Apple ensuring supplies with $11 billion in purchase commitments

Apple ensuring supplies with $11 billion in purchase commitments

Apple has upped their previous $7.9 billion in purchasing commitments to a whopping $11 billion.

That’s a 39 percent increase and a record for the March quarter. Why the sudden uptick? Two reasons, most likely: The tight supply environment caused by recent calamities in Japan and the expected increases in iPad shipments.

Apple COO, Tim Cook previously said they were selling every iPad 2 they could make, comments echoed in previous conference calls about the original iPad and iPhone 4 as well. Analysts have asked Apple why they still can't meet demand for their most popular products. These extra billions should go a long way towards answering that.

What it will mean for competing manufacturers and products and that don't have Apple's cash and economies of scale is uncertain. They can probably match price but can't match margin at those prices, further increasing Apple's profit lead and ability to make pre-payments such as these.

With close to $70 billion in the bank, Apple's probably just begun to lock in supply deals.

Any bets on whether or not they can make enough iPad 2s this quarter?

[Digital Daily]

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, ZEN and TECH, MacBreak Weekly. Cook, grappler, photon wrangler. Follow him on Twitter, App.net, Google+.

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There are 4 comments. Add yours.

RRP EPA Lead Paint Video says:

Companies often make commitments in order to keep their competitors from being able to use their supplier for their project.
If I tell Sony that I will spend 11B with them, then you have to go find someone else to make your product because Sony will not be able to get an additional xB of sales revenue through their system.
We do it all the time and have many other car companies locked out of being able to compete with price as the suppliers simply do not have the time and ability to make anything for them within the next few years (until they build new facilities).

OrionAntares#CB says:

I'm sure it's to serve two purposes. The first being to eat up manufacturing resources to attempt to prevent competitors from undercutting them. The second and probably more important might be to try to ramp up production to get more units shipped faster so all those re-order reservations waiting out there don't end up as sales to their competitors.