Analysis: Did Apple spend $US2.3bn bailing out iPhone screen supplier Sharp?

Analyst Horace Dediu notes that Apple spent $US2.3 billion more than forecast and suggests that it was to bail out Sharp.

Apple may have spent $US2.3 billion bailing out Sharp earlier this year according to an analyst who has examined Apple's capital expenditure for the year.

Apple analyst Horace Dediu notes that Apple spent $US2.3 billion more than forecast on "product tooling, manufacturing process equipment and infrastructure" and suggests that "circumstantial evidence" leads him to believe this may have been to bail out Sharp.

Dediu notes that Apple's 2011 forecast for capital expenditure (capex) for 2012 was anticipated to be $8 billion, including $900 million for retail and $7.1 billion for product tooling and manufacturing process equipment. However, in its 10-K report released in October 2012 Apple revealed it had spent $10.3 billion in total. That's $865 million on retail (an under-spend of $35 million) and $9.5 billion on other areas including "including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure". That's $2.3 billion higher than forecast.

Dediu also notices that: "The cash payments for capex were $2 billion lower than expenditures. This is a curious situation which was not highlighted in previous 10-K reports."

He notes that since "no new debt was booked" it is likely that Apple's over-spend was not paid for in cash but rather "some form of vendor financing".

He suggests that Apple "paid for some of the acquisitions through uncharacteristic or unorthodox means."

"The question is what was it spent on and why did it not go through the cash flow statement?" Dediu asks.

His answer: "Circumstantial [hypothetical, with no proof, he notes] evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp."

He notes that Sharp is a key supplier of screens to Apple and that it is "in financial distress".

Earlier this year there were reports that Foxconn was to invest in Sharp. That deal fell through however, states Dediu.

"My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier.) If Sharp were to enter into some form of bankruptcy, the key plant(s) used in producing screens for Apple might be 'up for grabs' by creditors and they might be taken off-line, jeopardizing Apple's production capacity, irrespective of contractual obligations," suggests Dediu, with the financing for this deal " done through a swap of 'pre-orders'."

Read Dediu's complete analysts here.

Follow Karen Haslam on Twitter / Follow MacworldUK on Twitter

Related

Report: Samsung Display terminates LCD contract with Apple

Ahead of Apple event, Sharp reveals 7-inch tablet with IGZO display

Sharp can't make iPhone 5 screen fast enough, caused supply issues

Will ditching Samsung parts mean Apple struggles to meet demand for iPhone 5?

New iPhone 5 'won't include' Samsung chips or screen

Next iPhone Screen Production Delayed By Sharp, Reports Say

Foxconn, Sharp megadeal still on hold as negotiations roller coaster continues

Sharp to supply LCD panels for Apple television, could launch this year

Sharp investment and patent suggests Apple television

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags iPadsmartphonestabletsAppleiPhonesharphardware systemsconsumer electronics

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Karen Haslam

Macworld U.K.
Show Comments

Father’s Day Gift Guide

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?