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Betting Apple Inc. of China looks bigger and bigger as the biggest handicap.
The most influential consumer electronics company in the world threw $ 44 billion in market value on Friday after pairs of pronouncements from Beijing and Washington drew attention to a massive Chinese manufacturing base from which almost all of the world's iPhones are made.
US President Donald Trump this weekend ordered US companies to immediately start looking for alternatives to manufacturing in China, which is something Apple is diligently unprepared for, according to analyst Daniel Ive of Wedbush Securities Inc.
"At best," Ives says, Apple "will manage to move 5% -7% of iPhone production outside of China" for 1
In the title of his report, Ives calls Trump's latest comments on China a "coup in Cupertino."
and assembly company, Foxconn Technology Group, said it has the capacity to build all Cupertino-related iPhones connected to the US outside China, but all indications are that it will take a lot of time and money to deploy. Apple made two big hits on Friday after the latest tariff announcements.
The president's comments were followed hours later by tweets declaring that the US would increase the percentage of existing and upcoming tariffs on Chinese goods. Trump's moves were in response to an earlier announcement that China plans to impose tariffs on $ 75 billion in US imports.
People familiar with the iPhone industry said it was almost impossible to move Apple's iconic device production in a wholesale fashion. about the difficulty of getting skilled labor elsewhere, a point that Apple CEO Tim Cook hit publicly as well. The challenges of reproducing complex production lines and the necessary infrastructure are also major obstacles.
There may be fewer economic reasons for adherence to the global economy # 2. Apple and its arm of contractors, led by Foxconn, are collectively the largest private employer in China, providing jobs to millions of people. Apple's diminished presence could have significant repercussions on the local labor market and erase Beijing in the wrong way at one time Chinese officials see a slowing economy as a significant risk to stability. The government has shown a tendency to clamp down on foreign companies that do not like it.
And Apple has to push away from the leader in the smartphone market Huawei Technologies Co. and win consumers in China, its biggest market after the US
What Bloomberg Intelligence says
Apple may see an added 71 bps of gross margin if President Donald Trump follows his threat to raise expected tariffs on US imports from China as countries "trade war escalates.
– Analysts John Butler and Boyun Kimclick here for the survey
Read more: Chinese Online Army Shows Foreign Brands Responsible
While Apple has requested at least some suppliers for suggestions for bi lice Production in China, there is no sign that the Cupertino company is preparing for a large-scale migration.
In one case, assembler offered a location outside China, but Apple rejected it and the supplier ended up xpanding in China. AirPods production in Vietnam was made on its own accord, people familiar with the decision said, but none of them apply to the iPhone, which remains mainly made in China, as part of older models are happening in India and focus on the internal market there.
Cook's ability to lobby Washington for tariff relief will be tested in the coming weeks. So far, it has been able to get a temporary refund for laptops of iPhone, iPad and Apple, which will not be subject to US tariffs until December 15. But going forward, unless a quick resolution of the trade war is reached, Apple seems to have to come up with detailed plans to build an iPhone outside of China, no matter how expensive it may be.
(A previous version of the story was adjusted to reflect the correct name of the Wedbush analyzer.)
(Updates with Chinese Market Context of paragraph 8)
– With the help of Edwin Chan.
To contact the reporter on this story: Debbie Wu in Taipei at firstname.lastname@example.org
To contact the editors responsible for this story: Edwin Chan at email@example.com, Vlad Savov , Peter Elstrom
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