This is a sad news for Apple as Apple’s shares fell 4.6% Friday and the company shed $44 billion of market value after President Donald Trump said US companies should start searching for ways to move their manufacturing outside China.
The company would require three years to move 20 per cent out, he adds, which is still less than the 25 per cent of iPhone production that Apple needs for its domestic U.S. market. American tariffs on goods from China would therefore directly impact Apple’s biggest moneymaker.
“In a best case scenario,” says Ives, Apple “would be able to move away 5%-7 per cent of iPhone production out of China” over the course of 18 months.
Ives calls Trump’s latest comments on China “a gut punch to Cupertino” in the title of his report.
Apple’s main assembly partner, Foxconn, has claimed that it has the capacity to build all of the Cupertino company’s U.S.-bound iPhones outside of China, however all indications are that to deploy it would require a great deal of time and money.
Apple’s stock price took two big hits on Friday in the wake of the latest tariffs announcements.
People familiar with iPhone production have said that it is nearly impossible to relocate manufacturing of Apple’s iconic device in a wholesale manner due to the difficulty of procuring a skilled labor force elsewhere, a point that Apple CEO Tim Cook has hammered away at in public as well.
The challenges of replicating the complex production lines and necessary infrastructure are also major hurdles.
While Apple has asked at least some suppliers for proposals on ex-China production, there’s no sign the Cupertino company is preparing for a large-scale migration.
In one case, an assembler proposed a location outside of China, but Apple rejected it and the supplier ended up expanding in China.
He has only been able to obtain a temporary reprieve for iPhones, iPads and Apple laptops, which won’t be subject to U.S. tariffs until December 15. If nothing is done concerning this trade war, Apple will be left no choice than to leave China, no matter what it may cost them.