As the tense negotiations between the United States and China over trade continue, the tech industry remains concerned about the impact that any tariffs will have on the price of products.
Apple’s iPhone 11, due to launch very soon, is just one of many products that could have its initial sales hurt by any increase in retail price brought on by the tariffs, but Apple may have a solution to keep the price down.
According to Apple Insider, which saw an investor note written by investment bank JP Morgan, analysts believe that Apple has been able to reduce its bill of materials for the iPhone 11 by $30 - $50 per unit. A device’s bill of materials is the total cost to the manufacturer for all the components that make up a product, so if a single iPhone 11 costs Apple less to make than an iPhone XS, then the impact of any tariffs applied to it will also be lessened.
The new analysis reckons this small reduction in production cost will reduce the estimated impact by a third. This obviously isn’t enough to cancel out the total cost of the tariffs on Apple’s bottom line, which is placed at an 8% decrease if Apple decides to do nothing, but is still an improvement.
As it stands, Apple products including the iPhone will be subject to a 10% trade tariff from December 15, delayed from its original September 1 implementation. The tariff applies a 10% price increase onto various goods bought in the US, including electronics like computers and games consoles, that have been imported from China.
Although 10% is a considerable increase, analysts like Ming-Chi Kuo believe that Apple, as well as other companies, will not increase their retail prices to compensate. Instead, the affected manufacturers will try to shoulder the costs themselves while moving their manufacturing out of China to bypass the tariffs. This avoids the risk of passing the cost to retailers and consumers, meaning that you might not notice the tariffs are in place should you want to upgrade to a new phone.
Tim Cook and the Apple leadership have also made appeals for exemption from the tariffs based on the risk of its rival Samsung being able to gain significant ground. Samsung manufacturers its devices in Korea, Vietnam and China, so it's easier for the company to avoid tariffs.