Apple to spend $30 bn on new US campus, bring back $38 bn in taxes
18 Jan 2018
Apple will open a new campus as part of a five-year, $30 billion US investment plan and will make about $38 billion in one-time tax payments on its overseas cash in one of the largest corporate spending plans announced since the passage of a tax cut signed by US President Donald Trump.
The Cupertino-based tech giant announced on Wednesday that the new a campus is a step towards hiring 20,000 new Apple employees over the next five years, but the location will be only disclosed later this year. It already has many campuses around the country which are located around Silicon Valley, and a big network of offices in Austin, Texas.
Apple also announced that the new campus will initially house 'technical support for customers.
As Apple is known to get tax breaks in exchange for creating jobs, experts say it won't be surprising if its new campus has a special tax status negotiated with state or local governments.
The company has been under increasing pressure to make US investments since the 2016 presidential campaign, when Trump targeted the iPhone maker for making products in Asian factories.
While Apple has announced no plans to change that practice and experts say it would be economically impractical to make iPhones in the United States, the company has begun to emphasise its impact on the US economy, from developers who sell software on its App Store to the tens of billions of dollars per year it spends with US suppliers.
Between the spending plan, hiring 20,000 people, tax payments and business with US-based suppliers, Apple estimated it would spend $350 billion in the United States over the next five years.
It did not, however, say how much of the plan was new or how much of its $252.3 billion in cash abroad - the largest of any US corporation - it would bring home. In addition to the $38 billion in taxes it must pay, Apple has run up $97 billion in US-issued debt to pay for previous share buybacks and dividends.
President Trump described the move by Apple as a victory for his efforts.
"I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS," Trump wrote on Twitter.
Asked in an interview with ABC News whether the job creation announcements were directly related to the Republican tax plan, Apple chief executive officer Tim Cook replied, "Let me be clear: There are large parts of this that are a result of the tax reform, and there's large parts of this we would have done in any situation."
About a third of Apple's new spending will be on data centres to house its iCloud, App Store and Apple Music services, a sign of the rising importance of subscription services to a company known for its computers and gadgets. Apple has data centres in seven states.
The announced US spending would be a significant part of Apple's overall capital expenditures.
Globally, the company spent $14.9 billion in 2017 and expects to spend $16 billion in 2018, figures that include both US-based investments in datacentress and other projects and Asian investments in tooling for its contract manufacturers.
If Apple's overall capital expenditures continue to expand at the same rate expected this year, the $30 billion investment in the United States could represent about a third of its capital expenditures over the next five years, Reuters calculates.
Apple had set aside $36.3 billion (roughly Rs. 2.32 lakh crores) in anticipation of tax payments on its foreign cash, meaning the payment would not represent a major impact on its cash flow this quarter.
Apple also said it would boost its advanced manufacturing fund, used to provide capital and support to suppliers such as Finisar Corp and Corning Inc, from $1 billion to $5 billion.
Apple said it planned to spend $55 billion with US-based suppliers in 2018, up from $50 billion last year.
Apple joins Amazon.com in scouting for a location for a new campus. Amazon finished taking applications from cities in October for its second headquarters.
Amazon set off a scramble between cities across the nation to host the headquarters, and Apple's announcement stirred broad interest.
Chicago Mayor Rahm Emanuel told reporters on Wednesday, "We're going to go compete and we're going to put our best foot forward" to compete for an Apple campus. A Philadelphia Department of Commerce spokeswoman said the city would submit a proposal if Apple opened the process for bids.
