Apple hit by trade war with China

Apple hit by trade war with China

Apple has reported the loss of $75bn of its market value when shares plummeted by 9% in the face of the escalating trade war between the US and China. The loss in market value means it has slipped behind both Microsoft and Amazon.

Last week US president Donald Trump ratcheted-up his antagonism towards China when his administration declared they would impose trade tariffs on $200bn in goods from China.

China immediately hit back by raising their own tariffs on $60bn in US produced products such as batteries and coffee which will begin on 1st June.

This could hit Apple badly as it is reliant on China for production as well as sales. China generates almost 20% of Apple’s revenues last year.

Analysts from Morgan Stanley said they could see Apple’s earnings falling by almost a quarter, estimating at $3 per share due to the proposed tariffs. While Jun Zhang at Rosenblatt Securities said that duties will lead to price increases for Apple’s Airpod, charging dock, Apple Watch and other products.

Apple is not the only high-tech company to feel the strain. Companies such as Intel and Qualcomm are also in the firing line. Analyst Dan Ives pointed out recently that Silicon Valley itself is a major target in this trade war.

Higher tariffs, many say, will mean higher component costs that will probably push prices higher on smartphones, tablets and computers. And, as a result we may see consumers buying fewer tech products.

China represents the heart and lungs of the tech food chain for US semiconductor companies, as well as tech bellwethers like Apple. US tech players, and investors, are caught in the crossfire with minimal leverage.

- Dan Ives: Analyst, Wedbush Securities Inc

Apple has been aware of this for some time and since 2015 has worked with manufacturing partners such as Foxconn to move production to India. This was partly due to reducing some of the Chinese government’s control over its product pipeline but since the trade war began Apple has accelerated its move to India.

Some analysts have wondered whether Apple can instigate a full switch to India given the country’s ‘onerous’ regulatory climate. Couple this with the easier access to China’s skilled workforce, then it is believed Apple could move only 10% of its total hardware production from China to India.

By:

A veteran freelance journalist writing extensively on internet news and cybersecurity.
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