Best guess for how many iOS devices will ship in 2014

In October 2013, at the end of its last fiscal quarter, Apple stated:

The Company’s capital expenditures were $7.0 billion during 2013, consisting of $499 million for retail store facilities and $6.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure. The Company’s actual cash payments for capital expenditures during 2013 were $8.2 billion.

The Company anticipates utilizing approximately $11.0 billion for capital expenditures during 2014, including approximately $550 million for retail store facilities and approximately $10.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.

These 10K (fiscal year annual) forecast figures for capital expenditures are shown in the following graph. Note that they also include the fiscal years from 2006 to 2012. Note also that the graph includes the actual expenditures (in green).

Screen Shot 2014-08-12 at 5.37.57 PM

From 2006 through 2013 the sum of the forecasts was $23.445 billion while the sum of the expenditures were $24.662 billion. With the exception of a carry-forward in 2012, the forecasts are broadly in-line with expenditures, with about 5% more spent than forecast.

This pattern of accuracy in spending makes a $10.5 billion expenditure during the current fiscal year believable. In other words, taking the forecast at face value, and given that three quarters of the fiscal year have already passed, what does it imply for the current and last quarter? The following graph shows what Q3 spending should be relative to previous quarters (and 2011, 2012 and 2013).

Screen Shot 2014-08-12 at 5.38.27 PM

The FQ4 (CQ3) “budget” for PP&E should therefore be $5.255 billion. This would be the most Apple has ever spent on PP&E in a single quarter.

Shown another way, each fiscal year’s spending from 2008 to present looks like this:

Screen Shot 2014-08-12 at 5.46.27 PM

2014 is shaping up to be a bigger “ramp” in spending than any previous year. We have also noted how iOS device shipments correspond to these CapEx figure.

The relationship is shown in the first graph. I super-imposed iOS unit shipments for the calendar years because capital expenditures tend to result in production in the following quarter and Apple’s fiscal year is shifted one quarter earlier than the calendar year. The iOS units shown for 2014 is based on shipments to date and a forecast of shipments for Q3 that is in-line with company guidance[1] and a modest forecast for Q4.

The metric of Capital Expenditures (excluding retail) is a good “rule-of-thumb” for predicting iOS growth, but it’s not perfect. Obviously we’ve seen issues between forecasts and actual spending on a quarterly basis, but there is an overall relationship which makes sense: Apple spends on tooling and infrastructure in terms of data centers to support iOS growth. So far, a growth in CapEx has resulted in a growth in iOS.

It’s therefore reasonable to assume that calendar 2014 will see at least 250 million iOS devices sold. How much that figure will vary will depend to some degree on the confluence and substance of product announcements this fall.[2]


  1. 37.2 million iPhones, 14 million iPads, 1.9 million iPods touch which result in net sales of $40.18 billion and corresponds to the top of the guidance range of $37 to $40 billion []
  2. My best guess is now 255.8 million. []
  • Space Gorilla

    So if my math is correct, your estimate of 14 million iPads would put fiscal 2014 iPad sales a little under three percent less than fiscal 2013. Doom! :) I think Apple needs to sell 16 million iPads in the back to school quarter to be level with fiscal 2013.

    I believe this would also make the iPad as a standalone business the top PC seller for two years running now.

    • Sacto_Joe

      The number of iPads needs to be taken in conjunction with the number of iPad Mini’s that hit the market. Unfortunately, Apple doesn’t break them out, so we have to guesstimate. Why is that important? Mini’s have lower revenue and margin. IMHO, the 10″ iPads have been increasing in sales relative to a year ago. Anecdotally, that works, since iPad margins increased last quarter. Finally, my guess is that people are waiting for the new iPad in large numbers, expecting Touch ID. I know I am!

    • KirkBurgess

      An announcement of a 5.5″ iPhone will probably reduce demand for the iPad mini. This is mostly a good situation to have however as margins on a possible 5.5″ iPhone will most likely be far larger. On the downside it might mean some people only buy one iOS device (5.5″ iPhone) instead of buying both an iPhone and an iPad Mini.

  • charly

    262 500k is what you get if you use the last three years in the first graph. Let that be my guess.

  • SlothropRedux

    Quick question- does this analysis factor in the capital expenditures for the new Apple headquarters? This is a significant outlay that would not have a direct effect on production.

    • KirkBurgess

      The cost of the HQ is actually quite small per quarter as it is spread over such a long period of construction and fit out (several years).

  • Sacto_Joe

    Apple is setting up AAPL for a major price increase, both by virtue of growth in Net Income and a continuing decrease in share count. Lucky you if you’ve bought in. Get some now if you haven’t – or wish to heck you had a year from now….

    • Space Gorilla

      We bought a bunch of Apple stock at around $100, a few years ago, I guess that was 2008-ish when Apple was getting hammered along with the rest of the market and dipped down below $100? I don’t remember exactly, but I knew Apple was going to go back up, the success of the iPhone was obvious to anyone who was paying attention. Now with the 7 for 1 split, and the increases, we’ve done very well, already into six figures profit-wise. Who knows what it’ll be worth ten years from now? A lot more I suspect.

  • KirkBurgess

    So Horace, it seems you are projecting roughly 90 million iOS device sales in the December quarter?

  • obarthelemy

    Feels weird doing it that way, mainly because investment’s level and timing relationship to sales feels very elastic (not all investment turns productive at the same speed – ie new variant vs new category – ; nor at the same level – ie extra production vs new feature on existing product – ; etc etc). I can understand such an indirect method when using sales of cardboard to gauge economic activity (though it has its issue in a Service economy), but linking CapEx and sales seems to imply that Apple is omniscient, and very fast on its feet ?

    What’s wrong with the classical method ? Get past data series, de-seasonnalize, get the trend, then if you want to get fancy bake in parameters such as new models, new lines, new markets, sales to existing customers vs sales to new customers, contracts/subsidies lifecycle, market size/saturation (or not, you seem to argue that Apple’s trajectory is fairly independent of what happens with Android… maybe do both ^^)

    • DarwinPhish

      “linking CapEx and sales seems to imply that Apple is omniscient”

      No, CapEx determines production. The unstated assumption is that sales=production. Since Apple has never taken a write down for unsold iOS devices, this is a fair assumption.

      • obarthelemy

        Actually, that CapEx = production = sales

      • Kizedek

        There is no implication about it: Apple is apparently pretty good at organizing its business. It’s quarterly in-channel inventory for all products is pretty consistent, and is about as low as it can be. (hence, once again, production/shipping does, pretty uniquely for Apple, pretty much equal sales. Maybe that is omniscience — or just a good focus and grasp of their business.

        Every manufacturer has to “predict” sales and determine what to manufacture and in what quantities, and at what rates. It’s no more “omniscient” of Apple to need to do this than anyone else.

        However, yes, we “assume” Apple will, as always, sell the products it manufacturers in pretty short order. So, perhaps Apple’s track record does show a lot more omniscience on their part than the track record of others. If anything, Apple has been surprised by the demand for its products.

        Now, to get an idea of what Apple is doing next with upcoming products, and to get an inkling of the degree to which it is optimistic about its own business, Horace has found some correlation or causation between CapEx expenditure and the ramp up of Apple’s production in the next quarter or two.

        But, what DarwinPhish is saying is that the general assumption about most manufacturing is almost looked at in reverse: wow, MS sold 100,000 Surfaces; they must have known they were going to, so they only manufactured 110k. No, they maybe manufactured a million and took a write down on 900k. We don’t really know, because MS likes to hide its losses in various cost centers; and since it doesn’t necessarily own or lease its own means of production, its CapEx gives less of a clue than it does in Apple’s case.

    • Kizedek

      “linking CapEx and sales seems to imply that Apple is omniscient”

      What’s for Apple to mysteriously know? That sales have increased with every launch weekend; That people line up; That people complain that Apple weren’t ready for the launch; That delivery times slip for X number of weeks; that X number of new countries come on line?

    • peter

      Horace’s method is a bit unusual, but given the strength of the historical relationship between capex and sales it is interesting to explore. Of course, the whole idea would collapse if the capex related to the manufacture of components that were formerly bought from suppliers (or if Apple was now buying equipment for suppliers that used to buy their own).
      I think that the idea of extrapolating past trends sounds better than it really is. In particular, it implicitly assumes things such as Apple doing the equivalent of moving into China (which it did last year) again this year. What makes Apple hard to extrapolate is the fact that up to now they have ignored such a large portion of the market (i.e. no large screen phones, nothing under $400, supply-constraint in most of Q4). A deliberate decision to broaden its range of devices would show up in capex first as it is a leading indicator.

      The main criticism of the capex approach is that it, as mentioned earlier, suggests sales of about 90m IOS devices in calendar Q4, which is a lot compared to historical sales. This is a number that is only realistic if Apple is about to expand its range of devices.

      • KirkBurgess

        Apple sold 80 million iOS devices in the last December quarter, so 90 million this year isn’t a stretch at all.

      • Horace Dediu

        Sounds about right.

    • pk_de_cville

      The CapEx vs Sales issue gets very interesting if you place Apple in Hollywood’s blockbuster culture.

      (Steve Jobs made Pixar a master of the blockbuster. He must have learned, stolen, and developed new ideas and practices towards making blockbusters happen repeatedly and intentionally.)

      Every year in September Apple ships its blockbuster set of products. As a result, Apple reaps the benefits of insane levels of opening weekend attention (hugely effective and free marketing) which produces six months of great sales and income. ///Every Year.///

      Of course, as blockbusters go, Apple must deliver real advances in platform and ecosystem performance, design, functionality, and UX. Just like Disney, Apple makes sure it delivers the goods.

      (We could call this annual September opening “Toy Story”, couldn’t we?)

  • stiffy

    The last chart makes it look like Apple’s getting a stiffy.