Kuo: Apple Will Absorb Any Cost Increase On Its Products Due to Recent Tariff

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Reputed analyst Ming-Chi Kuo believes that prices of Apple’s hardware products will not be affected by the recent 10% tariff imposed by the U.S. government on goods imported from China. The analyst believes that Apple has already made enough preparations for such a tariff and the company will absorb the additional cost for the near future.

For the iPhone, Kuo believes that it is a challenge for Apple to expand its non-Chinese production capacity due to the low level of automation. However, by 2020, the company would be able to meet the iPhone demand in the U.S. through its factories located outside of China. The company will be using the factories of its suppliers Wistron and Hon Hai located in India and Vietnam to meet the U.S. iPhone demand.

For the iPad, the higher degree of automation and the low demand means it is not that difficult for the company to meet the U.S. demand via its non-Chinese factories.

The Apple Watch is being entirely manufactured in China, though Kuo expects some non-Chinese factories will show up from next year. The same is true for the AirPods as well, with the change in internal design from SMT to SiP helping improve the overall level of production automation.

Apple will not be able to meet the U.S. demand for its Mac hardware from its non-Chinese factories until 2021 despite the higher level of automation for Mac manufacturing. This is because of the high demand for Macs in the United States.

Our Take

We should see many Apple suppliers setting up factories outside of China to help further diversify the company’s supply chain. The move will also help secure Apple from any further tariff hikes from the U.S. government on goods imported from China.

[Via AppleInsider]