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Apple will 'set the world on fire' with iPhone 6 sales

Gregg Keizer | July 29, 2014
Look for Apple to "set the world on fire" later this year with huge sales of the next iPhone.

Also off the balance sheet was an additional $5.6 billion in obligations, mostly for acquiring manufacturing and tooling equipment put in place by Apple's component makers and product assemblers.

The $21 billion total, then, is an indication of Apple's own build forecasts for the coming quarters, and thus its expectations for sales. The $21 billion is 46% higher than the same period the year before, a quarter prior to the launch of the iPhone 5S and 5C. The $15.4 billion in manufacturing/component commitments is 18.5% higher than that line in the second quarter of 2013.

Jan Dawson, chief analyst at Jackdaw Research, after agreeing that the numbers are big, cautioned against reading too much into the data, which some have used to bolster opinions that Apple will introduce at least one new product category, probably a wearable line, this year.

Apple's pre-paid commitments for components, tooling and equipment to third-party suppliers and manufacturers exploded in the June quarter, a signal, say analysts, of a huge second half of 2014 for the impending iPhone 6. (Data: Apple, SEC filings.)

"It's so hard to put this into context, because Apple's revenues and shipments from iPhone are growing constantly, and it's virtually a certainty that the fourth quarter will be Apple's biggest quarter ever even if it doesn't launch new products," Dawson said in an email. "As such, you'd expect to see a ramp up in this stuff."

Thompson echoed that. "I do think most of the investment is for [the iPhone 6] specifically," he said in an emailed reply to questions Saturday.

Even so, Dawson was intrigued by the $5.6 billion in commitments for tooling and equipment, the largest amount Apple has ever poured into that bucket, and 24% more than the previous record of $4.5 billion in the second quarter of 2012. That was just months before the introduction of the iPhone 5 and the iPad Mini, the latter a new segment of its tablet line.

"I found it interesting that the 'other' commitment is by far the biggest ever, which covers things like production facilities and factories," Dawson said. "If they're investing in new ways of making products, that's where that would show up. I think it's extremely likely that Apple is planning for a very big iPhone quarter at the very least, but I think the sheer level of spending points to one or more new products, too."

The June quarter was the second straight that Apple had significantly boosted its tooling/equipment commitments. In 2014's first quarter, Apple reported $2.8 billion in such obligations, an 87% increase from the previous quarter, and with the exception of 2012's June quarter, the highest ever until the just-reported period.


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