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Has Apple's iPad Become Irrelevant?

Sales of the iPad tablet fell 14% to $7.25 billion in the quarter ending on Dec. 25.

While a strong earnings report has sent Apple  (AAPL) - Get Apple Inc. Report shares up by more than 5% in after-hours trading, one of its products is faring significantly less well: iPad sales are down 14% to $7.25 billion.

With $123.9 billion in revenues, an all-time record, in the first fiscal quarter of 2022, Apple beat analyst expectations of $118.3 billion. 

The touchscreen tablet that Apple first launched in 2010 not only brought in the least sales but was also the only major product to fall below analyst expectations, which had been set at $8.8 billion - iPhone sales brought in $71.6 billion while Mac sales were at $10.85 billion.

Why Aren't People Buying iPads?

The iPad comes with a long history of being the underdog — when Apple first introduced the product in 2010, its name was met with widespread ridicule online. Too heavy to constantly carry around like an iPhone and too small to fully replace a Macbook or other work computer, it is often considered a secondary or "nice-to-have" purchase.

That said, this year brought a slate of challenges unrelated to customer preferences. In the earnings call, Apple's CEO Tim Cook said named supply chain constraints that gripped all of tech and retail during the pandemic as the year's biggest challenge. 

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"The issue with iPad [is that there] was a very significant constraint in the December quarter [...] on these legacy nodes that I had talked about," Cook said, referring to the processing chips that are necessary for things like screen display.

What's Going On With Those Chips?

Semiconductors have, indeed, been in significant shortage over the last two years. As making them requires highly sophisticated and costly infrastructure, entire industries depend on just a few companies that can make them. While companies in Asia and the U.S. have been trying to ramp up production, any new factory will take years to build.

But as the iPad is far from the only Apple device to require legacy nodes, the current numbers could be a result of the company prioritizing production of already more-popular products. In November, the Nikkei business newspaper claimed Apple was making around 50% fewer iPads than usual in order to preserve chips for the new iPhone 13.

While supply chain shortages cost Apple more than $6 billion in lost sales, Cook is optimistic that the situation is already improving.

"We're not guiding by product and constrained by product level," Cook said. "But overall, we do see an improvement in the March quarter in terms of the constraints going down versus what they were in the December quarter."