Apple has never purchased so many iPhone components

And other juicy tidbits from Apple’s 10-K.

From a note to clients by RBC’s Amit Daryanani that landed in my inbox Tuesday:

Our analysis of AAPL’s 10-K resulted in the following key highlights:

1) Off balance sheet manufacturing and purchase commitments were up sharply at an all-time high of $37.6B, +31.3% Y/Y and 60.5% q/q (iPhone 6 cycle, it was up 31.7% y/y), potentially indicating strong ramp for iPhone X;

2) Warranty accruals was up 12% q/q but down -8% y/y—logical given delay in iPhone X delay;

3) Vendor non-trade receivables were up 31% y/y, reflecting component purchases by AAPL for EMS partners and overall inventory on AAPL’s balance sheet was $4.9B, up 128% y/y – we think reflecting memory price and purchase dynamics;

4) Operating Margins were slightly down in the US, reflecting carrier discounts on new iPhones;

5) There was 60bps FX impact on gross margin this qtr.

Net/Net: We maintain our positive stance on AAPL as we see multiple tailwinds that should enable double-digit EPS growth not just in FY18 but also in FY19 as AAPL benefits from 1) ASP tailwinds from iPhone X and higher memory; 2) GMs benefit from services and better mix; and 3) potential tax reform.

Maintains Outperform rating and $190 price target.

My take: The scale of Apple’s purchase commitments stands out in this bar chart.

Component orders

Click to enlarge.

Link: Apple’s Form 10-K


  1. Fred Stein said:

    Nice. Ties back to the TSMC & Apple’s big bet story, and to the current high cost of the OLED screens.

    Projects forward to an upgrade of the iPhone and iPad installed base the bionic chip series and OLED screens

    November 14, 2017
  2. Gregg Thurman said:

    “Production constraints my ass”.

    November 14, 2017

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