Analyst says Trump's tweet on Friday was "a gut punch" to Apple

Analyst says Trump's tweet on Friday was
This past Friday, U.S. President Donald Trump was upset because China had retaliated against his latest tariff declaration. So the president sent out a tweet in which he "ordered" U.S. companies to pull out of China. While it isn't clear whether the president has this power (Trump economic adviser Lawrence Kudlow says that he does), the tweet might have concerned Apple enough to speed up any plans in place to move some of its production out of China. Because Apple designs the iPhone in the states and has it largely assembled in China, the product is considered a Chinese import and thus elgibile to be taxed.

Starting on December 15th, smartphones being shipped into the states from China will be subject to a 15% tariff. This was supposed to take place on September 1st, but the president pushed back the date so that some products-like the iPhone-won't face the additional tax during the holiday shopping season. However, starting on September 1st two popular Apple wearables, the Apple Watch, and the AirPods, will be subject to the 15% tax. Whether Apple absorbs all or part of the additional cost or passes it on to consumers is up to the company.

Back in June, a report out of Asia indicated that Apple was looking to move as much as 30% of its total production out of China. It already produces a small amount of iPhone models in India, although the facilities are in no way large enough to replace a chunk of production from China. Earlier forecasts called for Apple to eventually produce 250,000 handsets in India each month with 70% to 80% of the total exported.

It could take Apple three years to move 20% of its iPhone production out of China


If Trump does follow through on his tweet Friday and orders U.S. companies out of China, Apple will be caught unprepared according to one analyst. Bloomberg reports today that Daniel Ives of Wedbush Securities has issued a report to clients about Apple's iPhone production. In the title of this report, he states that the president's comments were "a gut punch to Cupertino." Discussing a hypothetical roadmap for moving production out of China, Ives says that it would take 18 months for Apple to move 5% to 7% of iPhone assembly out of the country and three years to move 20% of its handset production. That wouldn't even cover the 25% of Apple's total iPhone output that is earmarked for the U.S. every year.


Foxconn, the contract manufacturer that Apple relies on the most for iPhone production, says that it has the physical facilities to build outside of China the number of units Apple needs for U.S. consumers. Uprooting iPhone manufacturing to another country requires time and money to train a new workforce, and perhaps the biggest obstacle of all is putting together a trusted supply chain. In addition, pulling out of China means that a large number of workers in the country could lose their jobs. Not only would this make it hard for them to afford to buy Apple's devices, but it also could also make the company look bad in the eyes of Chinese consumers; remember, China is one of Apple's most important markets.

Apple's valuation dropped by $44 billion on Friday alone, although the stock today has recovered about 30% of what it lost at the end of last week. It is possible that the threat from the president was just some more bluster from Trump. This morning, the president said that China wants "very badly" to make a trade deal. And while that seems to have calmed things down a bit, it shouldn't stop Apple from working on plans to move a chunk of iPhone production out of China. After all, why should Apple have to worry about having this threat hanging over its head now, or even in the future.

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17 Comments

1. hypertonik

Posts: 27; Member since: Nov 17, 2014

Beat up your own to make others afraid of you.

2. all4dom

Posts: 23; Member since: Sep 30, 2013

Apple will try to find a way to.comtinue production in China but they really should look at moving production out. I think its appalling that any.american company produce their product in another country, especially a country like China that wants to wipe out the USA. Main problem is these tech leader idiots favor the dollar over anything else.

6. oldskool50 unregistered

They are only doing business in china because its cheaper. Because these company's want to make lots of money, and they sont wanna pay good wages. If you wanna go work in a US Apple factory for minimum wage, then go ahead. If you wanna work at that wage for 24/7, then go ahead because that's what they do in China. And Apple wouldn't be able to produce the same amount of product, because we have laws on how long you can work an employee, we have laws on age and wage amounts all which makes things expensive. Also if you want the iPhone to cost $2000 each, then have at it. Trump is stupid and the fact is when he is gone, the ext President will undo all this stupid stuff. Also, what is the different in leaving China and then going to India? The tariffs can be raised on any country they all move too, so it doesn't solve the problem now....DOES IT!!! If Trump or a y Presidents want these company's to bring jobs back to the US, they need to offer some serious incentives to do so. There is no difference if they move to India, Korea, Philippines or any place outside the US.

17. mootu

Posts: 1541; Member since: Mar 16, 2017

"especially a country like China that wants to wipe out the USA." Where do you get the idea that China wants to wipe out the USA? Typical Trump supporter bull.

3. Crispin_Gatieza

Posts: 3166; Member since: Jan 23, 2014

The Executive branch is not empowered by the Constitution to regulate commerce, especially with foreign countries. That belongs solely to Congress as per the “Commerce Clause” in Article 1 (Section 8 I believe). Didn’t Fox & Friends explain that to him?

4. mackan84

Posts: 632; Member since: Feb 13, 2014

I’m going to love hearing Trump explain how a new recession is justifiable in all of this. Nobody is going to afford American products when they’re unemployed anyway. Especially not an iPhone.

5. oldskool50 unregistered

I have another punch. More airlines are banning some models of the Macbook Pro from flights. Yet PA has yet to post about it. After all, the Macbook Pro is a mobile device. Am sure if it was the Surface, they'd have 50 stories a day. Jerry Rig Everything says, the 9W reverse wireless charging on the latest Note 10, is faster than the 5W charger Apple still inboxes with their $1000 phone. What a joke. Class Action Lawsuit file against Apple over the phone slowing debackle. And the tariffs hit the iPhone starting Dec 15th, which will add a considerable amount of cost to the iPhone, which we know Apple is highly unlike to absorb. With sales slipping by 20%, will Apple absorb those next year to keep from raising the cost? The iPhone 11 design said to be uglier than Google latest Pixels which are also pretty ugly. That's saying alot when you consider Apple thinks they are a luxury brand. No one would say a BMW is uglier than Camry. But Trump is stupid. What he should do is make all these companies who hide their money offshore, tell them Witter bring all the money here, of pay a flat tax of $50B for every year you don't bring tour money to US shores. And for any large company with more than 1000 employees outside the US, charge another tax for not employing US citizens. Apple is gonna be hurting big time after this year. Apple will fall to less than 100M sales at 2021 and Tim Cook tenure will be over. No the President does not have the power to tell any company not to do business in China. All he can do is fine them or something, or ban imports.

7. scarface21173

Posts: 702; Member since: Aug 17, 2014

I said 150M sales, but you could be right.

13. mackan84

Posts: 632; Member since: Feb 13, 2014

“More airlines are banning some models of the Macbook Pro from flights.” You do know that a recalled battery by manufacturers automatically gets banned by FAA to be onboard on any airline whatsoever?

8. cmdacos

Posts: 4326; Member since: Nov 01, 2016

Trump 2020

10. Crispin_Gatieza

Posts: 3166; Member since: Jan 23, 2014

Trump in prison 2020. There, I fixed your post. No need to thank me, we both know it.

12. MsPooks

Posts: 237; Member since: Jul 08, 2019

If it's anything like the Mueller Christmas, you'll forgive us for not holding our collective breath. :D

16. Awalker

Posts: 1986; Member since: Aug 15, 2013

He won't have an unscrupulous attorney general to protect him when he's out of office. He will be going to prison.

9. Alcyone

Posts: 574; Member since: May 10, 2018

MASA = Making America suffer again.

11. KickRocks

Posts: 283; Member since: Mar 22, 2011

Designed in California, built in China, Enough said...........

14. darkkjedii

Posts: 31605; Member since: Feb 05, 2011

Trump is an idiot

15. gadgetpower

Posts: 283; Member since: Aug 23, 2019

Apple should start making their own production in other asian countries.

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