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0000320193
20201030
10-K
107
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future per...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
108
The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
109
COVID-19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
110
Such measures have included restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelter-in-place orders.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
111
The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
112
The COVID-19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact the Company’s business, results of operations, financial condition and stock price.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
113
Following the initial outbreak of the virus, the Company experienced disruptions to its manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary iPhone supply shortages that affected sales worldwide.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
114
During the course of the pandemic, the Company’s retail stores, as well as channel partner points of sale, have been temporarily closed at various times.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
115
In many cases, where stores and points of sale have reopened they are subject to operating restrictions to protect public health and the health and safety of employees and customers.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
116
The Company has at times required substantially all of its employees to work remotely.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
117
The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
118
The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
119
Additional future impacts on the Company may include, but are not limited to, material adverse effects on: demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategic plans; and the Company’s profitability and cost struct...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
120
To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
121
Global and regional economic conditions could materially adversely affect the Company’s business, results of operations, financial condition and growth.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
122
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
123
In addition, a majority of the Company’s supply chain, and its manufacturing and assembly activities, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
124
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demand for the Company’s pr...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
125
In addition, consumer confidence and spending could be adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, changes to fuel and other energy costs, labor and healthcare costs and other economic fac...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
126
Apple Inc. | 2020 Form 10-K | 5 In addition to an adverse impact on demand for the Company’s products, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, cellular network carrie...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
127
Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
128
A downturn in the economic environment could also lead to increased credit and collectibility risk on the Company’s trade receivables; the failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair value of t...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
129
These and other economic factors could materially adversely affect the Company’s business, results of operations, financial condition and growth.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
130
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
131
The Company’s products and services are offered in highly competitive global markets characterized by aggressive price competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in produc...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
132
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
133
The Company believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
134
As a result, the Company must make significant investments in R&D.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
135
There can be no assurance that these investments will achieve expected returns, and the Company may not be able to develop and market new products and services successfully.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
136
The Company currently holds a significant number of patents, trademarks and copyrights and has registered, and applied to register, numerous patents, trademarks and copyrights.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
137
In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by emulating the Company’s products and infringing on its intellectual property.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
138
Effective intellectual property protection may not be consistently available in every country in which the Company operates.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
139
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
140
The Company has a minority market share in the global smartphone, personal computer and tablet markets.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
141
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
142
In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
143
Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
144
Certain competitors may have the resources, experience or cost structures to provide products at little or no profit or even at a loss.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
145
Some of the markets in which the Company competes have from time to time experienced little to no growth or contracted overall.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
146
Additionally, the Company faces significant competition as competitors imitate the Company’s product features and applications within their products or collaborate to offer solutions that are more competitive than those they currently offer.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
147
The Company also expects competition to intensify as competitors imitate the Company’s approach to providing components seamlessly within their offerings or work collaboratively to offer integrated solutions.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
148
The Company’s services also face substantial competition, including from companies that have significant resources and experience and have established service offerings with large customer bases.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
149
The Company competes with business models that provide content to users for free.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
150
The Company also competes with illegitimate means to obtain third-party digital content and applications.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
151
The Company’s financial condition and operating results depend substantially on the Company’s ability to continually improve its products and services to maintain their functional and design advantages.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
152
There can be no assurance the Company will be able to continue to provide products and services that compete effectively.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
153
Apple Inc. | 2020 Form 10-K | 6 To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions and transitions of products and services.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
154
Due to the highly volatile and competitive nature of the industries in which the Company competes, the Company must continually introduce new products, services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and services, and successfully ma...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
155
The success of new product and service introductions depends on a number of factors including, but not limited to, timely and successful development, market acceptance, the Company’s ability to manage the risks associated with new product production ramp-up issues, the availability of application software for new produ...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
156
Accordingly, the Company cannot determine in advance the ultimate effect of new product and service introductions and transitions.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
157
The Company depends on the performance of carriers, wholesalers, retailers and other resellers.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
158
The Company distributes its products through cellular network carriers, wholesalers, retailers and resellers, many of whom distribute products from competing manufacturers.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
159
The Company also sells its products and resells third-party products in most of its major markets directly to consumers, small and mid-sized businesses, and education, enterprise and government customers through its retail and online stores and its direct sales force.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
160
Some carriers providing cellular network service for iPhone offer financing, installment payment plans or subsidies for users’ purchases of the device.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
161
There is no assurance that such offers will be continued at all or in the same amounts upon renewal of the Company’s agreements with these carriers or in agreements the Company enters into with new carriers.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
162
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company employees and contractors, and improving product placement displays.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
163
These programs can require a substantial investment while not assuring return or incremental sales.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
164
The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for some or all of the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
165
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation risk.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
166
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which cost exceeds net realizable value.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
167
The Company also accrues necessary cancellation fee reserves for orders of excess products and components.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
168
The Company reviews long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be recoverable.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
169
If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
170
Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, no assurance can be given that the Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescenc...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
171
The Company orders components for its products and builds inventory in advance of product announcements and shipments.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
172
Manufacturing purchase obligations cover the Company’s forecasted component and manufacturing requirements, typically for periods up to 150 days.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
173
Because the Company’s markets are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
174
Apple Inc. | 2020 Form 10-K | 7 Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially reasonable terms.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
175
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
176
Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing fluctuations that could materially adversely affect the Company’s financial condition and operating results.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
177
While the Company has entered into agreements for the supply of many components, there can be no assurance that the Company will be able to extend or renew these agreements on similar terms, or at all.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
178
Component suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company’s ability to obtain sufficient quantities of components on commercially reasonable terms.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
179
The effects of global or regional economic conditions on the Company’s suppliers, described in “Global and regional economic conditions could materially adversely affect the Company’s business, results of operations, financial condition and growth,” above, also could affect the Company’s ability to obtain components.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
180
Therefore, the Company remains subject to significant risks of supply shortages and price increases that could materially adversely affect its financial condition and operating results.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
181
The Company’s new products often utilize custom components available from only one source.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
182
When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
183
The continued availability of these components at acceptable prices, or at all, can be affected for any number of reasons, including if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
184
If the Company’s supply of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
185
The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the source, or to identify and obtain sufficient quantities from an alternative source.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
186
The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are located outside of the U.S.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
187
Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in Asia.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
188
A significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
189
The Company has also outsourced much of its transportation and logistics management.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
190
While these arrangements can lower operating costs, they also reduce the Company’s direct control over production and distribution.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
191
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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
192
Although arrangements with these partners may contain provisions for product defect expense reimbursement, the Company generally remains responsible to the consumer for warranty and out-of-warranty service in the event of product defects and could experience an unanticipated product defect liability.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
193
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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
194
The Company relies on single-source 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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
195
Any failure of these partners to perform can have a negative impact on the Company’s cost or supply of components or finished goods.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
196
In addition, manufacturing or logistics in these locations or transit to final destinations can 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...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
197
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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
198
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 can be reduced or terminated, and the recoverability of manufacturing process equipment or prepa...
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
199
Apple Inc. | 2020 Form 10-K | 8 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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
200
The Company offers complex hardware and software products and services that can be affected by design and manufacturing defects.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
201
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.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
202
Defects can also exist in components and products the Company purchases from third parties.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
203
Component defects could make the Company’s products unsafe and create a risk of environmental or property damage and personal injury.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
204
These risks may increase as the Company’s products are introduced into specialized applications, including healthcare.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
205
In addition, the Company’s service offerings may have quality issues and from time to time experience outages, service slowdowns or errors.
0000320193-20-000096/full-submission.txt
0000320193
20201030
10-K
206
As a result, the Company’s services may not perform as anticipated and may not meet customer expectations.
0000320193-20-000096/full-submission.txt