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0000320193
20181105
10-K
271
Such diminished control may have an adverse effect on the quality or quantity of products or services, or the Company’s flexibility to respond to changing conditions.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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272
Although arrangements with these partners may contain provisions for warranty expense reimbursement, the Company may remain responsible to the consumer for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
273
While the Company relies on its partners to adhere to its supplier code of conduct, material violations of the supplier code of conduct could occur.
0000320193-18-000145/full-submission.txt
0000320193
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274
The Company relies on single-sourced outsourcing partners in the U.S., Asia and Europe to supply and manufacture many components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products.
0000320193-18-000145/full-submission.txt
0000320193
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Any failure of these partners to perform may have a negative impact on the Company’s cost or supply of components or finished goods.
0000320193-18-000145/full-submission.txt
0000320193
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276
In addition, manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions, economic, business, labor, environmental, pu...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
277
Apple Inc. | 2018 Form 10-K | 10 The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to certain of its suppliers associated with long-term supply agreements.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
278
While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply could be reduced or terminated and the recoverability of manufacturing process equipment or prep...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
279
The Company’s products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect the Company’s business and result in harm to the Company’s reputation.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
280
The Company offers complex hardware and software products and services that can be affected by design and manufacturing defects.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
281
Sophisticated operating system software and applications, such as those offered by the Company, often have issues that can unexpectedly interfere with the intended operation of hardware or software products.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
282
Defects may also exist in components and products the Company purchases from third parties.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
283
Component defects could make the Company’s products unsafe and create a risk of environmental or property damage and personal injury.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
284
These risks may increase as the Company’s products are introduced into specialized applications, including healthcare.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
285
In addition, the Company’s service offerings may have quality issues and from time to time experience outages, service slowdowns or errors.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
286
As a result, the Company’s services may not perform as anticipated and may not meet customer expectations.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
287
There can be no assurance the Company will be able to detect and fix all issues and defects in the hardware, software and services it offers.
0000320193-18-000145/full-submission.txt
0000320193
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288
Failure to do so could result in widespread technical and performance issues affecting the Company’s products and services.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
289
In addition, the Company may be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
290
Quality problems could also adversely affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, delay in new product and services introductions and lost revenue.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
291
The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.
0000320193-18-000145/full-submission.txt
0000320193
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292
The Company contracts with numerous third parties to offer their digital content to customers.
0000320193-18-000145/full-submission.txt
0000320193
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293
This includes the right to sell currently available music, movies, TV shows and books.
0000320193-18-000145/full-submission.txt
0000320193
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294
The licensing or other distribution arrangements with these third parties are for relatively short terms and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
295
Some third-party content providers and distributors currently or in the future may offer competing products and services, and could take action to make it more difficult or impossible for the Company to license or otherwise distribute their content in the future.
0000320193-18-000145/full-submission.txt
0000320193
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296
Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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297
The Company may be unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules, or continue to expand its geographic reach.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
298
Failure to obtain the right to make third-party digital content available, or to make such content available on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
299
Some third-party digital content providers require the Company to provide digital rights management and other security solutions.
0000320193-18-000145/full-submission.txt
0000320193
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300
If requirements change, the Company may have to develop or license new technology to provide these solutions.
0000320193-18-000145/full-submission.txt
0000320193
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There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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302
In addition, certain countries have passed or may propose and adopt legislation that would force the Company to license its digital rights management, which could lessen the protection of content and subject it to piracy and also could negatively affect arrangements with the Company’s content providers.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
303
The Company’s future performance depends in part on support from third-party software developers.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
304
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services.
0000320193-18-000145/full-submission.txt
0000320193
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305
There is no assurance that third-party developers will continue to develop and maintain software applications and services for the Company’s products.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
306
If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
307
The Company believes the availability of third-party software applications and services for its products depends in part on the developers’ perception and analysis of the relative benefits of developing, maintaining and upgrading such software and services for the Company’s products compared to competitors’ platforms, ...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
308
This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, expected future growth of product sales and the costs of developing such applications and services.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
309
Apple Inc. | 2018 Form 10-K | 11 The Company’s minority market share in the global smartphone, tablet and personal computer markets could make developers less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for competito...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
310
If developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices may suffer.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
311
The Company relies on the continued availability and development of compelling and innovative software applications for its products.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
312
The Company’s products and operating systems are subject to rapid technological change, and if third-party developers are unable to or choose not to keep up with this pace of change, third-party applications might not take advantage of these changes to deliver improved customer experiences or might not operate correctl...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
313
The Company sells and delivers third-party applications for its products through the App Store, Mac App Store and TV App Store.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
314
The Company retains a commission from sales through these platforms.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
315
If developers reduce their use of these platforms to distribute their applications and offer in-app purchases to customers, then the volume of sales, and the commission that the Company earns on those sales, would decrease.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
316
The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
317
Many of the Company’s products include third-party intellectual property, which requires licenses from those third parties.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
318
Based on past experience and industry practice, the Company believes such licenses generally can be obtained on reasonable terms.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
319
There is, however, no assurance that the necessary licenses can be obtained on acceptable terms or at all.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
320
Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, could preclude the Company from selling certain products or services, or otherwise have a material adverse impact on the Company’s financial condition and operating results.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
321
The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
322
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and have not yet been fully resolved, and new claims may arise in the future.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
323
In addition, agreements entered into by the Company sometimes include indemnification provisions which may subject the Company to costs and damages in the event of a claim against an indemnified third party.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
324
Claims against the Company based on allegations of patent infringement or other violations of intellectual property rights have generally increased over time and may continue to increase.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
325
In particular, the Company has historically faced a significant number of patent claims relating to its cellular-enabled products, and new claims may arise in the future.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
326
For example, technology and other patent-holding companies frequently assert their patents and seek royalties and often enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
327
The Company is vigorously defending infringement actions in courts in a number of U.S. jurisdictions and before the U.S. International Trade Commission, as well as internationally in various countries.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
328
The plaintiffs in these actions frequently seek injunctions and substantial damages.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
329
Regardless of the merit of particular claims, litigation may be expensive, time consuming, disruptive to the Company’s operations and distracting to management.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
330
In recognition of these considerations, the Company may enter into licensing agreements or other arrangements to settle litigation and resolve such disputes.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
331
No assurance can be given that such agreements can be obtained on acceptable terms or that litigation will not occur.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
332
These agreements may also significantly increase the Company’s operating expenses.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
333
Except as described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 9, “Commitments and Contingencies” under the heading “Contingencies,” in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a mater...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
334
The outcome of litigation is inherently uncertain.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
335
If one or more legal matters were resolved against the Company or an indemnified third party in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
336
Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company that could materially adversely affect its financial condition and operating results.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
337
While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
338
Apple Inc. | 2018 Form 10-K | 12 The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
339
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
340
These U.S. and foreign laws and regulations affect the Company’s activities in areas including, but not limited to, labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual p...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
341
By way of example, laws and regulations related to mobile communications and media devices in the many jurisdictions in which the Company operates are extensive and subject to change.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
342
Such changes could include, among others, restrictions on the production, manufacture, distribution and use of devices, locking devices to a carrier’s network, or mandating the use of devices on more than one carrier’s network.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
343
These devices are also subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
344
These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications, or delays in product shipment dates, or could preclude the Company from selling certain products.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
345
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
346
Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, or caus...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
347
The Company has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws and regulations or the Company’s policies and procedures.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
348
The Company’s business is subject to the risks of international operations.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
349
The Company derives a majority of its revenue and earnings from its international operations.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
350
Compliance with applicable U.S. and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and data localization requirements, environmental laws, labor laws and anti-competition regulations, increa...
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
351
Although the Company has implemented policies and procedures to comply with these laws and regulations, a violation by the Company’s employees, contractors or agents could nevertheless occur.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
352
In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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353
Violations of these laws and regulations could materially adversely affect the Company’s brand, international growth efforts and business.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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354
The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs, political instability and international trade disputes.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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355
Gross margins on the Company’s products in foreign countries, and on products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
356
The Company is also exposed to credit and collectibility risk on its trade receivables with customers in certain international markets.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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357
There can be no assurance the Company can effectively limit its credit risk and avoid losses.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
358
The Company’s retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and uncertainties.
0000320193-18-000145/full-submission.txt
0000320193
20181105
10-K
359
The Company’s retail stores have required substantial investment in equipment and leasehold improvements, information systems, inventory and personnel.
0000320193-18-000145/full-submission.txt
0000320193
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360
The Company also has entered into substantial operating lease commitments for retail space.
0000320193-18-000145/full-submission.txt
0000320193
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361
Certain stores have been designed and built to serve as high-profile venues to promote brand awareness.
0000320193-18-000145/full-submission.txt
0000320193
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Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores.
0000320193-18-000145/full-submission.txt
0000320193
20181105
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363
Due to the high cost structure associated with the Company’s retail stores, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and severance costs.
0000320193-18-000145/full-submission.txt
0000320193
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The Company’s retail operations are subject to many factors that pose risks and uncertainties and could adversely impact the Company’s financial condition and operating results, including macro-economic factors that could have an adverse effect on general retail activity.
0000320193-18-000145/full-submission.txt
0000320193
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Other factors include, but are not limited to, the Company’s ability to manage costs associated with retail store construction and operation; manage relationships with existing retail partners; manage costs associated with fluctuations in the value of retail inventory; and obtain and renew leases in quality retail loca...
0000320193-18-000145/full-submission.txt
0000320193
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Apple Inc. | 2018 Form 10-K | 13 Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business and present risks not originally contemplated.
0000320193-18-000145/full-submission.txt
0000320193
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The Company has invested, and in the future may invest, in new business strategies or acquisitions.
0000320193-18-000145/full-submission.txt
0000320193
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Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital and unidentified issues not discovered in the Company’s due diligence.
0000320193-18-000145/full-submission.txt
0000320193
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These new ventures are inherently risky and may not be successful.
0000320193-18-000145/full-submission.txt
0000320193
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370
The Company’s business and reputation may be impacted by information technology system failures or network disruptions.
0000320193-18-000145/full-submission.txt