Reliable Apple analyst Ming-Chi Kuo is out today with a new investor note covering Apple's supply chain and how President Trump's recent rounds of customs could affect things. Kuo says he believes "the tariff cannot affect the prices of Apple's hardware products" in the United States.
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Last week, Trump announced that the United States would place a ten percent tariff on another Goods imported from China with $ 300 billion as of September 1. Although it remains unclear whether this will include Apple products, analysts are concerned and AAPL stock hit news.
Kuo writes that Apple has probably made "proper preparations" for such a tariff, and he predicts that Apple will "absorb most of the additional costs" in the short term, thus Kuo believes that "prices of hardware products and shipping forecasts for the US market will remain unchanged "despite the tariff.
In the long run, Kuo writes that he believes Apple's non-Chinese manufacturing sites could meet" most of the US market demand "over the next two years. This line of thinking is based on a combination of "production automation" and Apple's market share in the United States. "If the market share in the US market is lower and the production automation rate is higher, it will be easier to expand non-Chinese production capacity" to meet US demand.
Here is Kuo's forecast:
1. iPhone . Expanding non-Chinese production capacity is challenging due to the low degree of production automation. We expect non-Chinese manufacturing locations to meet US demand by 2020.
2. iPad . It is not difficult to expand non-Chinese production capacity to meet US demand due to the higher degree of production automation and the smaller US market share.
3. Mac . Although production automation rates are higher than the iPhone, non-Chinese Mac production sites can meet US market demand until 2021 due to higher market share in the US market.
4. Apple Watch . We anticipate that there will be non-Chinese production sites, starting in 2020.
5. AirPods . We estimate that the change of AirPod's internal design from SMT to SiP will increase the level of production automation.
On Apple's revenue call last week, Cook addressed Apple's supply chain and reported that it would expand to other areas. Cook noted that Apple already has a "global" supply chain of sorts:
I know there has been a lot of speculation around the topic of various moves and so on. I wouldn't put much stock in these if I were you. The way I look at this, the vast majority of our products are made from everywhere. There is a significant level of content from the US, and much from Japan to Korea to China, and the EU is also contributing a good deal. And then there is the nature of a global supply chain.
So far, Apple has largely escaped the effect of tariff rates, without including Apple products (except any accessories) in the currently punished imports.
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