Apple has $100 billion of cash and a lot of ways
to spend it. Add more retail stores? Check. Set up more server farms to support its iCloud service? Check. Build a second
campus in Cupertino, Calif. to house its burgeoning staff? Check. Acquire companies and expand R&D? Check. Pay dividends
and do stock repurchases? Check, check.
CEO Tim Cook (Getty Images)
How about buying up its own supply chain? A lot of high-tech manufacturers on The Global
2000 dream about controlling what they pay for components and gaining the assurance that crucial parts will flow as needed.
Apple is one of very few firms with the financial wherewithal to make that come true, specifically by buying production
equipment to outfit new and existing factories in Asia that other people will run. Apple is already deploying its cash toward
this very goal, say people who follow the company closely. It’s a strategy that will likely continue the disruption in the
consumer electronics field that Apple has led to date.
The iPhone maker has $64 billion or so of its cash sitting
overseas, taxed at an attractively low 5% rate but also earning little to no interest. Any cash Apple chooses to bring back
to the States would get hit at the 35% U.S. tax rate, not a pleasant prospect. Spending that money on expanding offshore
production is far more compelling. Apple keeps the depreciation expense while keeping production costs down. It also means
the company will be ready to continue pumping up the volume to feed the seemingly insatiable appetite for iPhones and iPads
in the near term and rumored new category-busting products like an interactive TV in the long term.
