Investing.com - Potential Trump Tariffs Could Hit Apple iPhone Shipments, UBS Warns
If Donald Trump wins the U.S. Presidential election, there is a looming threat of increased trade tariffs that could have a significant impact on Apple's iPhone shipments, according to a recent report by UBS.
Trump's proposed tariffs, which include a hefty 60% tax on Chinese exports to the U.S., would directly affect the tech sector. UBS highlights the higher risks for discretionary consumer products like PCs and smartphones, particularly for Apple's supply chain, as over 75% of production is still based in China.
Apple's supply chain is more exposed compared to other suppliers, with 32% of its smartphones and 47% of its PCs heading to the U.S. market. Despite the company's goal of shifting 20% of its production out of China by 2026, much of this move is targeted at India. However, UBS notes that production must also cater to the Indian market.
If Apple were to redirect production from India to the U.S. market, it would not cover all of its units in that timeframe, leading to further production re-balancing outside of China over time. This could result in negative cost effects related to de-clustering.
UBS predicts that Apple and its supply chain would be disproportionately impacted by a potential tariff hike. Some of the most exposed suppliers to the iPhone include LG Innotek, Hon Hai, Largan, Genius, Taiyo Yuden, and Murata. The investment bank suggests that suppliers able to diversify quickly may gain relative share.
In response to potential tariff costs, analysts believe Apple may absorb the expenses or incur costs to shift production sites, affecting profitability across the supply chain. UBS indicates that major tech products facing tariffs would mainly affect companies heavily reliant on the U.S. market, as well as Chinese firms due to reduced GDP from lower production and wages.
In the smartphone sector, Apple stands out with 20% of its shipments going to China, but is already experiencing declining sales due to intensified competition and restrictions from state-owned enterprises. On the other hand, the Android supply chain, exemplified by Samsung, is less vulnerable as the majority of its production is based in Vietnam.
In conclusion, potential Trump tariffs could have a significant impact on Apple and its supply chain, leading to production re-balancing and cost effects. Investors should closely monitor developments in trade policies and their implications on tech companies like Apple.