World

Apple faces $358 billion 
cash stockpile dilemma

WASHINGTON It is a sign of Apple's success but also a thorny problem: Its cash stockpile has hit a staggering $256.8 billion (S$358 billion), sparking debate on what do with such massive reserves.

Apple's quarterly report on Tuesday showed its cash holdings, the majority held overseas, jumped to a sum that tops the economic output of Chile.

The tech giant has resisted the idea of bringing the cash home, because of disincentives in the United States tax code - it allows multinational firms to defer profits while they are held overseas but taxes income at up to 35 per cent when repatriated.

While any company would gladly be in Apple's shoes with its cash hoard, "there's something not quite healthy about it", said analyst Roger Kay.

"Normally, you would expect cash to fund investment opportunities, but obviously Apple doesn't have any use for that much cash," he added.

Apple faces periodic pressure to return more cash to shareholders with higher dividends and more share buybacks, and it has already spent some US$200 billion doing this.

Mr Patrick Moorhead of Moor Insights & Strategy argued that returning all the cash to shareholders "doesn't help further anyone's strategic interests" and that Apple needs to find ways to diversify its business.

One way would be "going vertical" or acquiring a chipmaker such as AMD to supply all Apple devices.

Netflix, he said, could complement Apple's business by offering content for Apple's ecosystem of devices.

Mr Moorhead said that if Apple is serious about autonomous vehicles, "it would need to buy a car company" such as Tesla to ensure "the Apple experience".

Apple's case has highlighted the growing cash stockpiles held overseas by US multinationals, estimated to be between US$2.5 trillion and US$3 trillion.

Professor Lisa De Simone, an expert in international taxation, said the current system creates "incentives for companies to shift as much of their profits as they can offshore".

Could Apple use some of the cash to bring large-scale manufacturing back to the US?

Mr Jan Dawson of Jackdaw Research said this is unlikely because of Apple's manufacturing and supply process. "We simply don't have the workforce to support this scale of manufacturing," he said. - AFP

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