Neil Hughes
The data in Apple's recently released 10-Q filing reveals the company has invested heavily in manufacturing and component purchases as it gears up for a series of highly anticipated major product launches this fall, including a next-generation iPhone and anticipated "iWatch."
The document filed with the U.S. Securities and Exchange Commission this week discloses that Apple's commitments for third-party manufacturing and components grew 22 percent quarter over quarter to $15.4 billion at the end of June. The increase was highlighted on Friday by analyst Katy Huberty of Morgan Stanley, who noted that the off-balance sheet commitments are a sign of "major product ramps" in the coming months.
In addition, Huberty highlighted that Apple has committed to $5.6 billion toward product tooling and manufacturing process equipment, advertising, research and development, and Internet and telecommunications services. That represents an increase of 100 percent sequentially.
Total commitments of $21 billion grew 46 percent year over year, as well as 36 percent from the previous quarter. She noted that's the highest sequential growth of any June quarter since Apple started selling the first iPhone in 2007.
In Huberty's eyes, there are likely two reasons for this major increase. First, she believes that Apple is planning to build more iPhones than ever for a record setting launch this fall — information consistent with recent supply chain rumors which have pegged the company building between 70 million and 80 million "iPhone 6" units before the end of this year.
Huberty also believes the significant spending increases could signal that Apple is planning to enter a new product category that would debut this year. The company is widely expected to launch a so-called "iWatch" this fall.
In addition, AppleInsider noted earlier this week that Apple spent a record $1.6 billion on research and development last quarter, a 36 percent year-over-year increase of $425 million. To date, Apple has spent $4.36 billion on R&D thus far in fiscal 2014, and that spending has been accelerating each quarter.
Apple's major investments come as the company is heavily rumored to launch not only an "iWatch," but a next-generation iPhone with two screen sizes of 4.7 inches and 5.5 inches, and a redesigned MacBook Air with Retina display.. Other products expected to be refreshed this fall include the Apple TV and iPad.
William Gallagher
Christine McKee
AppleInsider Staff
Chip Loder
Malcolm Owen
34 Comments
The BusinessInsider article explains the relationship between "off-balance sheet" commitments mentioned by Huberty and future revenue. http://www.businessinsider.com/chart-the-clearest-sign-that-apple-revenue-is-about-to-explode-2014-7
We have all become Macbeth: She should have died hereafter; There would have been a time for such a word. To-morrow, and to-morrow, and to-morrow, Creeps in this petty pace from day to day To the last syllable of recorded time, And all our yesterdays have lighted fools The way to dusty death. Out, out, brief candle! Life's but a walking shadow, a poor player That struts and frets his hour upon the stage And then is heard no more: it is a tale Told by an idiot, full of sound and fury, Signifying nothing.
[quote name="Gatorguy" url="/t/181563/apple-spending-on-manufacturing-parts-sees-biggest-increase-since-2007-launch-of-first-iphone#post_2569061"]The BusinessInsider article explains the relationship between "off-balance sheet" commitments mentioned by Huberty and future revenue. http://www.businessinsider.com/chart-the-clearest-sign-that-apple-revenue-is-about-to-explode-2014-7[/quote] Apropos of nothing, take a gander at AMZN this morning. They are really getting walloped.
We have all become Macbeth:
She should have died hereafter;
There would have been a time for such a word.
To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
Are you implying that measures of financial performance literally signify nothing?
[quote]In Huberty's eyes, there are likely two reasons for this major increase. First, she believes that Apple is planning to build more iPhones than ever for a record setting launch this fall -- information consistent with recent supply chain rumors which have pegged the company building between 70 million and 80 million "iPhone 6" units before the end of this year. Huberty also believes the significant spending increases could signal that Apple is planning to enter a new product category that would debut this year. The company is widely expected to launch a so-called "iWatch" this fall.[/quote] But R&D is manufacturing, is it? If they need to pay for supplies for a much larger number of iPhones than before, ok, but that is manufacturing, not research, right? That she thinks they are spending on an iWatch I can understand, and that would be research.