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Apple component lock-ups jump 40%

$11bn in commitments leave a mere $55bn to play with

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Apple has made commitments to spend $11bn in manufacturing and component expenditures, a new record for the company and a sign that Cupertino is working to lock up components in an increasingly competitive market.

"As of March 26, 2011," reads Apple's 10-Q filing to the US Securities and Exchange Commssion, "the Company had outstanding off-balance sheet commitments for outsourced manufacturing and component purchases of $11.0 billion."

The SEC 10-Q filing was made after Apple's 8-K filing of last week revealed that Apple's second-quarter 2011 profit had grown 95 per cent year-on-year, a level of performance that prompted CEO Steve Jobs to crow: "We're firing on all cylinders."

This $11bn figure – which equals one-sixth of Apple's $66bn nest egg – is a significant uptick in Cupertino's manufacturing and component commitments. In the company's 10-Q filing for its previous quarter, such commitments totaled $7.9bn. We'll do the math for you: that's an increase of just under 40 per cent.

One year ago, the commitments totalled $4.9bn, making the year-on-year growth a hefty 125 per cent.

This growth in both component-purchase commitments and manufacturing-cost planning reflects not only Apple's hedging against a tightening component market due to the increased display and NAND hunger of the burgeoning mobile market, but also Cupertino's confidence that iPad 2's sales will further blossom in its next fiscal quarter.

That is, if Apple can build them fast enough. In a conference call with reporters and analysts after Apple's second-quarter 2011 financial results were announced last week, company COO and Steve Jobs stand-in Tim Cook said: "The iPad has the mother of all backlogs, but we're working very, hard to get [it] out to customers as quickly as we can."

A 40 per cent increase in manufacturing and component commitments should help. ®

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