Apple’s Home Court Disadvantage
Investing more domestically doesn’t change the fundamental structure of iPhone maker’s busines
For Apple Inc., AAPL +0.21% bringing billions of overseas earnings home is one thing. Keeping it there is quite another.
Such is the conundrum facing the world’s most valuable company, which also happens to the world’s largest design studio. Apple makes nothing in the most traditional sense. The company farms out the labor-intensive manufacturing of its best-selling devices to production partners worldwide—though mostly in China. This still isn’t cheap. Apple had nearly $15 billion in capital expenditures in the fiscal year ended September, with its top use stated as “product tooling” and other gear used by its manufacturers.
That dynamic won’t be changing soon, despite the company’s latest effort to tout its work at home. Apple issued a lengthy statement Wednesday boasting that it will contribute $350 billion to the U.S. economy over the next five years. Much of this is indirect, though, reflecting what the company believes it can drive through its ecosystem and the so-called “app economy.”
More directly, Apple plans to have more than $30 billion in capital expenditures and create 20,000 new jobs domestically over the next five years. It also added $4 billion to a fund created last year to support local manufacturing partners. The company credited this plan to the recently passed tax reform package, which effectively frees up more than $250 billion that Apple has stashed offshore.
That is a considerable slug of liquidity, but Apple’s announcement Wednesday doesn’t actually suggest a significant shift in its business operations. Based on its recent trajectory, the iPhone maker already appeared on pace to spend at least $75 billion globally on capital expenditures over the next five years while its total workforce has risen by more than 30,000 over the past three. The company’s most notable new disclosure is a plan to open a new campus somewhere in the U.S. to provide technical support services for its products. That will give the many U.S. cities clamoring for Amazon.com Inc.’s new headquarters a new prize to chase.
The current political climate under President Trump has created a big incentive for globalized U.S. tech companies to wave their flag. As one of the world’s largest outsourcers, Apple has a stronger reason to do so than most. Still, there is no escaping the fact that making the iPhone will be a long-distance call for long time to come.