Is Apple, Inc. (AAPL) stock halal to invest in?
Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. In addition, the company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of... Read More
- It is questionable whether a material part of the business’s revenue comes from Haram.
- Interest is used but is not relied on to run the company.
- The company has a net positive impact on the environment, society and governance.
Apple's Q3 2020 Revenue by Product:
$26.42 billion: iPhone
$13.16 billion: Services*
$7.08 billion: Mac
$6.58 billion: iPad
$6.45 billion: Wearables, Home, and Accessories
*Apple Services include the following:
Of the different services, high on the list of suspects for prohibition in Islam are Apple Card (because of Islam's prohibition on interest) and Apple Music and TV+ (because of some of the foul and vulgar content in many songs and shows offered through Apple Music and TV).
Riba is defined as any contractual guarantee of benefit that accrues to the lender as compensation for lending money.
Riba is prohibited in Islam.
Interest charged on debt fits the definition of prohibited Riba.
Apple Card generates interest fees when a customer carries a balance. Now the question we have to ask ourselves is:
Is the interest that Apple collects from the Apple card a material part of Apple's revenue?
In November 2019, Goldman Sachs reported via regulatory filings that—just six weeks after the Apple Card launched—it had issued roughly $10 billion in credit to Apple cardholders. The firm also reported that consumers with the new credit card had already run up $736 million in loan balances during the period.
Apple does not divulge how much interest it has collected on the loan balances its customers carry.
However, given the size of the balance just six weeks after the card launched, it's safe to assume that the interest income Apple collects is a non-trivial amount of money. Even for Apple.
Is it a material part of Apple's close to $300 Billion in annual revenue? probably not. Apple Music and Apple TV+
Apple Music and Apple TV+ are even harder businesses to measure revenue contribution from.
Even if we were able to measure the revenue contribution of Apple Music and TV+, we still have to figure out what percentage of offerings on Apple Music and Apple TV+ are haram.
Revenue Apple generates from Apple Card, Music and TV+ are included in "Apple Services" which is a growing part of Apple's Revenue.
In the third quarter of 2020, Apple’s quarterly services revenue climbed to $13.16 billion, up from $4.4 billion in Q1 of 2014.
Apple's Service Revenue
The specific contributions of Apple Card, Apple Music and Apple TV+ to this growth is unclear.
Accordingly, The Halal Investors finds the following about Apple:
It is questionable whether a material part of the business’s revenue comes from haram.
Interest Income TTM / Revenue = 4,101,000 / 273,857,000 = 1.49%
Interest Expense TTM / Total Expense = 3,049,000 / 206,719,000 = 1.47%
While Apple's use of interest to run the company is not the ideal zero, it is not at a level that would cause us to question whether the company is reliant on interest to operate.
Accordingly, The Halal Investors finds Riba is used but is not relied upon to run the company.
**Update on 6-25-21**
We have performed an update on our review of Apple, we specifically call out that they should review their relationship with O-Film, and based on Apple's most recent reports they have reviewed their relationships with O-Film and other suppliers. Apple takes more accountability for their supply chain, and due to the fact they actually actioned out one of the specific call outs we have made, we have moved their score to comfortable. Below are two resources for the action they took around O-Film, and also a summary of their most recent responsibility report.
The value that Apple products have added to people's lives is undeniable.
There is barely a practical need for which you can’t find an Apple device or App that can help you.
Whether it’s staying in touch with friends and family, budgeting your finances, or keeping track of your health, Apple products have provided enormous value for a very large number of people.
There are also other corporate policies for which Apple should be commended.
For example, Apple claims that its stores, offices, and data centers are powered by 100% renewable electricity. By 2030, Apple has an ambitious goal for all of its products to be carbon neutral.
This entails transitioning hundreds of Apple's manufacturing suppliers to 100% renewable sources of electricity.
Having said all this, there is a dark cloud that looms over Apple's operations and it relates to its Chinese suppliers.
Reports by the Australian Strategic Policy Institute (ASPI) and the US Congress, among others, have found that thousands of Uighurs have been transferred to work in factories across China, under conditions the ASPI report said: "strongly suggest forced labor". It linked those factories to more than 80 high-profile brands, including, Apple.
China, which is believed to have detained more than one million Uighurs in internment camps in Xinjiang, has described its programs - which reportedly include forced sterilization - as job training and education.
O-film Tech, a supplier to Apple, has been accused by the United States Department of Commerce of violating the rights of Uighur Muslims in China. In response, Apple said it had not found any issues, despite conducting several surprise audits of its long-time supplier O-Film.
The Halal Investors is more inclined to believe The U.S. Department of Commerce, with nothing to gain from accusing O-film specifically, than Apple which stands to lose a key supplier in case the allegations about O-film are proven true.
Furthermore, the ASPI report identifies three other Apple suppliers as benefitting from Uyghur Muslim slave labor.
The Halal Investors finds Apple's lukewarm response to these accusations repugnant.
Accordingly, The Halal Investors has decided to give Apple an ESG rating of 0, meaning: "The Company is deemed to have a substantial negative impact on society and the environment".
Does Apple have any positive impact? sure it does. We mentioned some of it earlier.
However, if a patient is being admitted to the ER with a giant hole in their chest, it would be quite silly to point out the patient's well-manicured nails. Similarly, the issue of using slave labor in Apple's supply chain prevents us from giving much weight to any other positive impact Apple undoubtedly has.
Only a complete severing of ties by Apple with O-Film and any other companies associated with slave labor will change this rating.
We hope Apple will do the right thing and do exactly this.
Agree or disagree with our halal report cards? Share your feedback.