Apple Facing Major iPhone Price Rise Dilemma
Apple is facing a major dilemma with the cost of an already expensive iPhone set to be slapped with a 25% tariff as a direct result of the trade war between the USA and China
The big US phone Company is now trying to work out whether they absorb the tariff and face an even further slowdown in sales or pass on a large slice of the tariff on to consumers.
The iPhone is made almost entirely in China along with Apple MacBooks and iPads which will also be affected, so when U.S.-made parts including glass screen covers and facial-recognition sensors are shipped to China for assembly into iPhones and iPads, they will be more expensive, too.
The iPhone which is made by Foxconn who yesterday reported a 17% fall in profits due to falling iPhone sales, made up 63% of all Apple sales in 2018, and serves as a hub for additional revenue from services and related devices.
Analysts are saying that if the price of an iPhone rises any further it could take the devices beyond the budgets of more consumers.
Bloomberg claim that he heightened trade tensions are a test for Apple CEO Tim Cook and the global supply chain he helped build and run.
Recently, the company raised prices when it refreshed products that have already been hit with tariffs. The updated Apple Pencil, launched in October, costs $30 more than the previous version. The faster Mac mini costs $300 more than its predecessor.
Observers claim that Apple may take a similar approach with the iPhone. In its September letter to Lighthizer, Apple said tariffs would increase product prices.
The 25% tariff on iPhones would likely apply to the wholesale price of the devices when they are imported from China.
Apple doesn’t disclose wholesale prices, but research firms often estimate the bill of materials.
An iPhone XS Max with 256 gigabytes of storage has $653 worth of parts, according to TechInsights. A 25% levy on that would be $113, raising the purchase price by about 9%.
Apple’s other models, the iPhone XS and the iPhone XR, could face a similar increase, according to estimates. In a recent note to investors, Morgan Stanley estimated that the iPhone XS would cost $230 more.
JPMorgan analysts are forecasting a 14% price increase.