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Thanks for the post! It makes complete sense but I never realized a large majority of their cash holding is outside of the United States. Though I'm not entire

Thanks for the post! It makes complete sense but I never realized a large majority of their cash holding is outside of the United States. Though I'm not entire surprised I didn't realize this; every week someone is talking about huge company X or huge company Y that Apple could easily buy in the U.S. but in reality they really couldn't unless they wanted to take a big tax hit. I'm curious what they'll end up doing with all of that foreign cash. Are the options outlined in this article realistic / the best or only choices? Are there other possibilities?

seanmcdirmid 11y ago
Foreign R&D centers are the most obvious approach. If you make say, lots of money in China, open up an R&D center there as an investment; as a side effect it also makes the host country happier as you are giving jobs to locals (not just making money, but helping to develop the economy!). This has adverse side effect of shifting R&D from the country of origin, but it can also be expansive (do more vs. taking jobs from the US and putting them in China). People talk about foreign cash as if it somehow belongs back in America. But if you are Chinese, you definitely wouldn't see it that way (Apple makes more money selling iPhones in China, why does that money need to go the US? Ridiculous!).
- midnightclubbed 11y ago
  To take that one step further why aren't Apple putting that money into building its own overseas manufacturing facilities and reducing its reliance on 3rd parties? Building and running factories in China with the money it is making from Chinese consumers seems a more prudent choice than paying a chunk of US taxes so it can do share buy-backs?
  - toomuchtodo 11y ago
    Why doesn't Apple just buy Foxconn (or a majority stake)? This is not without precedent in other industries; owning the entire vertical would be hugely advantageous from a strategic perspective.
    - brisance 11y ago
      Because owning plant and equipment and capital assets is very risky; everything gets obsolete within months and now you're stuck with illiquid items that you have to amortize.
      - toomuchtodo 11y ago
        Compared to capital that's fairly illiquid at the moment? Better to have a manufacturing base for your next products instead of sitting on capital that's earning close to 0 returns and that you're probably never going to repatriate to the US unless an unlikely tax holiday occurs.
        brisance 11y ago
        Disagree. The GT Advanced Technologies debacle is a concrete example. Sure Apple lost money on that one, but it would have been a bigger hit on their bottom line had they full invested in their own sapphire plant and tooling. In the big scheme of things, fighting a lawsuit with an external supplier is a small price ot pay as compared to missing an iPhone launch window.
  - seanmcdirmid 11y ago
    Apple wants to focus and develop its expertise in doing stuff with high margins (high-end hardware design and software development). To run lean factories would be a huge distraction to them, it makes sense for them to just let companies like FoxCon do it.

seanmcdirmid 11y ago

Foreign R&D centers are the most obvious approach. If you make say, lots of money in China, open up an R&D center there as an investment; as a side effect it also makes the host country happier as you are giving jobs to locals (not just making money, but helping to develop the economy!). This has adverse side effect of shifting R&D from the country of origin, but it can also be expansive (do more vs. taking jobs from the US and putting them in China). People talk about foreign cash as if it somehow belongs back in America. But if you are Chinese, you definitely wouldn't see it that way (Apple makes more money selling iPhones in China, why does that money need to go the US? Ridiculous!).

midnightclubbed 11y ago
To take that one step further why aren't Apple putting that money into building its own overseas manufacturing facilities and reducing its reliance on 3rd parties? Building and running factories in China with the money it is making from Chinese consumers seems a more prudent choice than paying a chunk of US taxes so it can do share buy-backs?
- toomuchtodo 11y ago
  Why doesn't Apple just buy Foxconn (or a majority stake)? This is not without precedent in other industries; owning the entire vertical would be hugely advantageous from a strategic perspective.
  - brisance 11y ago
    Because owning plant and equipment and capital assets is very risky; everything gets obsolete within months and now you're stuck with illiquid items that you have to amortize.
    - toomuchtodo 11y ago
      Compared to capital that's fairly illiquid at the moment? Better to have a manufacturing base for your next products instead of sitting on capital that's earning close to 0 returns and that you're probably never going to repatriate to the US unless an unlikely tax holiday occurs.
      - brisance 11y ago
        Disagree. The GT Advanced Technologies debacle is a concrete example. Sure Apple lost money on that one, but it would have been a bigger hit on their bottom line had they full invested in their own sapphire plant and tooling. In the big scheme of things, fighting a lawsuit with an external supplier is a small price ot pay as compared to missing an iPhone launch window.
- seanmcdirmid 11y ago
  Apple wants to focus and develop its expertise in doing stuff with high margins (high-end hardware design and software development). To run lean factories would be a huge distraction to them, it makes sense for them to just let companies like FoxCon do it.