Apple's Gravy Train Keeps Delivering for Suppliers

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(Bloomberg) -- Apple Inc.’s fortunes are still tethered to a single slow-growing product, fellow Gadfly columnist Shira Ovide wrote after the iPhone maker’s March earnings report Tuesday.

Suppliers are cheering. What’s even better news than sales surpassing expectations is the fact Cupertino is putting more into the supply chain than ever before.

Quarterly sales didn’t hit a new high, but on a trailing 12-month basis they climbed to a record $247 billion, and so did the line item known as cost of goods sold (COGS), which touched $153 billion.

This metric isn’t a perfect measure of how much Apple spends on components and assembly, but it’s a pretty good approximation. When we divide COGS by revenue, essentially the reverse of gross margin, we can see that Apple’s spending rate climbed to 61.7 percent, the highest since the March quarter of 2014.

This may not be wonderful news for Apple shareholders, but it’s a good sign for the hundreds of suppliers that feed off the gravy train that is iPhone.

It means their big client isn’t squeezing them too much, even amid the new reality that supercycles are dead. And that’s something to sing from the mountains.

©2018 Bloomberg L.P.

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