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Apple to spend $10 billion on innovation, expansion in 2013

post #1 of 55
Thread Starter 
This year, Apple will spend $10 billion investing in its future. That's a huge increase over last year, and it obliterates the popular notion that the company is drifting off into a highly competitive market with no real plans for innovating in the future.

In yesterday's earnings conference call, Steven Milunovich of UBS Securities noted that in capital expenditures, Apple "spent almost as much as Intel does," and asked, "I think you guys have said, you're not going to become vertically integrated per se, but in a sense you are since most of that I assume is buying equipment for your partners.

"Could you talk about the strategy here and how much of a differentiator this gives Apple in terms of your ability to ramp new products over time and maybe a little bit more about how deep you will you go in terms of semiconductor componentry, etc."

What Apple is buying in its capital investments

Apple's chief financial officer Peter Oppenheimer answered that Apple expects to spend "about $10 billion in CapEx this fiscal year, that will be up little under $2 billion year-over-year."

Oppenheimer added, "we expect to spend a little bit under $1 billion in retail stores and the other $9 billion is spent in a variety of areas. We're buying equipment that we will own that we will put in our partners facilities. Our primary motivation there is for a supply, but we get other benefits as well.

"We're also adding to our data center capabilities to support all the services that Tim spoke about in answering Ben's question and in facilities and in infrastructure. So, that's where the capital is going."

Apple has the cash to take its business elsewhere

In comparison, Intel (as mentioned by Milunovich) outlined plans to spend $12.1 to $12.9 billion in CapEx during 2012, while Samsung planned to invest $12.2 billion in its own semiconductor CapEx. About half of Samsung's CapEx was dedicated to integrated circuits last year.

Solid State Technology observed one year ago that "Samsung is significantly boosting spending for logic ICs. Approximately $6.5 billion of Samsung?s 2012 CapEx budget is dedicated to logic ICs. Samsung is Apple?s foundry partner for the A4 and A5 application processors used in iPad tablet computers, iPhones, and iPod touch devices, and doesn't want to lose this lucrative business."

A new report by Reuters notes that Samsung is now expected to "cut capital spending by as much as a fifth this year - a first reduction since the global financial crisis - as demand for computer chips weakens and rival Apple Inc looks set to buy fewer of its microprocessors used in the iPhone and iPad."

At the same time, the report noted, "by comparison, Taiwan's TSMC raised its capital spending to $9 billion this year, aimed in part at winning Apple orders away from Samsung."

Apple's capital investments growing rapidly

Last July, Apple outlined plans to spend $7.2 billion across fiscal 2012, exclusive of its investments in retail stores.

Morgan Stanley


Katy Huberty of Morgan Stanley observed at the time that "Apple's revenue and capex ex-retail stores have been 97% correlated over the past seven years and the acceleration in capex growth signals a similar acceleration in revenue growth, in our view."

This caused Huberty to forecast Apple reaching revenues of $56.4 billion in the holiday quarter. That forecast was a substantial $10 billion increase over Apple's record performance one year ago, when it reported quarterly revenues of $46.33 billion. Apple's actual revenues this winter quarter amounted to $54.5 billion, a year over year increase of "only" $8.17 billion.

If Huberty's calculations are useful at all, that would mean Apple's rapidly increasing CapEx investments (which ballooned from less than $1.5 billion in 2009 to reach $7.2 billion last year and $9 billion this year) portends a continued rise in the company's record revenues.

Regardless of their actual correlation with revenues, Apple's CapEx investments also mean that the company will continue to be able to deliver competitive, innovative products, thanks to new equipment Apple is buying for its partners to ensure a steady supply of components and finished products. New equipment will also help bring down the cost of components, a content area of focus Apple's chief executive Tim Cook alluded to in his other comments.
post #2 of 55
Let's hope they spend at least a few million to improve OS X's text services, which seem virtually untouched since 10.2. The spell-checker's suggestions draw a blank about a third the time for me, which is a real time waster.

Building ePub into the system like PDF is has long been overdue. Named styles have been in Word since at least the late 1980s. It's time they came to OS X text apps, particularly since that'd make working with ePub export much better. And GREP for InDesign is such a delight, it'd be great if Apple would add a system-wide GREP with numerous included S&Rs.

Given the time most of us spend dealing with text, improving how Macs handle text would make our lives more productive.
post #3 of 55
Quote:
Originally Posted by Inkling View Post

...  it'd be great if Apple would add a system-wide GREP with numerous included S&Rs. ...

 

Yeah, what harm could that do?

post #4 of 55
It's questionable that the capex described herein can be seriously considered as innovation. Perhaps the equipment will facilitate the manufacturing of innovative products. But equipment purchase is no more an act of innovation than building a warehouse and housing the R&D team therein. Might get R&D tax credits but that's it.

Second, maybe Samsung is cutting back from capex because Apple is buying the equipment for them 1smile.gif
post #5 of 55
Quote:
Originally Posted by Inkling View Post

Let's hope they spend at least a few million to improve OS X's text services, which seem virtually untouched since 10.2. The spell-checker's suggestions draw a blank about a third the time for me, which is a real time waster.

Building ePub into the system like PDF is has long been overdue. Named styles have been in Word since at least the late 1980s. It's time they came to OS X text apps, particularly since that'd make working with ePub export much better. And GREP for InDesign is such a delight, it'd be great if Apple would add a system-wide GREP with numerous included S&Rs.

Given the time most of us spend dealing with text, improving how Macs handle text would make our lives more productive.

Dude, they are talking capex here. So your concerns ain't being addressed.
post #6 of 55
Quote:
Originally Posted by BoxMacCary View Post

Let's all hope that the Holy Grail of gaming, home Virtual Reality, is somewhere in those $10B plans ....

Not unless they are shipping the equipment to your house. You did read the article?
post #7 of 55

Part of this is probably stocking the new mothership with Segways.

post #8 of 55
Quote:
Originally Posted by JollyPaul View Post

Part of this is probably stocking the new mothership with Segways.


That would make the CEO of Segway happy. Oh wait, he died in a Segway crash. Bummer ...

post #9 of 55

Innovation means ideas, not equipment. Of which Apple is struggling for recently. And doesn't it already employ all the smartest guys in the room?

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post #10 of 55
Quote:
Originally Posted by hentaiboy View Post

Innovation means ideas, not equipment. Of which Apple is struggling for recently. And doesn't it already employ all the smartest guys in the room?

Can you explain what you mean?

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post #11 of 55

Good! It's better to invest and spend money than to sit around hoarding it. Apple needs to make good use of the huge pile of cash that it's sitting on, IMO.

 

What good is money if you don't eventually spend it? 

post #12 of 55
Quote:
Originally Posted by hentaiboy View Post

Innovation means ideas, not equipment. Of which Apple is struggling for recently. And doesn't it already employ all the smartest guys in the room?

Hey look, some random dude on a messageboard forum states that Apple is struggling for ideas, followed by a sarcastic remark- it must be true then!

 

Seriously, go apply to Apple if you think you have some incredible insight that they do not. I'm sure they would be honored and infinitely fortunate to have such a person. Oh wait, you're one of these superficial, spoiled observers who believes Apple needs to invent a new product category every year. And yes, the research required to implement ideas into real world situations, to develop the technology, to test, to integrate, to perfect, and to execute on those ideas in an actual shipping product- by the tens of millions- yes, that takes billions of dollars. The fact that you would mock such a notion means it's highly suspect you have what it takes to be one of these people with 'ideas'.  If you haven't noticed, Apple isn't exactly the company that just throws any new idea it has into a product, they're renowned for what they come up with in the labs and DONT release. And thats what makes them special. Anything they come up with must be wholly integrated into their entire product line and ecosystem, becoming an integral part of their identity. You honestly think there's not a shitload of new ideas at Apple? What separated them from other companies is that they don't implement most ideas until the technology is there to get them to a certain level of useability and utility. I can't remember another year when Apple refreshed so many of their products in such significant ways. God, you're quite vain. 


Edited by Slurpy - 1/24/13 at 3:46pm
post #13 of 55
Quote:
Originally Posted by "Apple 
[" url="/t/155622/apple-to-spend-10-billion-on-innovation-expansion-in-2013#post_2264271"]Good! It's better to invest and spend money than to sit around hoarding it. Apple needs to make good use of the huge pile of cash that it's sitting on, IMO.

What good is money if you don't eventually spend it? 

I believe that query is an argumentative fallacy known as begging the question.

Surely you believe companies and people should have savings in case there is a need that arises so you would agree that companies and people should insulate themselves by keeping a healthy reserve. The question then becomes, "How much is too much?" Even if we had the data we would all likely come up with a different answer and for different reasons.

Clearly Apple believes they are sufficiently insulated as they have 1) issued quarterly dividends, 2) submitted a buyback, and 3) chosen to invest more than in previous years. You can have an opinion that it's not enough and they have too much but without an argument to back up your position it's as meaningless as the phrase, "What good is... if you don't...?"

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post #14 of 55

Totally clueless and inept management.  Could care less about shareholders, all about stroking its ego that is left now.

post #15 of 55
Quote:
Originally Posted by "Apple 
[" url="/t/155622/apple-to-spend-10-billion-on-innovation-expansion-in-2013#post_2264271"]Good! It's better to invest and spend money than to sit around hoarding it. Apple needs to make good use of the huge pile of cash that it's sitting on, IMO.

What good is money if you don't eventually spend it? 

Bait
post #16 of 55
Quote:
Originally Posted by hentaiboy View Post

Innovation means ideas, not equipment. Of which Apple is struggling for recently. And doesn't it already employ all the smartest guys in the room?

This is a very narrow view of what equipment can be and the innovation required to mass produce Apples products. In fact innovation in equipment is often required to realize affordable new products. In the case of Apples products some of them wouldn't be affordable without innovation in manufacturing.
post #17 of 55
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Originally Posted by wizard69 View Post

This is a very narrow view of what equipment can be and the innovation required to mass produce Apples products. In fact innovation in equipment is often required to realize affordable new products. In the case of Apples products some of them wouldn't be affordable without innovation in manufacturing.

Moving assembly line, cottton gin, I-beam and plywood come to mind.

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post #18 of 55
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Originally Posted by SolipsismX View Post


Moving assembly line, cottton gin, I-beam and plywood come to mind.


To be fair, such innovations were novel ideas that were developed into equipment/hardware, and not equipment that were simply purchased. But the rest of his point is just troll material.

post #19 of 55
Quote:
Originally Posted by wizard69 View Post


This is a very narrow view of what equipment can be and the innovation required to mass produce Apples products. In fact innovation in equipment is often required to realize affordable new products. In the case of Apples products some of them wouldn't be affordable without innovation in manufacturing.


I don't completely disagree. But as someone else pointed out above, this is about Apple's capital expenditures - i.e. direct purchasing of equipment. So it's hard to call this innovation until/unless we see how they are using it.

post #20 of 55
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Originally Posted by KingChael View Post

Totally clueless and inept management.  Could care less about shareholders, all about stroking its ego that is left now.


Ego stroking ... and cash counting. :)

post #21 of 55
Quote:
Originally Posted by stelligent View Post


To be fair, such innovations were novel ideas that were developed into equipment/hardware, and not equipment that were simply purchased. But the rest of his point is just troll material.

All equipment, all machines were at one time or another a novel and unique concept.

How did Apple get 2048x1536 IPS displays with a 264 PPI mass produced before anyone else? What about the 326 PPI IPS displays from 2010? There were plenty of evidence years before where Apple invested in companies that make and design displays. How is that not innovation?

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post #22 of 55
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Originally Posted by ankleskater View Post

It's questionable that the capex described herein can be seriously considered as innovation. Perhaps the equipment will facilitate the manufacturing of innovative products. But equipment purchase is no more an act of innovation than building a warehouse and housing the R&D team therein. Might get R&D tax credits but that's it.

Second, maybe Samsung is cutting back from capex because Apple is buying the equipment for them 1smile.gif


It all depends on how they use the equipment, no?

post #23 of 55
Quote:
Originally Posted by SolipsismX View Post


All equipment, all machines were at one time or another a novel and unique concept.


That's not what the article is about. But I won't belabor the point because, arguably, there could be business innovation in how they purchase and use the equipment. And I don't mean this sarcastically.

post #24 of 55
Quote:
Originally Posted by stelligent View Post


That's not what the article is about. But I won't belabor the point because, arguably, there could be business innovation in how they purchase and use the equipment. And I don't mean this sarcastically.

I previous poster changed the topic. I just commented on it accordingly. As for business innovation I've long argued that Dell, HP, et al. have been innovating in the PC market. Not so much with technology and certainly not in the way Apple has but they have been finding new ways to cut corners and turn a profit on inexpensive machines. Selling space on their machines for pre-installed trial programs I found to be a clever albeit despicable act. Using about 5GB of HDD space for a secret partition that stored the entire OS instead of including a DVD was another one.

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post #25 of 55
Crazy part is that no matter what they do some loud mouth minority will be all the place bad mouthing it with their stock analyst brethren

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #26 of 55
Quote:
Originally Posted by SolipsismX View Post


I previous poster changed the topic. I just commented on it accordingly. As for business innovation I've long argued that Dell, HP, et al. have been innovating in the PC market. Not so much with technology and certainly not in the way Apple has but they have been finding new ways to cut corners and turn a profit on inexpensive machines. Selling space on their machines for pre-installed trial programs I found to be a clever albeit despicable act. Using about 5GB of HDD space for a secret partition that stored the entire OS instead of including a DVD was another one.


Since you have made an interesting turn here, I will renege on my promise not to belabor the point.

 

I do agree that Dell has been innovating in the PC space. To be precise, they had innovated. In addition to what you mentioned, Michael Dell was a first mover (or one of them) in direct sales and large scale e-commerce. Dell's supply chain management was the stuff of envy before Apple took over as the kingpin. Much changed when Kevin Rollins, the COO who made Dell so efficient, was promoted to the CEO role (interesting parallel with Apple, to a small extent). These days, I don't know what Dell is really doing that truly stands out.

 

The success of HP's printer business was no accident. There were innovations on both the technology and business fronts. But again, they seem to be struggling much. I don't know if Meg Whitman is the right person to turn around the ship. She seems to be have the ruthless business smarts to run a corporation, and is simply not tech savvy.

post #27 of 55
Originally Posted by KingChael View Post
Totally clueless and inept management.  Could care less about shareholders, all about stroking its ego that is left now.

¡

post #28 of 55

Innovation refers to the notion of doing something different (Lat. innovare: "to change") rather than doing the same thing better.

 

2007 - iPhone

2010 - iPad

2013 - ?

 

I think we're due

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post #29 of 55
Quote:
Originally Posted by hentaiboy View Post

Innovation refers to the notion of doing something different (Lat. innovare: "to change") rather than doing the same thing better.

2007 - iPhone
2010 - iPad
2013 - ?

I think we're due

How is better achieved in business if through some form of change? If you don't think the Retina MacBook Pro is innovative, for example, then what is so innovative about the iPhone or iPad? They both use metal, glass, touchscreens, processors, wireless radios, etc. It's all stuff that existed long before these products arrived.

And what about the iPod in your list? That was 2001. That means 6 years between the iPod and the iPhone so why does Apple have to have an entirely new product type and category this year or else?

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post #30 of 55
Originally Posted by SolipsismX View Post
…why does Apple have to have an entirely new product type and category this year or else?

 

But the stock! You saw! Stale! Steve's dead! No xMac! Other clichés!

post #31 of 55

Apple is often credited with producing products that "enrich people's lives". iPhone, iPad and yes iPod fall into those categories. Don't know about you but 'Friction Stir Welding' doesn't enrich my life.

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post #32 of 55
Quote:
Originally Posted by hentaiboy View Post

Apple is often credited with producing products that "enrich people's lives". iPhone, iPad and yes iPod fall into those categories. Don't know about you but 'Friction Stir Welding' doesn't enrich my life.

 

Well, it enriches my life. So suck it.

post #33 of 55
Originally Posted by stelligent View Post
Well, it enriches my life. So suck it.

 

Ew. Soggy cereal.

post #34 of 55
Quote:
Originally Posted by stelligent View Post


I don't completely disagree. But as someone else pointed out above, this is about Apple's capital expenditures - i.e. direct purchasing of equipment. So it's hard to call this innovation until/unless we see how they are using it.

There are two answers to that.

First, much of the new equipment DOES have a direct impact on their ability to produce innovative products. Friction Stir Welding, for example. Or the tooling and equipment needed to make the direct bonded screens in the iMac. Or the tooling and equipment to produce the beveled edges of the iPhone. Or the equipment to assemble the motherboards for the MBA which is a key part of their ability to make it so thin and light.

More importantly, though, as far as stock price is concerned, Apple is putting $10 B into capital equipment - an astounding number - and still expecting profits to continue to grow. That indicates a huge confidence in their ability to continue to grow sales.
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post #35 of 55
Quote:
Originally Posted by hentaiboy View Post

Apple is often credited with producing products that "enrich people's lives". iPhone, iPad and yes iPod fall into those categories. Don't know about you but 'Friction Stir Welding' doesn't enrich my life.

The fact that there is a massive backlog for the iMac says that it clearly enriches a lot of peoples' lives.
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post #36 of 55
Quote:
Originally Posted by hentaiboy View Post

Apple is often credited with producing products that "enrich people's lives". iPhone, iPad and yes iPod fall into those categories. Don't know about you but 'Friction Stir Welding' doesn't enrich my life.

Fine, you're talking about a complete product that redefined and invigorates a market note just a new technique or innovation that serves as a part of the product, but what about the 6 years between the iPod and iPhone? That was all within Steve Jobs's reign. Before that is was 1984 since the first iMac.

What's silly is to say "it's been long enough Apple needs something shiny and new to look at" like you have the attention span of Honey Boo Boo what is the benefit of releasing an entirely new product category on a set schedule if there is no product they think they can tackle and there is still plenty of growth and development they can make in their current offerings.

Do you know why Apple has been successful since Jobs's came back? It wasn't from the suggestions you make but from seeing an opportunity and jumping on with a laser focus. If that opportunity isn't there why force it into existence simply because you want to match the iPhone to iPad's timeframe?

Personally, I think there is an opening coming for Apple to enter the HEC market with full force. I also speculate that their update of so many products last Autumn leaves a huge gap this Winter/Spring which could be for a new product offering. That said, it's because of other forces at play, not because I looked at one time based metric and determined everything else should follow that same cycle.

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post #37 of 55
Quote:
Originally Posted by jragosta View Post

The fact that there is a massive backlog for the iMac says that it clearly enriches a lot of peoples' lives.

Bought mine two weeks now. I'll be doing the Snoopy dance as soon as it going from Processing to Preparing.

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post #38 of 55
Quote:
Originally Posted by jragosta View Post

Or the tooling and equipment to produce the beveled edges of the iPhone. 

I rest my case.

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post #39 of 55
Originally Posted by hentaiboy View Post
I rest my case.

 

What case? Someone please make a friction stir welding joke…

post #40 of 55
Quote:
Originally Posted by Tallest Skil View Post

 

What case? Someone please make a friction stir welding joke…

 

Trolls don't need a case. They feel incredibly vindicated by the mere fact that they type something, no matter how false, ridiculous, or asinine. 

I wouldn't mind friction stir welding some trolls. 

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