Kuo: Apple Likely to Absorb Any US Tariff Cost Increases on iPhone, iPad, and Mac

MacRumors

macrumors bot
Original poster
Apr 12, 2001
49,581
10,899



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.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: Kuo: Apple Likely to Absorb Any US Tariff Cost Increases on iPhone, iPad, and Mac
 

JPack

macrumors 603
Mar 27, 2017
6,054
9,625
Apple will likely "absorb" it by keeping base storage at 64GB for iPhone and keeping 5W charging. Basically absorb any drop in component prices.

When the iPhone 5G comes around, you can bet Apple will make up for it.
 

Southern Dad

macrumors 68000
May 23, 2010
1,532
563
Shady Dale, Georgia
Bull. There's no way I'd eat a tariff if everyone knows who's the cause. This isn't some minor, slip it in a bill from Congress. This is Trump doing Trump. Tim is going to go nearly the full +10, and he's going to point at Don the Con.
You could do that, if you had no competition in the marketplace. If the price of your goods went up 10% but the competitor did not, you will lose business.

Apple won’t move assembly back to the USA at this time, but they have proven that they will move assembly to avoid tariffs.
 

Classie

macrumors 6502
Nov 3, 2018
274
394
Sweden
It’s almost unfathomable how big corps/business work. There are so much preparation and future planing!
I think Apple is quite pleased with not having a product guy at the steering wheel ;)
 
  • Like
Reactions: audiophilosophy

genovelle

macrumors 65816
May 8, 2008
1,054
890
You could do that, if you had no competition in the marketplace. If the price of your goods went up 10% but the competitor did not, you will lose business.

Apple won’t move assembly back to the USA at this time, but they have proven that they will move assembly to avoid tariffs.
Competitors will all go up. They are all built in China. Even Samsung. They also have little profit to loose.
 

iReality85

macrumors 65816
Apr 29, 2008
1,006
2,148
Upstate NY
Well which is it? Is Apple "absorbing" the tariffs, or "properly preparing" for them? Because the latter seems to imply that Apple will avoid the tariffs, which is quite a bit different than absorbing them.
 
  • Like
Reactions: mbosse

PlayUltimate

macrumors 6502
Jul 29, 2016
402
512
Boulder, CO
what if Apple knew this all along and increased the prices of iPhones ahead of time so that customer will think Apple is doing their favor?? *mind-blown*
IMO, the problem is less about maintaining the price and more about maintaining margins. AAPL will take a hit due to decreased margins if Apple goes this route.
 
  • Like
Reactions: jjhny

yakapo

macrumors regular
Jul 11, 2008
221
147
Bull. There's no way I'd eat a tariff if everyone knows who's the cause. This isn't some minor, slip it in a bill from Congress. This is Trump doing Trump. Tim is going to go nearly the full +10, and he's going to point at Don the Con.
Is it unreasonable to at least request parity in regards to tariffs? Read Musk’s comments on the exorbitant regulations for US car manufacturers in China.
 

BarrettF77

macrumors 6502a
May 24, 2015
623
715
What everyone here seems to forget is the disproportionate amount in trade with a China. They steal our IP regularly, no one polices them as heavily as they should, and all in the name of cheaper labor.

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.
 

Falhófnir

macrumors 601
Aug 19, 2017
4,660
5,168
Still unclear if they will be affected by tariffs on consumer electronics? I mean, they could try to claim the watch is medical equipment, and by extension the iPhone as it's a requisite part of using the watch, but I don't somehow think the good old reality distortion field is quite that powerful...
 

kingofwale

macrumors 6502a
Apr 24, 2010
969
1,309
What everyone here seems to forget is the disproportionate amount in trade with a China. They steal our IP regularly, no one polices them as heavily as they should, and all in the name of cheaper labor.

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.
people's hatre for trump is blinding their common senese... what else is new?
 

hagjohn

macrumors 6502a
Aug 27, 2006
895
1,405
Pennsylvania
IMO, the problem is less about maintaining the price and more about maintaining margins. AAPL will take a hit due to decreased margins if Apple goes this route.
It would be good PR for Apple to take the hit and it will be a bad PR hit for this administration.
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.