Trump's trade deal with China means no iPhone price increase

midian182

TechSpot Editor
Staff member

In a note to investors from Wedbush Securities analyst Dan Ives, it’s claimed the tariffs could have added $150 to the price of a base model iPhone 11 Pro if Apple chose to pass the costs onto its customers.

“Trump delivered an early Christmas present to Apple,” Ives said in the note, which was obtained by Bloomberg. “If this tariff went through it would have been a major gut punch for semi players/Apple and could have thrown a major wrench into the supply chain and demand for the holiday season.”

With consumers already weary of high-priced smartphones, Ives believes iPhone demand would have fallen by 6 to 8 percent had the handsets seen a price jump. If Apple had chosen to absorb the costs, he estimates its earnings per share would have dipped by 4 percent.

Apple still pays 15 percent tariffs on some parts found in the Apple Watch, AirPods, HomePod, and others, and in September, the US Trade Representative’s office denied its request to be exempt from the 25 percent tariffs that affect parts for the Mac Pro. However, the new phase one deal should lead to a phase two agreement, which could see these tariffs rolled back.

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m4a4

TS Evangelist
If the tariffs were kept, the only reason Apple would pass that cost onto their consumers would be to stir up some controversy (and because they know their loyal consumers would more than pay for it). Apple could easily absorb the cost and still make it's high profit margin...
 

gamerk2

TS Evangelist
I find it funny people can make the connection that increased tariffs will increase cost of products but most of those people don't understand that increasing taxes on corporations will do the same thing.
Note quite.

Tariffs hit the product directly; they're literally an "add on cost" to the final market price of a product.

Taxes, on the other hand, hit profits. They don't directly increase product cost (though obviously a corporation can choose to do so).

So yeah, not equivalent. Nice try though.
 

IAMTHESTIG

TS Evangelist
No one is going to buy these apple products if they're over priced.
They're already overpriced... Sorry, but point-fail.

Do you get more for your money? Sure, in some areas... but don't say no one will buy them as Apple fans line up in front of stores before they open to buy these overpriced products.
 

umbala

TS Maniac
“Trump delivered an early Christmas present to Apple,” Uh, this is like setting your own house on fire and after you put out the fire all the *****s call you a hero!
 
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Yynxs

TS Maniac
They're already overpriced... Sorry, but point-fail.

Do you get more for your money? Sure, in some areas... but don't say no one will buy them as Apple fans line up in front of stores before they open to buy these overpriced products.
Pretty sure that was sarcasm.
 

Yynxs

TS Maniac
Note quite.

Tariffs hit the product directly; they're literally an "add on cost" to the final market price of a product.

Taxes, on the other hand, hit profits. They don't directly increase product cost (though obviously a corporation can choose to do so).

So yeah, not equivalent. Nice try though.
uh.. no. Tariffs belong to the company that got it here, a 'tax' if you will. The Founding Fathers forbid this sort of thing between states. But the price of the product is, is still determined by market forces. Those "market forces" just got goosed in the company's 'ah no', but the tariff cost itself is to the company. If the company sells zero products, the tariff still gets paid on received current inventory.
 

Shadowboxer

TS Maniac
So a 15% price increase only sees a 6-8% loss of demand? Why would a company not increase their prices?

If anything those numbers indicate that Apple products are underpriced.

Personally I’d probably stump up the cash still, it’s not like I’m going to lower my standards to Android!
 

jobeard

TS Ambassador
Knock Knock!! It's only a PHASE 1 agreement in principle-- got a long way to go in the quagmire of vacillating ideas from the Whitehouse.
 
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captaincranky

TechSpot Addict

Photo caption "Tim Apple obviously happy as a pig in slop"

<p>In a note to investors from Wedbush Securities analyst Dan Ives, it’s claimed the tariffs could have added $150 to the price of a base model iPhone 11 Pro if Apple chose to pass the costs onto its customers.</p>
We couldn't have people pumping the brakes by not buying a new Apple iPhone, thereby cutting into Apple's "meager" profit margins, now could we?

<p>“Trump delivered an early Christmas present to Apple,” Ives said in the note, which was obtained by <a href="https://www.bloomberg.com/news/articles/2019-12-12/apple-avoids-150-per-iphone-levy-after-u-s-china-reach-deal">Bloomberg</a>. “If this tariff went through it would have been a major gut punch for semi players/Apple and could have thrown a major wrench into the supply chain and demand for the holiday season.”</p>
Meh, why worry? At a grand a pop, they're really only "stocking stuffers", aren't they". So you would have had to do without jelly beans and ear pods for a while, big deal.

<p>With consumers already weary of high-priced smartphones, Ives believes iPhone demand would have fallen by 6 to 8 percent had the handsets seen a price jump. If Apple had chosen to absorb the costs, he estimates its earnings per share would have dipped by 4 percent.</p>
We certainly can't have that. Good god, Amazon might have become the most wealthy company in the world.

<p>Apple still pays 15 percent tariffs on some parts found in the Apple Watch, AirPods, HomePod, and others, and in September, the US Trade Representative’s office denied its request to be exempt from the <a
Quick, somebody get the Apple board of directors a box or six of tissues
 

gamerk2

TS Evangelist
uh.. no. Tariffs belong to the company that got it here, a 'tax' if you will. The Founding Fathers forbid this sort of thing between states. But the price of the product is, is still determined by market forces. Those "market forces" just got goosed in the company's 'ah no', but the tariff cost itself is to the company. If the company sells zero products, the tariff still gets paid on received current inventory.
Nope, and shows your lack of understanding on the functional difference between how taxes and tariffs get implemented in practice.

A Tax on profits does *not* automatically adjust the price of a product; a company may choose of its own volition to change the cost of a product based on taxes, but absent action by said company, raising or lowering taxes has *zero* effect on the cost of a product.

A Tariff by contrast *does* hit the cost of a product; that's literally it's only purpose for existing. A Tariff is designed *specifically* to make products more expensive to try and entice consumers to chose to purchase a locally produced option instead of a foreign produced one.
 
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Yynxs

TS Maniac
Nope, and shows your lack of understanding on the functional difference between how taxes and tariffs get implemented in practice.

A Tax on profits does *not* automatically adjust the price of a product; a company may choose of its own volition to change the cost of a product based on taxes, but absent action by said company, raising or lowering taxes has *zero* effect on the cost of a product.

A Tariff by contrast *does* hit the cost of a product; that's literally it's only purpose for existing. A Tariff is designed *specifically* to make products more expensive to try and entice consumers to chose to purchase a locally produced option instead of a foreign produced one.
Not sure you understand.
In the video below, NBC breaks down each part of the phone’s various elements, discloses out much they cost individually, and then adds everything up to reveal the total production cost.

Taking the iPhone 11 Pro Max, we’re told that the screen costs $66.50, the battery is $10.50, the new triple camera design is $73.50, and the processor, modems, and memory equal a total of $159. Everything else — sensors, holding material, assembly (which we assume means labor) and more— all come to $181, which delivers a total production cost of $490.50. That’s less than half of Apple’s $1099 retail price for the iPhone 11 Pro Max. Of course, this breakdown doesn’t include research, development or marketing which would significantly increase the overall cost to Apple.

maybe rephrasing will help. A tax on profits is a tax on the company sales. No sales. No profits. No taxes. A tariff is a charge on a product IMPORTED. No imports. No charge. Make it inside the tariffing country. No charge. Make a profit and the tax on profit applies to sales of any kind wherever you make your products. (and I know, the complexity of American tax structure obviates that, but this is the easy version).

https://www.macrotrends.net/stocks/charts/AAPL/apple/net-income
Apple annual/quarterly net income history and growth rate from 2006 to 2019. Net income can be defined as company's net profit or loss after all revenues, income items, and expenses have been accounted for.
  • Apple net income for the quarter ending September 30, 2019 was $13.686B, a 3.11% decline year-over-year.
  • Apple net income for the twelve months ending September 30, 2019 was $55.256B, a 7.18% decline year-over-year.
  • Apple annual net income for 2019 was $55.256B, a 7.18% decline from 2018.
  • Apple annual net income for 2018 was $59.531B, a 23.12% increase from 2017.
  • Apple annual net income for 2017 was $48.351B, a 5.83% increase from 2016.

and the "tariffs" were imposed when? May 2019? Now if it was tax