Taxing imports by Trump marks the beginning of the end of globalization as large companies rethink the design and production of their products, particularly Apple’s renowned iPhone, which may be facing obsolescence.
In the past, Apple designed iPhones in the U.S., manufactured them in China and India, and distributed them globally, along with other products like AirPods made in Vietnam and iMacs assembled in Malaysia. This supply chain strategy led Apple to become the world’s most valuable company, with a staggering $3.70 trillion market cap.
However, everything began to crumble when President Donald Trump announced new import taxes, especially targeting China with a 54% tariff increase. This move has caused major tech companies including Apple to grimace as it inevitably drives up production costs.
For instance, the cost of an iPhone 16 Pro with 256GB storage is $1,100, with a production cost of approximately $549.73, sourced from various countries. The majority of components are assembled in China, such as:
– A18 Pro processor from Taiwan: $90.85
– Display from South Korea: $37.97
– Battery from China: $4.10
– 5G modem from South Korea: $26.62
– 8GB memory unit from the U.S.: $21.80
– 256GB storage unit from Japan: $20.59
– Main camera module from Japan: $126.95
– Mainframe from China: $20.79
– Other components from multiple countries: $200.06
After factoring in assembly and testing costs, Apple’s total production cost amounts to around $580. However, with the new 54% import tax on Chinese goods, this cost could skyrocket to $850, impacting Apple’s profit margins significantly.
Analysts from Rosenblatt suggest that Apple might face additional import tax costs of up to $40 billion, potentially leading to a 43% price increase for certain iPhone models, resulting in higher prices for consumers worldwide.
Dr. Pipat Luengnaruemitchai, Head Economist at KKP Research, believes that while the actual impact may be less severe due to currency fluctuations and lower export prices, the overall cost of iPhones will undoubtedly rise. However, relocating production entirely to the U.S. would be a lengthy process with staggering costs.
In addition, production costs in the U.S. are significantly higher, at around $300 per unit compared to just $30 in China. If Apple were to manufacture all components domestically, costs could surge to nearly $3,500 per device.
TLDR: Trump’s import tax policies are reshaping global supply chains, potentially leading to higher product costs and impacting consumer prices, particularly in the tech industry like Apple’s iPhone production.
Leave a Comment