Apple recently announces that it will invest $30 billion to expand its US operations, adding 20,000 jobs to the national economy. It will also pay a one time $38 billion tax payment as part of its repatriation of its overseas profits. Apple already calculated this large payment when it put aside $36.3 billion during 2017 in anticipation of tax payments on its foreign cash. This means that Apple calculated this expense and it has no impact on performance.
The investment is calculated, and according to the Apple executives, the $30 billion will create 20,000 jobs in a new US campus, data center and directly increase Apple’s contribution to the US economy by $350 billion within the next 5 years.
This recent development is the first of a major IT company, after Trump’s tax bill and criticism of IT companies investing in foreign countries to maximize their profits at the expense of national integrity. Apple decision as well as its incredible tax payment, perhaps the biggest one ever made in US history, is part of a recent trend by US companies following the recent tax legislation. Walmart raised wages by $2 per hour (although it fired 100,000 workers at the same time) and Fiat Chrysler is dishing out a onetime $2,000 bonus to 60,000 employees.
Apple CEO Tim Cook stated that “We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness. We have a deep sense of responsibility to give back to our country and the people who help make our success possible.” He added that “Apple is a success story that could only have happened in America, and we are proud to build on our long history of support for the US economy.”
Apple started to restructure its iPhone procurement sourcing by transferring parts for the iPhone to US manufacturers, such as the glass screen of the iPhone models to Corning, and optical components of the iPhone camera to US-based Finisar. Apple’s new campus location has not yet been revealed and this comes after they moved their headquarters to Cupertino. Currently Apple employs 84,000 people around the US and this will go over 100,000 once they complete their new employment drive.
Around 33% of Apples spending in 2018 will be on its data centers, which are used to house iCloud, App Store and the Apple Music service. Apple has already got seven data centers in the US. Apple spent around $15 billion during 2107, and it is expected to increase its capex expenditure to $16 billion in 2018. If this growth in expenditure continues over the next five years, Apple’s investment of $30 billion in capex this year will represent around a third of all its expenditure for the next five years.
Trump’s tax bill has put more money into the pockets of the US citizen, which will find itself back in the pocket of the US government once spending increases. It will bolster the economy through increasing employment incentives and increasing the natural wealth of the average US citizen.
