An executive at Foxconn was recently quoted as saying that their corporation has the ability to export all iPhone manufacturing outside of China’s border depending on the outcome of Trump’s trade tariffs with the country.
Young Liu, Foxconn’s head of semiconductors group, has noted that a quarter of all production capacity is currently outside of China and that they “have the capacity to meet Apple’s demands”.
If these tariffs do hold strong in the coming months, then Apple may indeed need to reconsider its current manufacturing system. The newly applied tariff will undoubtedly affect the production of current Apple iPhones, iPods, iPads, MacBooks, watches and more. These all currently constitute about a third of Apple’s income and so these tariffs may also largely effect Apple’s stock ($AAPL).
Some investors may be gearing up toward dropping their shares if volatility continues to increase within the brand. An analyst quoted by Bloomberg recently implied that if tariffs do continue, then Apple product prices could go up between nearly 10 to 15 percent more. This increase, says the analyst, will likely cause a drop in demand by at least 10 but possibly up to 40 percent for Apple’s products. This may affect their stock’s EPS by 6 to 7 percent: time will certainly tell.
The relationship between Foxconn and Apple is not a one-way street, though. Nearly half of Foxconn’s revenue comes from Apple, and so it is entirely in their best interest to work in the interest of whatever Apple’s needs are, and presumably in whichever country Apple’s needs are. In a move which sidesteps neighboring India’s manufacturing import duties of 20%, Foxconn is already starting to move some of their facilities over to India.
On the downside, nothing comes without repercussion with dealing with China, it seems. Much in the same way that they responded to Trump’s lowering of the American tax rate with their own 0% corporate tax rate, China could similarly be gearing up toward a tariff tax hike of its own in response to the FoxConn situation.
China is keenly positioned to make this blow against America, after all, since they represent much of the current manufacturing for not just the goods made for America but also for the rest of the entire world. Having the capacity to produce anything at will has its perks, and surely comes with its own set of responsibilities, too.
