One possibility is that they know they can dominate the supply chain so effectively, they can make more per unit than a competitor could if they (the competitor) followed suit.
Similar to when Gmail came out and people were blown away that they offered 100MB of storage, and everyone (Yahoo, Hotmail) had to step up despite their far larger userbase. Then, when they finally matched Google, Google raised their cap to 1GB.
In this case, manufacturers will have to work hard to match Apple's bring-mfg-to-the-US actions, but won't even be on the same playing field, since Apple's worked so hard to maximize the efficiency of their supply chain.
No. In the BusinessWeek interview this quote is pulled from [1], it's clear he's referring to wanting other companies to emulate Apple's increased transparency in supplier relationships and working conditions. In a follow-up question, he says:
"Our transparency in supplier responsibility is an example of recognizing that the more transparent we are, the bigger difference we would make. We want to be as innovative with supply responsibility as we are with our products. That’s a high bar. The more transparent we are, the more it’s in the public space. The more it’s in the public space, the more other companies will decide to do something similar. And the more everybody does it, the better everything gets.
It’s a recognition that we need to be supersecretive in one part about our products and our road maps. But there are other areas where we will be completely transparent so we can make the biggest difference."
Mac desktops or also laptops? If it's only about the desktops, I suspect that they are preparing to lower the volumes below what's economical to build in China.
Or the the rising wages in China means that building a fully automated line isn't as cost-prohibitive as it was in the past. And with states/cities throwing tax incentives at companies it doesn't matter where the automated line is so long as it can be integrated into the supply chain easily.
It's likely a combination of lower volume, like you state, cheaper automation, rising wages and some political incentives like tax breaks, etc.
>Or the the rising wages in China means that building a fully automated line isn't as cost-prohibitive as it was in the past.
The wages don't play much role in it.
There is an article about the last Apple US factory, back when they used to make stuff here, and the guys managing it explain that it wasn't the wages that drove them to China (the extra cost would be negligible in a product's price, like a few extra dollars compared to a $500 price tag), but the economies of scale, with supplier factories for glass, metal, SSDs, parts, etc being literally next door to your factory, something that wasn't true in the US.
Yes. It's the logistics that make the giant Chinese factory cities the preferred manufacturing facilities. Wages are a happy side-effect of doing business with a lawless regime.
> We decided being more transparent about some things is great—not that we were not transparent at all before, but we’ve stepped it up in places where we think we can make a bigger difference, where we want people to copy us
I'm willing to bet that the reason they're doing this is exactly the opposite. Integrating their last-stage manufacturing would be a great way of squashing those pesky product leaks from contractors.
Wonder if this is the first step towards a move across all products. It'd make sense to start with a relatively low-volume, high-margin product like the Mac.
>great way of squashing those pesky product leaks from contractors
They will still not be doing the manufacturing themselves - so there will still be contractors just that they will be a new set of US based contractors that can be better controlled because they are based in US vs China.
> “We decided being more transparent about some things is great..."
Ironically the rest of his statements and the article as a whole are extremely vague. $100MM at Apple scale doesn't seem like very much and since (from the article) they won't be doing it themselves I'd love to hear more about where that money is going.
There are a handful of companies that do this work, they will partner with them, my bet is Foxconn as they already work with them. Build a facility and Foxconn will do what it does, with Americans in America. As an American, I think this is good, I wonder how successful it will be but I hope it works out well.
There are a lot of negative comments. From what Tim said it sounds like it is motivated by a desire to do some good, not just more profit. Maybe that is BS, if you can successfully do this, it knocks a few days off the time from order to delivery and that's also a huge edge. I can also see wanting to not give China so much control. I don't see it being devious though.
Sanmina (recently dropped the SCI from its name) still owns that plant in Fountain, CO. I could imagine it might be a big PR win for Apple if they revived what used to be their flagship factory in the US.
How is that misleading, it provides work to people in the US. A case can be made that the factory wouldn't be there if it weren't for Apple's business:
"The A5 processor - the brain in the iPhone 4S and iPad 2 - is now made in a sprawling 1.6 million square feet factory in Austin owned by Korean electronics giant Samsung Electronics, according to people familiar with the operation. One of the few major components to be sourced from within the United States, the A5 processor is built by Samsung in a newly constructed $3.6 billion non-memory chip production line that reached full production in early December."
You don't start an application by having a finished product on the first day. Let Apple run with this, and we can check in in a year and see where they intend to take this. It's premature for us to glean anything off of this right now.
As a slight sidetrack, Apple doesn't have that much cash in reserve.
They have short term investments and long term investments.
Articles you read that claim they have 100 billion (or whatever) in cash are seriously confused about how cash and cash equivalents work.
From their latest 10k:
Cash and cash equivalents $ 10,746
Short-term marketable securities $ 18,383
Long-term marketable securities $ 92,122
(this is in millions)
Long term marketable securities are basically those things that they would likely take a significant hit on if they had to actually convert to cash in a reasonable period of time.
So how does this really compare to other companies?
Let's look at google.
As of September 30, 2012, Google had:
Cash and cash equivalents: $ 16,260
Short term marketable securities:$ 29,464
Whoops. It turns out google has more actual cash than apple, and more combined short term securities + cash.
Just not as much in long term investment securities.
In short: Apple doesn't really have some amazing amount of cash.
Thanks for the breakdown, does that $92,122 represent their investments in infrastructure and manufacturing (that google does not really need to make) or money invested in long term securities/financial products? Whats the Long-Term marketable securities for Google?
>Articles you read that claim they have 100 billion (or whatever) in cash are seriously confused about how cash and cash equivalents work.
It's semantics. It's cash. Not in the literal sense that they are wallpapering the headquarters with it. But it's cash from profits they've earned, that are invested in bonds and securities, just like you are I would.
>Long term marketable securities are basically those things that they would likely take a significant hit on if they had to actually convert to cash in a reasonable period of time.
Not necessarily true. Apple holds something like $15BB in Treasuries under their LTMS holdings. These are liquid (hence the label marketable). They also own a bunch on municipal bonds and corporate debt, most of which are also extremely liquid.
It's not semantics to call it "not cash".
If i own a million shares of apple stock, I don't own cash or a cash equivalent, i own a marketable security. They are valued quite differently.
The long term/short term is the maturity, and as you point out, some billions are probably treasuries, which are easy to trade (They don't break it down that I saw, Google does break it down into treasury bonds, etc).
However, some of it could be (and certainly is) instruments that they could transform into cash (hence marketable), but would take a significant loss on if they needed to do so quickly (< 90 days).
Calling that cash is simply false.
Let's stick with the simple fact: If they needed to transform that 92 billion in long term marketable securities into cash tomorrow, the percent chance they will get 92 billion for it is quite low.
If they need to transform it into 92 billion in cash in the next 6 months, the percent chance they will get 92 billion for it is quite high.
I take offense to stating that people who use the term "cash" don't know what they're talking about. They, in fact, do know that "cash" doesn't imply Apple has a Scrooge-McDuck-type vault loaded with hundred dollar bills.
>"If i own a million shares of apple stock, I don't own cash or a cash equivalent"
Commercial paper, short-term debt, preferred stock, T-bills, option contracts are all cash equivalents. This is where Apple is putting its money (they aren't buying tens of billions worth of common stock). It's "cash".
I completely and totally understand what cash and cash equivalents mean. Nobody believes Apple has a scrooge-mcduck like vault, and I have never claimed otherwise.
I have very simply claimed that Apple's cash and cash equivalents are not 100 billion, and that long term marketable securities are not cash.
You vehemently disagree, seemingly because they are liquid enough you may be able to get some money for them.
Let's start simple: Can you explain why if you think they are 'cash' or 'cash equivalents', they're explicitly not listed in the 10-k as "cash equivalents"?
I mean, you keep claiming up and down they are the same as cash, or "cash equivalent", and yet apple doesn't believe so. Nor does Google on their 10-q.
Given the companies don't believe they are cash or cash equivalents, or at least their auditors don't, can you explain why you do?
I'll also point out while it's theoretically at the discretion of the auditor whether the marketable securities can be included in "net cash", a lot don't, simply because the risk is not 0, where the risk on cash is ~0.
The risk on long term marketable securities is not 0 either, and in fact, can be quite high.
>"You vehemently disagree, seemingly because they are liquid enough you may be able to get some money for them."
No, I disagree because I know what a substantial portion of Apple's investments are (this information is public), and they are, by definition, cash or cash equivalents.
>"Let's start simple: Can you explain why if you think they are 'cash' or 'cash equivalents', they're explicitly not listed in the 10-k as "cash equivalents"?"
Because they don't have to list them as such? There's a lot of deception in SEC filings; that's half the game. It's only me speculating, but I believe Apple is utilizing many tricks to help them retain all those earnings, rather than paying taxes on all those profits. Would that surprise you?
>"Given the companies don't believe they are cash or cash equivalents, or at least their auditors don't, can you explain why you do?"
Taxes.
I mean, this side-discussion started because you made the claim:
"In short: Apple doesn't really have some amazing amount of cash."
Which is only true in the strictest definition of "cash". When "cash" is used how most investors understand it --those people you accused of being "seriously confused"-- Apple has a bunch. You don't have to take my word for it, it's out there.
Uh, no.
If it was "cash", or equivalent, it would be under "cash and cash equivalents".
Marketable simply means they can be traded (IE they are not something like non-OTC stocks)
They may be long term instruments that they would take a loss on if they traded before maturity.
Heck, they may be long term instruments that have trading restrictions on, etc.
If long term assets have trading restrictions they're not marketable. I get that it isn't cash cash in the most literate sense, it's liquid assets, which is nearly equivalent to cash, just like the "cash" in your bank account.
Stop arguing with everyone, long-term marketable securities doesn't mean what you think it means.
You're right in that it's not cash, and in some cases it's illiquid. However, you seem to think the 'long-term' in 'long-term marketable securities' means 'will take a long time to sell for fair value'. This is wrong; long-term just refers to the maturity of the instruments. Again, these long-term instruments are more likely to be illiquid, but they're not illiquid by definition. 10-year Treasury notes are 'long-term' but highly liquid.
So, in conclusion, it depends on what these "long-term marketable securities" are, which is what most of the other replies are trying to say. If you want to argue, argue that Apple owns a bunch of RIMM stock or something, don't accuse others of misunderstanding the term.
Most probably aren't. Even in China, where wages are much lower than in the US, Foxconn wants to automate half the jobs at the plants within three years.
Manufacturing is coming back in the form of new jobs. The jobs that the Chinese are having are becoming extinct. Product labels use to be stuck by hand in China even in mass production. Long gone are those days!
I suspect Apple will replicate what they are already doing in Brazil, where Foxconn locally built a factory to manufacture specific Apple products to the local market.
Note two things: 1. I suspect this would be a Foxconn factory, not Apple (note how Tim Cook says "we'll be working with people"); 2. The total investment of the Foxconn factory in Brazil was 5 times bigger, so I suspect that Apple's $100m would cover only a fraction of the total investment required to build a factory in the US.
Regardless, that's good news for the American worker.
They don't need to replicate what they're doing in Brazil if it's still more economical to manufacture in China. The difference with Brazil is a whopping 60% import tax on pretty much anything, which would make an iPad cost about 1,000 USD minimum if they didn't make them locally.
The idea being that manufacturing was pushed abroad due to the appeal of cheaper labor, without a deep consideration of hidden costs or the overall context of such a transition.
GE, which is featured extensively in the article, actually managed to reduce manufacturing costs by bringing the fabrication of a water heater and other appliances back to American shores — largely due to the faster loop and better communication between designers, engineers, and laborers who all speak the same language and are in the same factory.
Also due perhaps to real wages in the US declining to the point where cost/benefit calculations of US based production facilities are finally starting to add up for some manufacturers.
And not to mention 2012 is when there were new minimum wages for Malaysia and other SE Asia countries.
It's made manufacturers seriously consider Africa as a low-wage manufacturer, but unlike some of the Asian countries, they do not have the political stability to enforce contracts.
Manufacturing leaving the US in mass was always a myth. The jobs went away because of automation. In some cases the cheap labor offshore was still cheaper than automation, but like most technology automation continues to get cheaper every year while cost of labor goes up.
As automation gets cheaper I expect more and more manufacturing that really did move to not just come back to the US, but also new manufacturing to set up shop. Shipping costs are expensive and it only makes sense to be as close to your customers as possible. The one exception to this trend will be manufacturing that is inherently 'dirty.' Those will continue to be overseas until countries like China decide that destroying their environment for a short term gain isn't a very good long term strategy.
Shipping an iMac cost nothing -- yes the boats guzzle up fuel like crazy, but 400 20' containers can take a massive load. The cost on an individual computer, shoe or pillow is essentially nothing.
Apple airships pretty much everything. If you settle for transit by boat, you're going to have at least 4 weeks between leaving the factory and being in someones hands. Apple pushes to hold stock less than 1 week.
Shipping times are actually longer now than they were 5 years ago. Right before the financial crisis, shipping companies built up their fleets significantly and built "super ships" with huge capacity only to be met by diminished business just years later. As a result, they've deliberately slowed down their ships to cycle in more of their otherwise-would-be-idle ships.
I remember years ago, I had a part time job with 3Com, while in school, when they were still around in Santa Clara. I was on one of the lines which mfgd the 10/100 Enet boards. The lines had lots of automation, but not quite enough, as I heard a year or two later, they began shuttering the lines and moving them overseas.
So, as in these articles, sometimes manual labor is cheaper than automation, but we may have reached a point where wages have 'normalized' enough throughout the developing world that the variance is not significant enough to make manual labor economical.
What are the billions of people in developing nations (south Asia, Africa) going to do for a living, if their infrastructure and economies have not matured enough to sustain their own 'homegrown' industries?
I mean, outsourcing was seen as detrimental to our economy, but this phenomenon also had an impact in pulling millions of people in dev nations out from arduous agrarian and other subsistence activities.
I liked your last paragraph. I believe too that it was detrimental for the lives of those people who immigrated to cities to find jobs at those factories. Jobs that are detrimental to their health in many ways.
In some cases, yes. But I think on balance people who escape the countryside for the city factory jobs are not leaving a comfortable job for the promise of riches but with health risks. The factory/city job offers a much better alternative. An alternative to being a subsistence farmer or a day laborer, or a maid, or the daughter who has to marry at 16-18 and have no chance at an education. In the countryside it's not unusual for people to barely 'eke out' a 'living'. It could be picking up discarded trash and finding something recyclable, etc. Going from the coutryside to working for a Foxconn is like going from line cook at MickeyD's to being exempt salaried in the US with flex time -it's no contest.
As 'unhealthy' as the city job might be, the alternative in the countryside is, for many people, worse. It's a life of a kind of feudalism.
Manufacturing leaving the US in mass was always a myth.
Uh, figures?
It is one thing to say the US remained a manufacturer but to say the US didn't offshore a significant portion of its manufacturing capacity would seem to be an extraordinary claim which requires evidence, right?
The proportion of consumer goods I see which are marked "made in China" today approaches something like a hundred percent. Sure, there are other significant USA industries that produce a lot (and naturally have increased their output via automation) but it seems badly-spoken to say claim manufacturing leaving the US is myth. Some industries have left, "in mass", even.
Depends on how you measure it, employment or dollars. If in employment, yes, much left; in dollars, relative to what was produced domestically, not so much.
As to your "make in China" - you'd have to buy many, many t-shirts or DVD players to even approach the magnitude of money going around in making, for example, Caterpillar construction equipment or BMW X5's.
It is a myth. America is still the top manufacturer in the world.
The difference is that China makes tons of duplicate copies of cheap goods, while America makes high value, lower run, complicated goods.
Which is why if you look only at consumer good you get the mistaken assumption that manufacturing is leaving the US. Try sourcing $100,000 machines and all of them are made in the US.
The "myth" claimed by the OP was that manufacturers have left the US. That is not a myth despite the US remaining a top manufacturing country - because, as you say, what remained specialized, high-value items (planes, chemicals).
A large number of particular manufacturers left the US.
Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.
The story of American factories essentially boils down to this: They've managed to make more goods with fewer workers.
Then point to numbers showing they have left in mass. If such a large part of manufacturing has left then how does the US (according the 2009 report linked) still lead the world in manufacturing output? Are productivity increases enough to make up for manufacturing leaving at the levels many people like think? I certainly don't think so.
Pointing to manufacturing jobs going away is an invalid metric to start. Manufacturing jobs are gone and going, but it's not something that can be stopped. Some jobs were moved overseas, but many have simply been automated away. Over time even the ones overseas will be automated away.
Industries change ALL THE TIME. I don't know what it takes to make a t-shirt, but I have to imagine it is becoming automated to the point where not as many factories are needed. There's also shifts in consumer buying that happen.
I'm sure when cars were invented there were closed down stables all over the place. Progress happened. Rural textile plants have left in favor of luxury car makes like BMW opening plants. Don't confuse a particular industry changing to manufacturing as a whole. The value of products produces simply doesn't show manufacturing leaving. In fact, the high dollar products are moving to the US.
That graph is awful. I'm not even sure that your conclusion is a valid one. Whoever made that graph should be beaten to death with the collected works of Edward Tufte.
What's bad about it? It has a fairly low "information density" (because it's a boring time series) but there's no other real sins I can think of. It's the authors of pretty (but useless) infographics who generally need to be beaten to death with the collected works of Edward Tufte.
That doesn't make it a bad graph. In fact, putting lots of white space at the top and bottom to make 2% look small would make it a bad (misleading) graph and obfuscate any detail in the line. It's a graph representative of the data. Could have done with a better colourscheme, perhpas.
Which inflation number? The government one where anything that has gone up is removed or some other made up random number we like to call 'inflation?' :)
The same greed that sent jobs overseas is now bringing them back. The difference is now the US companies will run a huge PR campaign saying they doing this because care about America, blah, blah, blah.
I wonder how much this move was precipitated by Google's purchase of Motorola. Google produced each generation of nexus phone with a different manufacturer. This allows Google to learn the best practices of each of them. But eventually Google will produce the nexus devices themselves through their Motorola facilities, allowing them to iterate fast and produce cheaply. Apple sees this coming and figures out they also need to produce their devices in-house.
There's been 4 generations of Nexus phones with 3 manufacturers (HTC, 2x Samsung, LG). It seems like a bit of a leap to say that Google is learning the best practices of each and then will eventually use Motorola.
Not saying it can't or won't happen, just that you seem to be passing off your conjecture as something that's inevitable.
Yeah, and they took out a loan on their logo. Unfortunately, Ford is in worse shape now than GM and Chrysler because they didn't get a reset button to fix every problem - the lost by winning.
I can't imagine that Apple thinks of being bailed out. Companies at their peak don't think that way. Hubris is nothing else. Firms don't admit to it until they're in way over their head.
It's happening. Wages are rising elsewhere, while US wages remain stagnant, thus making domestic manufacturing for high-end goods more profitable than manufacturing elsewhere again. I've been predicting an eventual return of manufacturing to the USA for years now. It'll be a slow process, but it will inevitably happen - the only questions are when and how long.
In terms of investment in manufacturing, $100 million is chump change. Fabs are an order of magnitude or more greater. The amount is approximately that required for a middling "power center" shopping development. Or constructing a handful of Apple stores.
Not to be cynical, but I suspect that local, state and federal tax subsidies will yield a positive ROI on the $100 million. This looks like pure PR.
You're only partially correct. Apple doesn't need a fab. Apple needs a systems integrator like Foxconn and it's MUCH cheaper (order of magnitude max) to setup an assembly plant than a fab. But yes, I suspect subsidies would make even a $100m investment profitable.
I was using chip fabs as a point of comparison in regards to the scale of Apple's investment. It was chosen because HN readers are more likely to be familiar with the cost of such manufacturing plants than, for example, those associated with automotive manufacturing.
I agree that Apple doesn't need a fab. It doesn't need a manufacturing facility in the U.S. either.
They might eventually need one (or a non-Samsung partner) considering their increasingly contentious relationship. Intel would definitely fit into the overall progression of events[1].
Quarterly. Net. Profit. That's less than 1% of their pure profit reinvested in the US. Ignoring the credits and subsidies they will get. Cry me a river.
Thank you for saying this. If you look at Apples stock today, its up $10 a share, or $10 BILLION dollars in market cap just because they are going to make a shitty $100 million dollar investment. Why are the people so impressed with this?
This is good news - Now if we could just get Apple to pay taxes. I hope the comment from brudgers saying it is a PR move is wrong, but my cynical side things he is right.
Possible side effect: Change in business privacy? Say Foxconn are the contractor, a product leak in the factory's first year might be a lot more chase-able than one in China, but also a lot more inevitable. Will there be robot-only zones for the private parts, or more lawsuits?
The "working with people" comment makes me wonder if they are working with Rethink Robotics.[1] That would be an even more interesting take on this shift.
Well, once robotics takes over a large portion of Foxconn, it won't make as much sense to hire low wage employees overseas, thus why not have the robots building/assembling the products as close to the consumer as possible?
Apple spends a lot of shipping too, so I'm sure it's a balancing act between cost of labor/automation/shipping.
Apple might be doing this to get contracts from US gov't(local/national/military). One of the requirements for doing business with US gov't is to manufacture these device in US.
192 comments
[ 4.3 ms ] story [ 216 ms ] threadSimilar to when Gmail came out and people were blown away that they offered 100MB of storage, and everyone (Yahoo, Hotmail) had to step up despite their far larger userbase. Then, when they finally matched Google, Google raised their cap to 1GB.
In this case, manufacturers will have to work hard to match Apple's bring-mfg-to-the-US actions, but won't even be on the same playing field, since Apple's worked so hard to maximize the efficiency of their supply chain.
"Our transparency in supplier responsibility is an example of recognizing that the more transparent we are, the bigger difference we would make. We want to be as innovative with supply responsibility as we are with our products. That’s a high bar. The more transparent we are, the more it’s in the public space. The more it’s in the public space, the more other companies will decide to do something similar. And the more everybody does it, the better everything gets.
It’s a recognition that we need to be supersecretive in one part about our products and our road maps. But there are other areas where we will be completely transparent so we can make the biggest difference."
[1] http://www.businessweek.com/printer/articles/85170-tim-cooks...
It's likely a combination of lower volume, like you state, cheaper automation, rising wages and some political incentives like tax breaks, etc.
The wages don't play much role in it.
There is an article about the last Apple US factory, back when they used to make stuff here, and the guys managing it explain that it wasn't the wages that drove them to China (the extra cost would be negligible in a product's price, like a few extra dollars compared to a $500 price tag), but the economies of scale, with supplier factories for glass, metal, SSDs, parts, etc being literally next door to your factory, something that wasn't true in the US.
I'm willing to bet that the reason they're doing this is exactly the opposite. Integrating their last-stage manufacturing would be a great way of squashing those pesky product leaks from contractors.
Wonder if this is the first step towards a move across all products. It'd make sense to start with a relatively low-volume, high-margin product like the Mac.
They will still not be doing the manufacturing themselves - so there will still be contractors just that they will be a new set of US based contractors that can be better controlled because they are based in US vs China.
Ironically the rest of his statements and the article as a whole are extremely vague. $100MM at Apple scale doesn't seem like very much and since (from the article) they won't be doing it themselves I'd love to hear more about where that money is going.
There are a handful of companies that do this work, they will partner with them, my bet is Foxconn as they already work with them. Build a facility and Foxconn will do what it does, with Americans in America. As an American, I think this is good, I wonder how successful it will be but I hope it works out well.
There are a lot of negative comments. From what Tim said it sounds like it is motivated by a desire to do some good, not just more profit. Maybe that is BS, if you can successfully do this, it knocks a few days off the time from order to delivery and that's also a huge edge. I can also see wanting to not give China so much control. I don't see it being devious though.
http://news.cnet.com/Apple-may-outsource-iMacs/2100-1001_3-2...
Sanmina (recently dropped the SCI from its name) still owns that plant in Fountain, CO. I could imagine it might be a big PR win for Apple if they revived what used to be their flagship factory in the US.
"The A5 processor - the brain in the iPhone 4S and iPad 2 - is now made in a sprawling 1.6 million square feet factory in Austin owned by Korean electronics giant Samsung Electronics, according to people familiar with the operation. One of the few major components to be sourced from within the United States, the A5 processor is built by Samsung in a newly constructed $3.6 billion non-memory chip production line that reached full production in early December."
http://www.reuters.com/article/2011/12/16/us-apple-samsung-i...
http://www.businessweek.com/printer/articles/85170-tim-cooks...
Articles you read that claim they have 100 billion (or whatever) in cash are seriously confused about how cash and cash equivalents work.
From their latest 10k:
Cash and cash equivalents $ 10,746
Short-term marketable securities $ 18,383
Long-term marketable securities $ 92,122
(this is in millions)
Long term marketable securities are basically those things that they would likely take a significant hit on if they had to actually convert to cash in a reasonable period of time.
So how does this really compare to other companies?
Let's look at google.
As of September 30, 2012, Google had:
Cash and cash equivalents: $ 16,260
Short term marketable securities:$ 29,464
Whoops. It turns out google has more actual cash than apple, and more combined short term securities + cash. Just not as much in long term investment securities.
In short: Apple doesn't really have some amazing amount of cash.
It's semantics. It's cash. Not in the literal sense that they are wallpapering the headquarters with it. But it's cash from profits they've earned, that are invested in bonds and securities, just like you are I would.
>Long term marketable securities are basically those things that they would likely take a significant hit on if they had to actually convert to cash in a reasonable period of time.
Not necessarily true. Apple holds something like $15BB in Treasuries under their LTMS holdings. These are liquid (hence the label marketable). They also own a bunch on municipal bonds and corporate debt, most of which are also extremely liquid.
The long term/short term is the maturity, and as you point out, some billions are probably treasuries, which are easy to trade (They don't break it down that I saw, Google does break it down into treasury bonds, etc).
However, some of it could be (and certainly is) instruments that they could transform into cash (hence marketable), but would take a significant loss on if they needed to do so quickly (< 90 days).
Calling that cash is simply false. Let's stick with the simple fact: If they needed to transform that 92 billion in long term marketable securities into cash tomorrow, the percent chance they will get 92 billion for it is quite low.
If they need to transform it into 92 billion in cash in the next 6 months, the percent chance they will get 92 billion for it is quite high.
Yes, it is.
I take offense to stating that people who use the term "cash" don't know what they're talking about. They, in fact, do know that "cash" doesn't imply Apple has a Scrooge-McDuck-type vault loaded with hundred dollar bills.
>"If i own a million shares of apple stock, I don't own cash or a cash equivalent"
Commercial paper, short-term debt, preferred stock, T-bills, option contracts are all cash equivalents. This is where Apple is putting its money (they aren't buying tens of billions worth of common stock). It's "cash".
I have very simply claimed that Apple's cash and cash equivalents are not 100 billion, and that long term marketable securities are not cash.
You vehemently disagree, seemingly because they are liquid enough you may be able to get some money for them.
Let's start simple: Can you explain why if you think they are 'cash' or 'cash equivalents', they're explicitly not listed in the 10-k as "cash equivalents"?
I mean, you keep claiming up and down they are the same as cash, or "cash equivalent", and yet apple doesn't believe so. Nor does Google on their 10-q.
Given the companies don't believe they are cash or cash equivalents, or at least their auditors don't, can you explain why you do?
I'll also point out while it's theoretically at the discretion of the auditor whether the marketable securities can be included in "net cash", a lot don't, simply because the risk is not 0, where the risk on cash is ~0.
The risk on long term marketable securities is not 0 either, and in fact, can be quite high.
No, I disagree because I know what a substantial portion of Apple's investments are (this information is public), and they are, by definition, cash or cash equivalents.
>"Let's start simple: Can you explain why if you think they are 'cash' or 'cash equivalents', they're explicitly not listed in the 10-k as "cash equivalents"?"
Because they don't have to list them as such? There's a lot of deception in SEC filings; that's half the game. It's only me speculating, but I believe Apple is utilizing many tricks to help them retain all those earnings, rather than paying taxes on all those profits. Would that surprise you?
>"Given the companies don't believe they are cash or cash equivalents, or at least their auditors don't, can you explain why you do?"
Taxes.
I mean, this side-discussion started because you made the claim:
"In short: Apple doesn't really have some amazing amount of cash."
Which is only true in the strictest definition of "cash". When "cash" is used how most investors understand it --those people you accused of being "seriously confused"-- Apple has a bunch. You don't have to take my word for it, it's out there.
They may be long term instruments that they would take a loss on if they traded before maturity. Heck, they may be long term instruments that have trading restrictions on, etc.
It's simply not cash. Period.
You're right in that it's not cash, and in some cases it's illiquid. However, you seem to think the 'long-term' in 'long-term marketable securities' means 'will take a long time to sell for fair value'. This is wrong; long-term just refers to the maturity of the instruments. Again, these long-term instruments are more likely to be illiquid, but they're not illiquid by definition. 10-year Treasury notes are 'long-term' but highly liquid.
So, in conclusion, it depends on what these "long-term marketable securities" are, which is what most of the other replies are trying to say. If you want to argue, argue that Apple owns a bunch of RIMM stock or something, don't accuse others of misunderstanding the term.
[1] http://www.heraldtribune.com/article/20120123/ARTICLE/301239...
Note two things: 1. I suspect this would be a Foxconn factory, not Apple (note how Tim Cook says "we'll be working with people"); 2. The total investment of the Foxconn factory in Brazil was 5 times bigger, so I suspect that Apple's $100m would cover only a fraction of the total investment required to build a factory in the US.
Regardless, that's good news for the American worker.
http://techcrunch.com/2012/04/01/foxconn-plans-new-iowa-plan...
The idea being that manufacturing was pushed abroad due to the appeal of cheaper labor, without a deep consideration of hidden costs or the overall context of such a transition.
GE, which is featured extensively in the article, actually managed to reduce manufacturing costs by bringing the fabrication of a water heater and other appliances back to American shores — largely due to the faster loop and better communication between designers, engineers, and laborers who all speak the same language and are in the same factory.
It's made manufacturers seriously consider Africa as a low-wage manufacturer, but unlike some of the Asian countries, they do not have the political stability to enforce contracts.
As automation gets cheaper I expect more and more manufacturing that really did move to not just come back to the US, but also new manufacturing to set up shop. Shipping costs are expensive and it only makes sense to be as close to your customers as possible. The one exception to this trend will be manufacturing that is inherently 'dirty.' Those will continue to be overseas until countries like China decide that destroying their environment for a short term gain isn't a very good long term strategy.
So, as in these articles, sometimes manual labor is cheaper than automation, but we may have reached a point where wages have 'normalized' enough throughout the developing world that the variance is not significant enough to make manual labor economical.
What are the billions of people in developing nations (south Asia, Africa) going to do for a living, if their infrastructure and economies have not matured enough to sustain their own 'homegrown' industries?
I mean, outsourcing was seen as detrimental to our economy, but this phenomenon also had an impact in pulling millions of people in dev nations out from arduous agrarian and other subsistence activities.
As 'unhealthy' as the city job might be, the alternative in the countryside is, for many people, worse. It's a life of a kind of feudalism.
Uh, figures?
It is one thing to say the US remained a manufacturer but to say the US didn't offshore a significant portion of its manufacturing capacity would seem to be an extraordinary claim which requires evidence, right?
The proportion of consumer goods I see which are marked "made in China" today approaches something like a hundred percent. Sure, there are other significant USA industries that produce a lot (and naturally have increased their output via automation) but it seems badly-spoken to say claim manufacturing leaving the US is myth. Some industries have left, "in mass", even.
As to your "make in China" - you'd have to buy many, many t-shirts or DVD players to even approach the magnitude of money going around in making, for example, Caterpillar construction equipment or BMW X5's.
That is wrong no matter how you measure US manufacturing output.
The difference is that China makes tons of duplicate copies of cheap goods, while America makes high value, lower run, complicated goods.
Which is why if you look only at consumer good you get the mistaken assumption that manufacturing is leaving the US. Try sourcing $100,000 machines and all of them are made in the US.
-Not exact figures.
http://seekingalpha.com/article/602691-u-s-manufacturing-lea...
Per capita. But not even close on an absolute basis - the US makes more than twice as much as Germany.
http://www.ourfuture.org/blog-entry/2009104319/g20-manufactu...
I couldn't find more recent numbers.
The "myth" claimed by the OP was that manufacturers have left the US. That is not a myth despite the US remaining a top manufacturing country - because, as you say, what remained specialized, high-value items (planes, chemicals).
A large number of particular manufacturers left the US.
http://seekingalpha.com/article/602691-u-s-manufacturing-lea...
From 2011:
http://www.newsday.com/news/nation/u-s-still-leads-world-in-...
Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations. The story of American factories essentially boils down to this: They've managed to make more goods with fewer workers.
The point is that many US manufacturing industries have left.
The two points are different, especially for the workers who previously worked in those industries.
IE, the OP points that industries haven't left the US in mass. That the remaining industries are very productive is a different, etc.
Pointing to manufacturing jobs going away is an invalid metric to start. Manufacturing jobs are gone and going, but it's not something that can be stopped. Some jobs were moved overseas, but many have simply been automated away. Over time even the ones overseas will be automated away.
I'm sure when cars were invented there were closed down stables all over the place. Progress happened. Rural textile plants have left in favor of luxury car makes like BMW opening plants. Don't confuse a particular industry changing to manufacturing as a whole. The value of products produces simply doesn't show manufacturing leaving. In fact, the high dollar products are moving to the US.
http://research.stlouisfed.org/fred2/series/ECIWAG
[1] http://research.stlouisfed.org/fred2/series/COMPRMS
http://www.wired.com/magazine/2011/02/ff_madeinamerica/
Made in America: Small Businesses Buck the Offshoring Trend
Not saying it can't or won't happen, just that you seem to be passing off your conjecture as something that's inevitable.
Not to be cynical, but I suspect that local, state and federal tax subsidies will yield a positive ROI on the $100 million. This looks like pure PR.
I agree that Apple doesn't need a fab. It doesn't need a manufacturing facility in the U.S. either.
[1]http://www.phonearena.com/news/Intel-wants-to-take-Apples-ch...
http://www.apple.com/pr/library/2012/10/25Apple-Reports-Four...
Quarterly. Net. Profit. That's less than 1% of their pure profit reinvested in the US. Ignoring the credits and subsidies they will get. Cry me a river.
[1] http://spectrum.ieee.org/robotics/industrial-robots/rethink-...
Apple spends a lot of shipping too, so I'm sure it's a balancing act between cost of labor/automation/shipping.
I suspect this is to combat negative PR from their overseas subcontractors.