Apple’s $430 Billion Spending Spree Is the Ultimate Power Play
(Bloomberg Opinion) -- Administrations come and go, but CEOs like Apple Inc.’s Tim Cook know there’s no better way to wave the flag than to flash the wallet, whoever is in charge.
On Monday, Apple Inc. said it was raising its U.S. investment commitments by 20% over the next five years to $430 billion. The new figure, which includes spending with American suppliers, building data centers and other domestic expenditures, replaces its previous five-year goal of $350 billion set in 2018 under the Trump administration. Then, corporate tax cuts prompted Apple to say it would repatriate some of its overseas cash hoard, allowing for the spending spree while also giving the company a chance to score a political point with job promises. “Huge win for American workers and the USA!,” former President Donald Trump tweeted at the time.
The acceleration announced Monday is a big positive. It points to Apple’s confidence in the economy and its willingness to invest aggressively to keep up with the pace of innovation. In the statement, the tech giant said it will invest tens of billions of dollars to develop next-generation semiconductors, artificial intelligence and 5G wireless technologies. These are all areas that are critically important for Apple to create its future products and compete in the marketplace. But there is clearly a political component to this announcement, too.
It is telling how Apple reiterates it is the largest taxpayer in the U.S., supporting more than 2.7 million jobs throughout the economy. The company conspicuously says its investments entail working with more than 9,000 suppliers in all 50 states. Apple also provided detailed plans for future job creation in California, Colorado, Massachusetts, Texas, Washington and Iowa. All of which sends a message to local, state and federal politicians on how much the company will contribute to their economies.
The timing is not coincidental. The Biden administration is considering increasing the tax burden on large technology giants such as Apple for profits held overseas. The proposal aims to clamp down on the practice of putting income-generating assets in lower-tax offshore countries. Biden also plans to raise the corporate tax rate to 28% from 21%. If after-tax profit streams get crimped, Apple may not be able to invest as much going forward. At least I suspect that is what they are saying behind closed doors.
And then there are the regulatory issues. Apple has come under increasing antitrust scrutiny over the past year. It is under multiple investigations from the European Union and is being investigated by Congress over alleged anticompetitive business practices related to its App Store. Last Wednesday, executives from Spotify Technology SA and Match Group Inc. testified before a Senate Judiciary Committee’s antitrust panel complaining about the App Store’s high fees and restrictive rules. In perhaps a way to strike back, Apple repeatedly emphasized on Monday how the iOS app economy gives livelihoods to millions of developers.
Apple is not alone in framing its investments to also make a political point. Chip giant Intel Corp. announced in March that it would spend $20 billion to build two new factories in Arizona, which are expected to create roughly 15,000 local jobs. Analysts expect that Intel may be able get future subsidies and incentives from the Biden administration for building more U.S-based semiconductor factories.
These are smart moves by the big technology companies. After all, even if Apple was going to spend and invest in these areas anyway, it doesn’t hurt to publicly show the size of the stakes and to dress it up politically. Who knows, it may change a congressman’s mind or two.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
©2021 Bloomberg L.P.