Sat, Jun 22, 2019 - Page 10 News List

Apple warns of risks to iPhone from US tariffs

PROFIT:With most of its gear made in China, the thing that has benefited Apple previously might turn full circle and harm its super-normal margins, a researcher said

Bloomberg

Apple Inc this week urged the administration of US President Donald Trump not to proceed with tariffs of as much as 25 percent on a new slate of products imported from China, saying it would reduce the company’s contribution to the US economy.

The Cupertino, California-based technology giant made the plea in a letter to US Trade Representative Robert Lighthizer.

Tariffs would affect nearly all major Apple products, including iPhones, iPads, MacBooks, Apple Watches, AirPods and iMacs, the company wrote.

It would also hurt lower-volume products like the HomePod speaker, some Beats headphones, wireless routers, the Apple TV box, cases and iPhone replacement parts, it said.

“We urge you not to proceed with these tariffs,” Apple said.

This is the first time Apple has specifically mentioned the iPhone on a list of products that would be affected by tariffs. The smartphone generates about two-thirds of Apple sales and drives the purchase of other devices and services.

“What has benefited Apple in the past might turn full circle and harm their super-normal margins in the future,” Mirabaud Securities Ltd researcher Neil Campling wrote in a note to investors on Thursday. “While Apple attempts to portray itself as pivoting to a services company, the bare fact remains that more than 60 percent of profit is generated by the iPhone.”

Apple is one of the largest job creators in the US, the company said, responsible for more than 2 million positions.

Apple also said it is the biggest US corporate taxpayer.

It has pledged to make a direct contribution to the US economy of more than US$350 billion over five years, and said it is on track to meet that goal.

The US and China said that their presidents would meet in Japan next week to relaunch trade talks after a month-long stalemate.

Apple spent decades building one of the largest supply chains in the world. The company designs and sells most of its products in the US, but imports them from China after assembly. That makes it one of the most exposed companies to tariffs.

It might be evaluating moving some production out of China to elsewhere in Asia, a recent Nikkei report said.

Apple’s global supply chain has helped it efficiently pump out hundreds of millions of devices, making the company one of the most profitable in the world, but the approach relies on cheap labor and the relatively free movement of goods between nations. The trade dispute is a threat to this lucrative “status quo.”

In the past, when it has been up against local taxes on the sale of products built elsewhere, Apple has relocated production within that country.

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