CEO Tim Cook holding the iPhone 16 Pro Max in his hand. Photo: Bloomberg . |
For Apple, the new US reciprocal tariffs are a big challenge because the company relies on supply chains in many countries, meaning products imported into the US could be more expensive.
In Bloomberg 's Power On newsletter , analyst Mark Gurman said Apple is trying to keep iPhone prices stable in the U.S. In the current environment, the company may consider some solutions to minimize the impact.
Solution for Apple
According to Gurman, Apple has never raised the starting price of its high-end iPhone models. Since 2017's iPhone X, equivalent versions have started at $999.
In fact, there have been some minor tweaks over the eight years, such as the addition of a Pro Max version and the removal of the low-capacity option. Recently, concerns about iPhone price increases have returned, with users asking how much more expensive it will be.
“Of course, many people buy smartphones through trade-in programs, so the sticker price may be less relevant. But there’s still the issue of price shock. $999 is a psychological threshold that many people probably don’t want to cross,” Gurman said.
That’s why Apple wants to keep the starting price there. When Trump imposed tariffs in his first term, Apple convinced the president to exempt iPhones from the tariffs. Apple also diversified its supply chain, no longer relying too much on China.
US President Donald Trump and Apple CEO Tim Cook. Photo: New York Times . |
When the Covid-19 pandemic broke out in 2020, Apple accelerated the pace of diversifying its supply chain. Despite suffering losses due to inflation in the US, the company did not change its pricing strategy.
Bloomberg ’s writer said that the new tariffs from Mr. Trump will be the biggest challenge for Apple, especially when the countries affected are not only China. Most areas in Apple’s supply chain are subject to tariffs.
It’s still possible that CEO Tim Cook will seek an exemption, or that taxed countries will negotiate. But assuming the tariffs go into effect on April 9, Apple will have to make a big decision: whether to absorb the brunt of the tariffs, encourage suppliers to lower prices, pass the costs on to customers, or adjust its supply chain.
According to Gurman, Apple could combine all four of these solutions. First, the company’s purchasing team negotiates price reductions with manufacturing partners. This helps maintain profit margins.
Next, Apple is likely prepared to bear a small portion of the cost, especially when the hardware profit margin is still quite high (around 45%).
Apple may still consider adjusting iPhone prices. In this context, the reaction from users does not seem too serious. Finally, Apple is considering continuing to change the structure of its supply chain to reduce the damage from tariffs, not necessarily bringing the entire production line to the US.
What will Apple do?
In fact, Gurman revealed that Apple has been building up inventory in the US for months, since tariffs do not apply to goods already imported into the US. Theoretically, the company could hold off on raising prices until the iPhone 17 launches in September.
The risk, though, is that the news about the new iPhone will be all about price, rather than hardware upgrades. On the bright side, tariffs in many countries are lower than in China.
iPhone 16 Pro billboard. Photo: Bloomberg . |
“If you go into the back of an Apple retail store in the US today, you will see a lot of inventory that was made in China.
“However, more and more iPhones are being made in India. iPads, Apple Watches and AirPods are made in Vietnam, while Macs are made in Thailand and Vietnam. In the coming months, you will see more and more diversity to cope with tariffs,” Gurman said.
It’s worth noting that Apple can certainly raise prices in other markets to respond to tax policies, currency fluctuations, and inflation. For example, the company raised iPhone prices in Japan in 2022 due to a weak yen.
That same year, inflation caused prices of iPads and some products to rise in Europe and the UK. There was a post-Brexit price increase in the UK, making Macs significantly more expensive.
It's not easy to move production back to the US.
According to Bloomberg , Apple’s long-term strategy for changing its supply chain includes decentralizing manufacturing facilities in many major markets. For example, Foxconn has been manufacturing iPhones in India and Brazil, helping the company avoid tariffs in these countries.
Increasing production in Brazil could lessen the impact, as Trump only imposed a 10% tariff on imports from the country. However, the scale of Brazil’s production lines is very small compared to Asia, requiring significant expansion plans. In addition, Brazil only focuses on producing basic iPhones, not iPhone Pro models.
A less dire scenario would be for Southeast Asian countries that manufacture Apple devices to negotiate with the US government to reduce tariffs. But Gurman said that in any case, the likelihood of a company like Apple moving all of its manufacturing to the US in the next few years is very low.
Users experience iPhone 16. Photo: Bloomberg . |
“If management really wants to produce iPhones domestically, it will take at least half a decade to build and operate. That’s not counting the impact on iPhone prices. This move is likely to double costs, a dire scenario for both the company and consumers,” Bloomberg ’s writer emphasized.
Apple has made recent moves to increase its investment in the US, including a plan to invest $500 billion over the next four years, announced in February. CEO Tim Cook contributed $1 million to Trump's inauguration fund in January. However, things are not going well for the Apple.
In the short term, Apple needs to find a solution to appease users who are worried about the price increase of the iPhone. According to Gurman, the company can promote installment purchase and trade-in programs, or even “revive” the device leasing plan.
“If this new order does exist, at least Apple has ways to deal with it,” Gurman stressed.
Source: https://znews.vn/iphone-lieu-co-tang-gia-post1543907.html
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