Apple To Absorb The Impact Of Trade Tariffs, Won’t Hike iPhone 11 Prices

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The US-China trade war has already forced dozens of companies to move their production to other countries such as India, Vietnam, Indonesia, Taiwan, and Malaysia. US President Donald Trump has slapped additional 10% tariffs on $300 billion worth of Chinese imports. The fresh trade tariffs would cover electronics gadgets including Apple’s iPhones, iPads, and Macs. With the iPhone 11 launch just around the corner, Apple fans might be wondering whether the tech giant would bump up the iPhone 11 prices as a result of trade tariffs.

One thing that Apple doesn’t like to compromise on is its profit margins. So, some experts were speculating that the company could pass the burden of additional tariffs to consumers by increasing the iPhone 11 prices. But the world’s most respected Apple analyst Ming-Chi Kuo has said in his latest investor note (via 9to5Mac) that the company would absorb the impact of the trade tariffs.

It means the tariffs won’t lead to a price hike for Apple devices in the “mid-short term.” During its latest quarterly earnings call, the company reported strong sales in China even though worldwide iPhone revenues declined 12% YoY to $25.99 billion. The tariffs will go into effect on September 1st.

China responded to Trump Administration’s move by asking all Chinese companies to stop imports of US agricultural products. Beijing also threatened to impose additional tariffs on the US farm products purchased after August 3. But what irked Trump was China devaluing its currency to the lowest level in more than a decade.

Trump called the yuan devaluation a “currency manipulation” and a “major violation.” A weaker yuan against the US dollar could eat into the profits of US companies doing business in China.

Apple’s decision to increase prices with the iPhone X launch was not received well by consumers. The current iPhones are ridiculously expensive, leaving little room for Apple to increase prices. Part of the reason iPhone sales have been declining over the last several quarters is their enormous price tag. The tech giant can’t afford to increase the iPhone 11 prices.

Ming-Chi Kuo told investors that while Apple would absorb the impact of the trade war in the near term, its contract manufacturers are ramping up production outside China to meet the future US demand. According to the analyst, the production facilities in India and Vietnam will be able to meet the US iPhone demand as early as next year.

Apple’s dominant market share in the US coupled with the advanced production automation will allow Apple to absorb the impact of the trade tariffs in the “mid-short term.”

The non-Chinese production facilities will also be able to meet the US demand for iPads, Apple Watch, and AirPods, thanks to production automation. But things don’t look equally optimistic for the Mac line. Apple’s non-China facilities will not be able to meet all the US demand for Macs until 2021 at the earliest.

If you were planning to upgrade to iPhone 11 this year, you shouldn’t worry about a price hike. Anyway, the iPhone 11 series is probably worth skipping. Numerous supply chain leaks and mock-ups have revealed that the iPhone 11 series would look similar to the existing models. The only major upgrades are a triple camera setup on the back (for the OLED models) and a faster processor. It won’t offer 5G connectivity.

Kuo has told investors earlier that all three models of the 2020 iPhone lineup would support 5G connectivity. Android vendors such as Samsung, Xiaomi, OnePlus, LG and others have already launched their 5G handsets featuring Qualcomm’s X50 modem.

The 2020 iPhones will feature Qualcomm’s 5G modem rather than that of Intel’s or Apple’s in-house. Intel has given up on smartphone 5G modems while Apple’s in-house modem won’t make it to smartphones until 2021 at the earliest.

What’s more, the analyst predicts that Apple is going to bring back Touch ID with 2021 iPhones. The company won’t bring back the home button. It means the Touch ID fingerprint sensor will be integrated under the display. The Touch ID and Face ID will compliment each other to further enhance security.

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