Apple spending on manufacturing & parts sees biggest increase since 2007 launch of first iPhone
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.
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.
Comments
http://www.businessinsider.com/chart-the-clearest-sign-that-apple-revenue-is-about-to-explode-2014-7
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.
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?
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.
"All of that said... You don't really need a chart or a peek at off-balance sheet commitments to figure revenue is ready to spike. All reports point to a big iPhone release this fall, an iWatch, maybe a new Mac, and possibly something in the payments space. Those things are naturally going to generate record levels of revenue for Apple."
This.
I completely believe that Apple will roll out something in the payments space. This along with iPhone 6, opening up the APIs for Siri/Homekit/TouchID/etc, my opinion is this will be the most exciting release of an iPhone since the original. I can't F'ing wait.
And that's saying nothing of an iWatch or Mac or even something with Apple TV. All of the Tim Cook haters should be eating their words in just a few months.
Apropos of nothing, take a gander at AMZN this morning. They are really getting walloped.
Aw, so sad. Couldn't happen to a nicer bunch of folks.
DED post in 3, 2, 1...
I bet AMZN shareholders start to think, "what is the value-add if we spin off AWS?"
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.
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.
Manufacturing is the physical production of goods, which includes tooling/equipment/facilties. This cost is under Capital Expenditures, I believe, not R&D.
There is such a thing a manufacturing R&D which Apple is also doing. Developing (designing and testing) manufacturing processes, methods, lines, etc., for the production of products or even materials. LiquidMetal and sapphire are the two biggest materials that come to mind.
http://bits.blogs.nytimes.com/2014/06/16/jonathan-ive-on-apples-design-process-and-product-philosophy/?_php=true&_type=blogs&_r=0
I'm assuming he's referring to sapphire but he says he's been working on this stuff for several years so perhaps we'll see a big use of liquidmetal? Or is there some other material that none of us are thinking about?
"Magictanium"
Jobsium? Jobsanthium? Stevium? Boomanthium? Onemorethingium?
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.
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.
no.
my guess is that the initial manufacturing setup expense (CapEx) is higher due to either a more capacity needed (more SqFt + more production assembly tools) and/or more expensive tools (FoxBots). Those are up front costs that amortize several quarters after purchase...
'development' is typically classified as going from prototype to product candidate, which is the cost of 'designing the manufacturing process'
Manufacturing Setup(CapEx) and Parts are not part of product development, they are part of production.
Determine a product (research) [Will this Sell?]
Design a product (Development) [Is this perfect balance of cost to manufacture, Usability, function-feature, performance]
Build manufacturing/Distribution capacity for product (CapEx) [buy/build/lease tools and facilities based expected demand curve]
Train labor on build/distribute process
Build up inventories of components to make/package/sell product (supplies)
Build Product for X= parts+labor-per-hour/hour-to-make+[if piece count>TotalExpectedRun, then $0, else (R&DCosts+Capex-to-make-product)/(total expected run of product)]+royalties-on-IP-of-Product-per piece
Cost of Product for X+CostOfSales(shipping+channelcosts)+expected_year_1_support_costs(infant mortality)/perUnit
GrossProfit% = (1-Cost_of_Product/ASP)*100
Thermonuclium?
Jobsium? Jobsanthium? Stevium? Boomanthium? Onemorethingium?
Di-Lithium-Licksoxide the colloquial term for: 2(5)6 dilithium 2(:)l diallosilicate 1:9:1 heptoferranide
The rare substance that powered Steve those last years (it wasn't a just liver transplant, a small plasma engine was installed, generating the necessary energy to supplement his vegan diet with adding meat or dairy).
Normally found in crystal form, it's the basic catalyst of all trans warp space travel in the future.
The Apple Campus 2 is really an NCC starship.
"We have all become Macbeth." —Speak for yourself. These (in the play) are the words of a man who overstepped the natural bonds of his people by killing their good leader, usurping his crown, all because of ambition and listening to his even more ambitious wife. He is desperate, tortured with guilt, trapped, and his soliloquy is a denial of Time in all its aspects: present, past and future, and then denial of life itself.
Is that you? Certainly isn't me. Sorry, this is one of my favorite passages, and it has a specific moral lesson in it about respect for established order, and what happens if it's violated. I wish the neocons who conned the US into Iraq would have been familiar with the lesson, for example. Out of place here.
"We have all become Macbeth." —Speak for yourself. These (in the play) are the words of a man who overstepped the natural bonds of his people by killing their good leader, usurping his crown, all because of ambition and listening to his even more ambitious wife. He is desperate, tortured with guilt, trapped, and his soliloquy is a denial of Time in all its aspects: present, past and future, and then denial of life itself.
Is that you? Certainly isn't me. Sorry, this is one of my favorite passages, and it has a specific moral lesson in it about respect for established order, and what happens if it's violated. I wish the neocons who conned the US into Iraq would have been familiar with the lesson, for example. Out of place here.
Out of context, it fits the Huberty situation to a "T".
More clearly stated, Apple's R&D is centered around the design and development of new products for current and future market segments, in parallel with designing, developing and creating new tools, machining processes, assembly, forms, control systems, etc., that they Patent and actually create specifically for large scale productions of current and future products.
They are refining and evolving the how products are manufactured, then deploying them around the globe, solely for their products.
Thank you both for your kind and detailed explanation.