Apple analyst Ming-Chi Kuo has outlined some potentially stormy weather for the tech giant following the Trump administration’s new tariff policies.
These tariffs impose a burdensome 54%, 26%, and 46% on Apple’s hardware assembly in China, India, and Vietnam, respectively.
With 85-90% of Apple’s production happening in China, this could eat into Apple’s future profitability.
Kuo notes a significant drop of 8.5-9% in Apple’s overall gross margin if prices remain stable.
Apple might mitigate that damage if India and Vietnam can negotiate tariff waivers, narrowing the blow to 5.5-6%.
If India negotiates exemptions and ramps up its iPhone production to over 30% of the global market, the impact could shrink dramatically to 1-3%, Kuo suggests. This strategy appears more favorable than expecting China to make favorable trade concessions.
Shifting production is just part of the plan. With high-end iPhones making up 65-70% of new model sales in the US, Kuo believes Apple has ways to counter looming tariff hikes without breaking a sweat.
Whether it’s increasing carrier subsidies or cutting down on Trade-In program discounts, Apple could maneuver creatively while keeping user perception intact.
Another avenue for Apple is squeezing its supply chain. This might mean putting the squeeze on suppliers to cut costs — yes, even those who’ve been long-time partners.
Apple’s suppliers could be asked to share the burden further, adding another layer of strategy to buffer tariffs in the short term.
On the horizon, Kuo cautions that the macroeconomic environment might spell further troubles for Apple.
Sustained tariff hikes could lower consumer confidence and purchasing power, potentially lengthening device replacement cycles. If gross margins dip below 40%, it might be temporary if Apple’s strategies play out successfully in the medium to long run.
Planning your financial journey can be daunting but it doesn't have to be. Fire Fast by Dzambhala helps you understand and plan effectively.
Join the vibrant privacy-ensured Dzambhala community on
Want to give feedback on this story? Write to us.