Apple's domestic pricing and shipment forecasts aren't likely to be impacted by U.S. tariffs thanks to "proper preparations" made by the tech giant, according to a new investor note by Apple analyst Ming-Chi Kuo and obtained by MacRumors.
Financial markets were rattled last week by President Donald Trump's surprise announcement of 10 percent tariffs on $300 billion of Chinese imports, effective September 1, in retaliation for moves by the Chinese government.
It's still unclear if Apple's products will come under the tariffs on toys, games, and consumer electronics, but if they do, Kuo believes Apple will absorb most of the additional costs in the mid-short term while increasing its non-Chinese production locations to avoid rising costs in the long run.
In the mid-short term, if Apple absorbs most of the additional costs due to tariffs, there will be a negative impact on its profits from its hardware business, but the company will reap benefits in its brand image and relationships with suppliers. We also believe that the negative impact on Apple are limited and temporary because the profit from service business is growing, and non-Chinese production locations will gradually increase.
Apple has been expanding production in India and Vietnam as part of a strategy to diversify product manufacturing beyond China. Kuo thinks Apple's non-Chinese production locations could meet most of the demand from the U.S. market after two years. Specifically, he believes iPhone, iPad, and Apple Watch manufacturing could meet demand as early as next year, but adequate Mac production outside of China won't be achieved before 2021.
The predictions stand in contrast to recent comments made by Apple CEO Tim Cook during his July earnings call, in which he was asked about Apple potentially moving out of China. Cook responded: "There's been a lot of speculation about this, [but] I wouldn't put much stock in it. Parts come from everywhere, including the U.S. We currently make the Mac Pro in the US and would like to continue that."
Earlier last month, Apple asked for a U.S. import tariff exemption on parts for the new Mac Pro, which President Trump said would be denied.
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Top Rated Comments
For everyone blaming Trump, grow up and stop being a band wagoner. Since when has more government and any government been a good thing or been done correctly?
The FCC finally pushing to stop these robo callers took how long? And why?.... only because it impacts them is why.
For the first time someone in the Oval Office in a long Time is there who doesn’t need the pay check. Yes he may do things for Corp America, but show me a few company’s who’s CEOs who aren’t about ever increasing their revenue and income?
Government used to be viewed as a role to serve the country. Now it’s a self serve and everyone goes along in blaming one person when it’s certainly not.
It puts Apple in a bit of a jive, sure they've got the pockets to do this but they shouldn't really have to.
Trump needs to go already.