Caught in the middle of a trade war between US and China, World’s most valuable company, Apple, shed $44 billion in market value after a couple of Beijing and Washington pronouncements cast a spotlight on its huge Chinese manufacturing base, from which almost all iPhones in the world are produced.
Donald Trump, US president advised American companies to immediately start looking for alternatives to manufacturing in China.
In early August, Donald Trump, US President, tweeted that he would impose a 10percent tariffs on Chinese goods worth $300 billion. These included consumer electronic goods like smartphones. Apple stock fell close to 10% in the first three trading days of this month following this announcement.
Apple shares again fell on August 14 after the yield curve inverted for the first time since 2007, fuelling recession fears. Apple stock has currently lost 4.5% in August 2019. Despite the recent pullback, shares have gained 30% year-to-date. Though Apple shares are trading 12% below its year-long high, the stock is up 20% since the start of 2018, outperforming broader indices.
Apple’s main assembly partner, Foxconn Technology Group, 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.
The president’s comments were followed hours later by tweets declaring that the US would increase the rate of existing and impending tariffs on Chinese goods. Trump’s moves were in response to an earlier announcement that China was planning to impose tariffs on $75 billion of U.S. imports.
People familiar with iPhone production 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.
Since iPhone debuted in 2007, Apple’s sales have jumped 10X. It also became the first public company to ever achieve a trillion-dollar valuation.
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