Apple to spend $10 billion on innovation, expansion in 2013
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.
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.
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.
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.
Comments
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.
Quote:
Originally Posted by Inkling
... it'd be great if Apple would add a system-wide GREP with numerous included S&Rs. ...
Yeah, what harm could that do?
Second, maybe Samsung is cutting back from capex because Apple is buying the equipment for them
Dude, they are talking capex here. So your concerns ain't being addressed.
Not unless they are shipping the equipment to your house. You did read the article?
Part of this is probably stocking the new mothership with Segways.
Quote:
Originally Posted by JollyPaul
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 ...
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?
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?
Quote:
Originally Posted by hentaiboy
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.
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...?"
Totally clueless and inept management. Could care less about shareholders, all about stroking its ego that is left now.
Bait
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.
Quote:
Originally Posted by SolipsismX
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.
Quote:
Originally Posted by wizard69
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.
Quote:
Originally Posted by KingChael
Totally clueless and inept management. Could care less about shareholders, all about stroking its ego that is left now.
Ego stroking ... and cash counting.