Apple Invests $3.9 Billion into Mysterious Technology

Apple Signs Mysterious $3.9 Billion Supply Agreement

by Anton Shilov
01/18/2011 | 11:49 PM

Apple said Tuesday that it would spend $3.9 billion onto securing supplies of an undisclosed technology that it believes would be important for the company as well as for the industry at large. The company declined to disclose the type of the technology as well as its intention.

 

“During the September and December quarters, we executed long-term supply agreements with three vendors through which we expect to spend a total of approximately $3.9 billion in inventory component prepayments and capital expenditures over a two-year period. We made approximately $650 million in payments under these agreements in the December quarter, and anticipate making $1.05 billion in payments in the March quarter,” said Peter Oppenheimer, chief executive officer of Apple, during the recent conference call with financial analysts.

Tim Cook, the chief operating officer of Apple did not reveal any details about the technology, but compared the supply agreement to the flash agreement from 2005.

“It is something I do not want to give out because I view it as a competitive, something I just do not want our competition knowing. From our point of view on the design side, we design components where we believe we can innovate beyond what's available in the market. […] As you probably remember, we have historically entered into certain agreements with different people to secure supply and other benefits. The largest one in the recent past has been we signed a deal with several flash suppliers back at the end of 2005 that totaled over $1 billion because we anticipated that flash would become increasingly important across our entire product line and increasingly important to the industry,” said Mr. Cook.

One the thing that is known about the tech is that it requires process equipment and tooling, which means that the technology is yet untapped and may be in the stage of experimental or low-scale production. Another thing is that it is available from three vendors.

 “We constantly look for more of these [technologies]. So, in the past several quarters we have identified another area and come to some recent agreements […]. These payments consist of prepayments and capital for process equipment and tooling. Similar to the flash agreements, they are focused in that area we feel is very strategic. And so I would prefer not to go into more detail about what specific area it is in, but it is the same kind of thinking that led us to those deals that led us to the flash deal,” added Tim Cook.

There are a number of promising technologies on the market in different areas, including batteries, displays, storage and other. The announcement by Apple mostly means that it plans to utilize an innovative technology that is not in mass production today.