Apple Walks Away From China
Apple plans to exit most of its Chinese manufacturing relationships. The company now wants all iPhones sold in the United States to be made in India. The post Apple Walks Away From China appeared first on 24/7 Wall St..
Tariffs and the concentration of the assembly of its iPhone in one country have triggered Apple Inc.’s (NASDAQ: AAPL) plan to exit most of its Chinese manufacturing relationships. It plans to move most of these to India, which will take at least a year. This will end partnerships in China that go back well over a decade.
24/7 Wall St. Key Points:
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Apple Inc. (NASDAQ: AAPL) plans to exit most of its Chinese manufacturing relationships.
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The company now wants all iPhones sold in the United States to be made in India.
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Apple is extremely anxious about the impact of its reliance on Chinese manufacturers on its profits. Tariffs of as much as 125% on products made in China would push the price of an iPhone to $3,000, particularly if they are made in the United States, where labor costs are higher than in China. Apple would also have to make massive investments in building American-based factories.
Bloomberg reported that, by the end of 2026, Apple wants all iPhones sold in the United States to be made in India. The goal means the company would roughly double its annual iPhone output in India to more than 80 million units.
Apple wants to protect its gross margin, which is the envy of the industry. In the most recently reported quarter, this margin was 47%, as the company had revenue of $124 billion and a gross margin of $58 billion. Gross margins in the quarter were at an all-time record.
Other Problems
Manufacturing in China is part of several problems. Another is iPhone sales there, the world’s largest smartphone market with a billion users. That is approximately four times the U.S. figure. Local companies like Oppo and Vivo have robbed Apple of its market share.
Another hurdle for Apple is the weak launch of its AI product. An upgrade will not be available until 2026.
The good news is that its shares are up 24% in the past year, compared to an increase of only 8% in the S&P 500. And Apple continues to be the most valuable company in the world, with a market cap of $3.1 trillion. However, a quarter or two of weak earnings could take that crown away.
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The post Apple Walks Away From China appeared first on 24/7 Wall St..