Did Apple Spend $2 Billion to Bail Out Sharp?

Apple analyst Horace Dediu has dug deep into Apple's 2012 capital expenditures and found some spending, above and beyond what Apple had previously disclosed. He discovered that Apple spent $2.3 billion more than it had forecast on "product tooling, manufacturing process equipment and infrastructure".

Sharplogo
However, Apple didn't actually shell out cash for its increase in CapEx, but instead is booking vendor financing. Dediu believes it may have been to bail out Sharp, which was in dire financial straits earlier this year.

Circumstantial evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp. Sharp is a key supplier of screens to Apple but is also in financial distress. Sharp has also been the object of an intended investment by Foxconn [Hon Hai]. That deal fell through as Sharp’s finances deteriorated. 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. I believe that Apple’s late and unprecedented expenditure was to secure this asset. I further believe that the financing for this deal was done through a swap of "pre-orders".

Dediu has much more on the spending and his analysis at Asymco.

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Top Rated Comments

turtlez Avatar
151 months ago
Nice to see Apple playing nicely for once rather than suing!

Suing for good reason is hardly being mean. How would you like it if someone came along and stole your designs that you work on all year round.
Score: 29 Votes (Like | Disagree)
abhishake Avatar
151 months ago
Why not just buy Sharp at a steep discount?
Score: 16 Votes (Like | Disagree)
nuckinfutz Avatar
151 months ago
Nice to see Apple playing nicely for once rather than suing!

There's nothing wrong with suing. Courts are here to handle conflict resolution in a civil matter. Hundreds of years ago people spilled blood over these types of conflicts (territory, resources etc). Please stop trying to demonize a civil process that has saved millions upon millions of lives.


Back on topic:

I hope this is an investment. Remember Apple invested 500 million in LG to enable higher production. Sharp is moving over wholesale to IGZO panels but that cost money and their HDTV business dried up.
Score: 11 Votes (Like | Disagree)
NT1440 Avatar
151 months ago
They're not really though. Had they played nice, they wouldn't be forced to rely on Sharp and could use Samsung's production facilities. Instead, they didn't play nice and this 2 billion bailout is a consequence.

Yup, this is completely one sided. Samsung has no responsibility in the relationship between them an Apple deteriorating. :rolleyes:

It's two massive companies having a pissing match.
Score: 11 Votes (Like | Disagree)
gmanist1000 Avatar
151 months ago
Makes sense if they want to move away from Samsung displays.
Score: 11 Votes (Like | Disagree)
realeric Avatar
151 months ago
Better than burning the money for stock dividends.
Score: 10 Votes (Like | Disagree)