By Nivedita Balu

(Reuters: Apple Inc. (NASDAQ:) Investors have cheered for years investments to grow its supply chain in order to satisfy the worldwide demand for iPhones and MacBooks. It is now a question of whether it can actually sell everything that it makes.

The rising cost of fuel and groceries in America, Europe, and Asia have raised concerns about consumer spending. Wall Street is now uncertain if Apple will be able to sell as many iPhones this year as last.

Apple announces fiscal second quarter results Thursday.

According to Jeff Pu of Haitong International Tech Research, “Demand should be the main focus given the rising inflation in the United States and the uncertainty surrounding China’s economic growth… Supply issues are also important but they are more immediate.”

China, world’s biggest smartphone market, is expected to ship 300 million smartphones this year. That’s up from the 325,000,000 units shipped last year. Trendforce, a research company, expects even more decline as China’s economy suffers from the strict COVID-19 restrictions and the Ukraine conflict.

In March, Apple launched the low-cost 5G iPhone SE in China to attract consumers who are looking for an upgrade. According to Jeff Fieldhack, Counterpoint Research’s Jeff Fieldhack, this plan may not be successful as less consumers will upgrade.

China’s demand for 5G smartphones is also expected to decline as Chinese consumers reduce spending on everyday necessities amid slower economic growth.

“When we sit here half a year from now, we’ll probably say that this was the quarter where there’s this new wave of headwinds that came in and shifted the market around,” Canalys analyst Runar Bjørhovde said. It’s introducing a number of new challenges in the coming quarters.

Apple is a market leader despite the fact that demand for iPhones and MacBooks has surged. But, Apple’s iPhone 13 series still saw a significant increase in market share.

Apple will report revenues of $93.89 trillion for its fiscal quarter 2, a 4.8% jump, but the slowest rate growth in six quarters. According to data from Refinitiv, iPhone sales, which are where Apple makes most of its revenues, will drop slightly to $47.88 million.

GRAPHIC: iPhone sales growth at risk https://graphics.reuters.com/APPLE-RESULTS/zgvomlajbvd/chart_eikon.jpg

Click here for an interactive graphic: https://tmsnrt.rs/3ERUGHX

Apple’s product shortages cost it billions in lost sales, but the company was able to avoid many of the problems that plagued other tech companies thanks to its purchasing power and its ability to order custom components for its products.

The company also prioritized producing high-margin and more expensive products. Apple projected that these supply issues would remain at a low level in the second quarter. This is another reason analysts have switched to the demand side.