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Apple Seeks Consent for "High Tech Manufacturing" in Arizona


Per media reports, Apple Inc AAPL has requested the government to allow it to use its Mesa, AZ facility to conduct "high-tech manufacturing".

Apple is asking the Foreign Trade Zones Board to allow it to manufacture “finished products and foreign status materials/components”. This is because “production under FTZ procedures could exempt Apple from customs duty payments on the foreign-status materials/components used in export production.” At present, Apple is allowed to manufacture only “certain components for consumer electronics”, per the filing.

Plus, as far as sales in the U.S are concerned, Apple would be eligible to “choose the duty rate during customs entry procedures that applies to finished server assembly cabinets (duty-free) for the foreign-status materials/components” on a all goods that are in the purview of the existing authority including transformers, inductors, routers and network switches, per the filing.

Per a Business Insider report citing sources familiar with the matter, Apple will be using the Mesa facility to “build and configure servers” and then send it to other data center sites in U.S. like Oregon and North Carolina. The Mesa manufacturing facility was set up by Apple in 2013 and was leased to a supplier to manufacture sapphire screen covers. However, after the supplier went bankrupt, Apple pumped additional capital of $2 billion to convert the facility into to a Global Command Center, powered entirely by green energy, to store data from iTunes and iCloud, further adds the report.

Analysts note that that tech companies usually do not have manufacturing operations in the U.S because of higher labor costs involved than other regions like South East Asia. Apple has been subject to intense focus of President-elect Donald Trump regarding this issue.

Throughout his campaign, Trump has been opposed to Apple’s decision to manufacture goods overseas and had even promised that he will urge Apple to bring manufacturing jobs back to the country. Trump was quoted speaking to The New York Times in Nov 2016, "One of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States, where instead of going to China, and going to Vietnam, and going to the places that you go to, you’re making your product right here."

In fact, to alleviate Apple’s concern of increased prices of finished products, Trump has told the company’s CEO Tim Cook that he will provide tech companies huge tax cuts.

At present, Apple has a Zacks Rank #3 (Hold).Apple’s shares have marginally outperformed as the broader market over the past one year. Over the past one year, shares of Apple have registered growth of 20.77%, compared with the Zacks Computer Miniindustry’s gain of 20.68%.

Some better-ranked stocks in the wider technology space include Jabil Circuit Inc JBL, Veeva Systems Inc. VEEV and MeetMe, Inc. MEET. Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

In the trailing four quarters, Jabil, Veeva Systems and MeetMe have yielded positive average earnings surprises of 45.61%, 47.77% and 36.07%, respectively.

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