Posted on 05/13/2019 2:36:06 PM PDT by Zhang Fei
Apple closed down nearly 6% on Monday after news of a major escalation in the U.S.-China trade war.
China said on Monday that it decided to raise tariffs on some U.S. goods after President Donald Trump threatened to further raise tariffs on Chinese imports last week.
The trade war is affecting a lot of different stocks, but Apple seems to be hit harder than most. The Dow Jones Industrial index dropped 2.6%, and the Nasdaq Composite dropped 3.5%.
Apple is especially vulnerable to a trade war with China for two primary reasons.
First, it assembles its iPhones primarily in China. Although it has a lot of American suppliers — it spent $60 billion on American suppliers in 2018 — iPhone assembly is done in mainland China.
The other reason is that Apple, unlike other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.
Apple reported $51 billion in revenue in 2018 from “Greater China,” which includes Hong Kong and Taiwan. That’s Apple’s third-biggest region, after the Americas and Europe. Apple’s total revenue for the year was $265.6 billion.
When Apple said earlier this year that its holiday quarter revenue would be significantly less than it had previously said to expect, it blamed a bad economic climate in China.
(Excerpt) Read more at cnbc.com ...
“The other reason is that Apple, unlike other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.”
Wouldn’t that make them less vulnerable?
It has to be noted, however, that Apple’s Chinese customers may be less profitable, because they have a much better warranty than non-Chinese customers. That superior warranty may have attracted Chinese fraudsters who cost Apple billions in warranty expenses.
https://www.theatlantic.com/technology/archive/2013/04/china-iphone-warranty-vs-america-apple-apology/316758/
https://www.techspot.com/news/76859-chinese-criminals-fraudulent-warranty-claims-cost-apple-billions.html
[“The other reason is that Apple, unlike [other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.”
Wouldn’t that make them less vulnerable?]
That statement shows a complete lack of understanding of how tariffs work. The Apple products built in China and then sold in China are not subject to any tariffs AT ALL.
Ping!...................
Yes it would.
The fact is that China has duplicated Apple's technology and is now competing directly against Apple. Blaming the tariffs is like blaming your nurse for your self inflected gunshot wound. The nurse (tariffs) can help you. But you blame her to try to keep people from realizing just how very stupid you've been.
China has been screwing the US for years. Payback Time !
[That statement shows a complete lack of understanding of how tariffs work. The Apple products built in China and then sold in China are not subject to any tariffs AT ALL. ]
Because US megacorps are so well-represented in China as a % of total sales, the possibility of Party harassment over and above the current low-level static could affect their profits significantly. Not 1% or 2%, but 10-20% hits. And possibly a hit to capital, if they have to write their entire China operation off.
https://en.wikipedia.org/wiki/Fast_food_in_China#KFC_vs._McDonald%27s_in_China
How does that have anything to do with tariffs?
How does that have anything to do with tariffs?
Apple has made their bed.
If it catches fire, they’ll burn in it.
They’ve had two years to shift their assembly elsewhere.
I am coming to the conclusion that the PRC is just a “kinder” and “gentler” version of the DPRK.
“Apple, unlike other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.”
...and therefore is one of the main US hostages that the Chinese Government can retaliate against.
IIRC Apple is limited in how quickly they can repatriate Chinese earnings?
Also, Apple stopped reporting overseas cash.
Simple question. If Apple makes its products in dirt cheap China, why are Apple products by far the most expensive?
Look for Apple to move its iPhone assembly to India where they have already established a plant for their high end goods
“The other reason is that Apple, unlike other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.”
This is the dumbest argument of all. Apple only has 7% of the Chinese market. Huawei owns the market with the iPhone tech they stole from Apple. India with its 1.3 billion populus offers a hell of a lot more upside than China in penetrating their massive market Hopefully India will supplant China as our trade partner of the future
[How does that have anything to do with tariffs?]
The point being that China can wreak havoc on the bottom lines of a good number of Fortune 500 companies. Our leverage consists of the Chinese imports we let in. Their leverage comes from their US imports some of which are of products made in red states, and their ability to completely shut out even Chinese-made American products for which there are Chinese substitutes thereby cratering a good number of S&P 500 components. Imagine the S&P 500 with 20% lower earnings. Wouldn’t that cause a 20% decline in the stock market? How’s that going to look going into the 2020 election? That’s a worst case scenario, but it’s a possibility.
[Apple only has 7% of the Chinese market. Huawei owns the market with the iPhone tech they stole from Apple. India with its 1.3 billion populus offers a hell of a lot more upside than China in penetrating their massive market Hopefully India will supplant China as our trade partner of the future]
As to desirability from an investment standpoint, there is a reason few megacorps build anything in India. For foreigners, it’s a much more onerous place to invest*, which is why most production leaving China is moving to Southeast Asia. Latin America is a lot like India, but with higher costs. Which is why the ultimate beneficiary of this trade war, from a jobs standpoint, will likely be the US, for some items, and Southeast Asia, for others.
* The Indian government is a lot worse than the Chinese government in terms of ripping off foreign manufacturers. Nokia was extorted for hundreds of millions of dollars after building a plant in India. The Indian tax authorities expected to be paid a cut of Nokia’s worldwide corporate profits, even though the plant was basically an assembly operation. Nokia settled with a payment of almost $300m to retain access to the Indian market, but this kind of shakedown is precisely yet another reason companies like Apple build products through subcontractors - that way the host government housing the plant that builds Apple’s products, not to mention the plant’s employees, has no claim on Apple’s profits. Nonetheless, I wouldn’t put it past India to try shaking Apple down anyway. That’s why if Foxconn builds in India, it would be wise to do so only for Apple products sold in India.
“Party can shut off market access.”
They do that with or without trade war.
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