Apple Hits Highest-Ever Manufacturing Costs

The speculation surrounding the upcoming release of the iPhone 6 has been temporarily overshadowed by a recent report showing Apple manufacturing costs have soared in recent months. According to a RBC Capital Markets report, Apple manufacturing costs hit an all-time high in June 2014. While industry experts can only speculate about the rising manufacturing costs, the spending spike indicates Apple may be gearing up for the release of a new product line.

Apple manufacturing costs and component costs were up 18.5 percent in June. One possible explanation for the increase is the highly anticipated release of the iPhone 6. According to the Wall Street Journal, Apple is expected to order between 70 and 80 million units by the end of 2014. In comparison, only between 50 and 60 million 5C and 5S iPhones were manufactured last year.

While the increase in production of the latest iPhone model explains some of the rise in Apple's manufacturing costs, this alone is unlikely to account for the dramatic rise in spending. Some industry experts, such as Amit Daryanani of RBC Capital Markets, believe the manufacturing cost increase indicates a release of a new product line that will occur sometime in the near future — possibly even before the close of 2014.

In addition to manufacturing costs, Apple has also directed an unprecedented amount of revenue to research and development this year. By July 2014, Apple had already invested a record high of $425 million in research and development, totaling a 36 percent year-over-year increase. The combined rise in Apple manufacturing costs and investment in research and development further support the speculation surrounding a new product line.

One possible new product line that has long been the focus of speculation is the Apple iWatch. While other major companies — such as Google, Samsung and Nike — are already leading the wearable technology market, Apple has been uncharacteristically late to release a similar product. According to industry sources cited in an Apple Insider article, the Apple iWatch is on track to be released before the start of the 2014 holiday shopping season.

Aside from how the company has been spending revenue, the acquisition of Beats Electronics earlier this year is perhaps the most solid evidence that Apple is poised to move beyond the realm of revolutionizing the same product lines year after year. Although only time will tell what is behind the recent spike in Apple manufacturing costs, Apple recently announced a media event that will take place in September. At least some of the questions that have resulted from Apple’s manufacturing cost increase will no doubt be answered at this time.

Apple has a well-earned reputation for guarding its latest products and developments from competitors and consumers alike. Details about a possible new product line — and more specifically, the release of a new wearable technology device — are only rumors at this point. However, if the recent trend in Apple manufacturing costs is any indication, it is only a matter of time before Apple debuts a new and innovative product line.

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