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Trade war and Apple boycott in China: Apple profit could fall 29%

THE trade war between the United States and the China This is not exactly a new issue, but recently the downturn between the two largest economies in the world has attracted analysts' attention to the effect of this tension on the market and to some “symbolic” companies in these countries, such as Apple and the Huaweirespectively.

Since the beginning of this battle, Apple (more precisely its CEO) has been willingly positioning itself as a mediator of relations between the two countries so that these tensions do not get off track and, of course, undermine the giant's business. from Cupertino. However, this is not exactly what happened, as reported by the South China Morning Post.

In addition to being hurt by import tariffs imposed by the White House, Apple also suffers from the growth of the boycott company in Chinese territory. As we reported this week, the situation got even more complicated for Ma (ironically) when its rival (Google) announced that it would close deals with Huawei after Donald Trump decreed restrictions on the Chinese manufacturer.

Impact on actions

Although the President immediately redefined that sanctions should be enforced only three months from now, the damage to Apple will definitely not be so literary. According to a new report by the US bank Goldman Sachs, the worst case scenario for Apple involves a 29% drop in overall profits (about US $ 15 billion), as highlighted by the Markets Insider.

According to analyst Rod Hall, the escalation of the trade war between the two powers coupled with the tightening of Trump government restrictions on US companies selling products and services to Huawei could mean that the Chinese government is looking for a way to counteract and Apple is the most obvious target.

As if the situation was no longer bad enough for Ma, she could still be affected otherwise, according to Hall. Among the negative side effects, the analyst pointed out that Beijing could restrict Apple's manufacturing of products in China, where the company has the largest number of suppliers.

That would certainly hit the heart of the company if it weren't for the number of people Apple employs in the country: about 5 million, of which approximately 1.8 million are linked to iOS and App Store. In addition, the FoxconnApple's Taiwanese subcontractor, responsible for over 1 million jobs in China.

If China restricts iPhone production in any way, we do not believe the company can transfer the high volume of iPhone manufacturing out of China in a short time, although actions that take Apple production out of China may have negative implications. both for the Chinese technological ecosystem and for local employment.

If these speculations go beyond the theoretical plan and reach the real world, Apple shareholders should, in the words of presenter Jim Cramer Mad money gives CNBC), “Hold on tight”.

While the aftermath of the US-China crisis may be catastrophic for Apple if Beijing restricts Apple's production there, Cramer says Ma's shareholders should not sell their company papers.

I still believe you should own (the shares) Apple. I will not sell them.

Impact on production

Of course, Apple will not wait patiently for a possible production restriction in China. In this regard, we have already commented that Foxconn will start production of iGadgets (mostly iPhones) in India soon, but that's not the only Ma plan under their sleeves.

According to the DigiTimes, a Pegatron (another Apple vendor) should start manufacturing MacBook and iPad in Indonesia already next month. The possibility is not remote, after all, last January, we informed that the supplier planned to expand its factories to the archipelago, beyond India and Vietnam.

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Regardless of which view we analyze this imbroglio, the fact that Apple will step on eggshells in the coming months. It remains for us to continue following the ride of this carriage.

via 9to5Mac: 1, 2; AppleInsider