Apple suppliers may consider moving iPhone production out of China if the US increases tariffs imposed on devices to 25 percent, Bloomberg reported.
Apple, however, will continue making iPhones in China till a tariff level of 10 percent, the report said. China has been Apple’s production base for signature products from iPhone to iPads and Macs. Most of these iPhones are made by assembly partner Hon Hai Precision Industry and shipped around the world.
Cell phones, the biggest US import from China, have so far been spared but would be hit if Trump activates the new $267 billion tariff list. In November, US President Donald Trump told the Wall Street Journal that he could slap tariffs on smartphones and laptops made in China.
The company and its partners are reportedly assessing their supply chains, amid the ongoing trade war between the world’s two largest economies.
Apples’ manufacturing partners are largely beholden to the US company’s wishes. Migrating parts of the sprawling network they underpin will be difficult and the US company seems to be in wait-and-see mode, for now, a source told the news agency.
An Apple partner has already suggested alternative locations for non-iPhone production, but the US company has indicated there’s little need to make such a move, for now, another source said. This stance, however, may change if the tariffs escalate.
Apple has been grappling with mounting evidence that its latest iPhone line-up has failed to excite consumers, the report said. A hike in import taxes may hurt the company more.
A 10 percent tariff could result in an earnings per share decline of just $1 for Apple, should all its hardware sold in the US be subject to the levy and the company absorb the cost, RBC analyst Amit Daryanani wrote in a November 28 research note. In case Apple absorbs a 25 percent tariff, it could result in an EPS decline of about $2.5, he added.