Apple May Have to Cancel iPhone Models to Deal With Tariffs
Apple could be forced to revamp its entire iPhone product strategy amid President Donald Trump’s trade war with China, according to Wall Street analysts.
Morgan Stanley analyst Erik Woodring believes Apple can mitigate the effects of the tariffs by cutting the less-profitable models from its iPhone lineup.
A “targeted iPhone mix shift could significantly minimize the tariff headwind,” Woodring wrote in a note to clients Thursday. Instead of raising prices, Apple can remove low-end iPhone storage options, the analyst said.
BofA analyst Wamsi Mohan suggested an even more-aggressive action on Wednesday by saying Apple can move new launches to a two-year schedule from annually. That would to help simplify the supply chain by extending the timeline on expensive manufacturing changes.
Last week, Trump unveiled a so-called reciprocal tariff rate of 34% on China. This week, Trump added additional tariffs resulting in a total rate of 145% on China imports, while the Asian country retaliated with 125% tariffs on U.S. goods.
Analysts generally believe domestic iPhone manufacturing isn’t tenable on a financial basis. The company relies on the contract manufacturer Foxconn to make the vast majority of its iPhones in China. Wedbush analyst Daniel Ives estimates an iPhone made in the U.S. would be sold at $3,500 versus $1,000 today. It may mean that Apple will need to either raise iPhone prices for American consumers or make other drastic changes to its product strategy.
On Friday, Apple shares rose by 0.9% to $192.21. Apple did not immediately respond to a request for comment if the company is considering reducing its iPhone product lineup or going to a two-year product cycle.