that move around a lot," said Cook. "So, I would not want to comment on that."
(Image credit: Apple)
Sales of Apple's products and services increased 15.6% year-over-year to $143.756 billion during the quarter that ended on December 27, 2025. Although sales of Macs ($8.386 billion) and wearables ($11.493 billion) decreased year-over year, sales of iPhones ($85.269 billion), iPads ($8.595 billion), and services ($30.013 billion) set records and were up considerably — by 23%, 6.3%, and 13.9%, respectively — compared to the same quarter a year ago, which contributed to the company's record business performance.
However, for the second quarter of its fiscal 2026, the company expects revenue to grow by 13% - 16% year-over-year to around $107.75 billion - $110.62 billion due to constrained iPhone supply during the quarter.
TSMC's N3 supply reaches the limit?
Apple's latest iPhone 17 and iPhone 17 Pro are based on the company's A19 and A19 Pro chips that are produced by TSMC using its N3P fabrication technology. Apple was the first company to adopt TSMC's N3B — the foundry's original 3nm-class node — in 2023, and for a while was the only major user of N3B before Intel jumped on board a bit later, and then AMD and Qualcomm joined with N3E in 2024.
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