iPhone Prices Would Jump If Apple Moved Assembly to US as Trump Wants: How Much?

Trump tweeted Apple should manufacture its products in the U.S. to avoid his proposed tariffs. But what about price?

Consider Tump's absurd view of the world.

Bank of America View

A Bank of America analysts says you will have to [pay 20% more for an iPhone](iPhone prices would rise up to 20%) and other goods to satisfy Trump's ridiculous view of "winning".

IPhone prices will rise significantly if Apple assembles the smartphone domestically, according to Bank of America Merrill Lynch.

>"'Back to US' manufacturing seems to be back on the agenda for President Trump We believe Apple could ask Hon Hai and Pegatron to shift a small portion of their iPhone manufacturing to the US in response to President Trump's request," analyst Wamsi Mohan said in a note to clients entitled "Handicapping the China trade risk and potential for ramping US manufacturing" Monday. "The conclusion was for the iPhone (not currently impacted by Tariffs) moving production (100% of final assembly) to the U.S. would need 20% price increases to offset the incremental labor costs."

>Mohan said under the "most likely" scenario in which Apple moves 10 percent of its iPhone assembly to the U.S., the average selling price of the iPhone would rise by 8 percent. He also said if Apple shifts 50 percent or 100 percent of iPhone assembly domestically, it would increase iPhone prices by 14 percent and 20 percent respectively.

Price Double?

The Financial Review says Donald Trump's 'Made in the USA' iPhone would cost $US 2000.

>Would you willingly spend $US 2000 to buy an iPhone that today costs a grand?

>That's how much veteran analyst Tim Bajarin tells me it would cost Apple to retail if it made iPhones in the United States.

>Think about the parts dilemma for a second. Remember that Apple makes more than 200 million iPhones yearly and has to come up with OLED screens, camera sensors, solid state storage drives and the like to put into every one of them.

>These are all made-in-Asia products.The reason the launch of the iPhone X was delayed in 2017 to November from September was the scarcity of the OLED screens. Apple couldn't get enough of them for the phone, and it took time to get factories up to speed.

>Apple's not alone. Cameras have been made in Asia for decades, Samsung creates its Galaxy phones in South Korea, Vietnam and India, Amazon gets Echo speakers made in China and Google gets the Pixel phone made in South Korea.

>I think the American consumer would have a tough time forking over $US 2000 for an iPhone, but what are they going to go -- all suddenly switch to using Samsung phones? Granted, Samsung sells more phones yearly, mostly lower-priced models in developing countries, but the iPhone is the best-selling consumer device, hands down.

Not Just Apple

Apple would be one of the companies hardest hit, but the same setup applies across the board.

Forcing people to pay ten to 20 percent more for goods, or 100% as one analysts suggested to create a few jobs when unemployment is under four percent is not terribly smart, to say the least.

Mike "Mish" Shedlock

Comments (43)
No. 1-21
Runner Dan
Runner Dan

Ironic how we cant compete, labor-wise, with a communist country because of our own socialistic policy regarding wages. The arrogance of we know better than the free market works to the detriment of the American people, again.

NewUlm
NewUlm

I dont buy it, since numbers are not detailed they MUST be assuming the 70%ish margin would continue - it would not. The phone would still be around $1000 because if 60% of today buyer would pay $2000 than that would be the price. What would happen margins would compress and the stock price would drop. I do think we should drop tariffs, but this article is leaning towards fake news.

Bam_Man
Bam_Man

And the US workers assembling them would also jump. Just like they do in China, only sooner.

pi314
pi314

Mish, why are you propagating fake news (100% increase!) when you know better? Disappointed.

ML1
ML1

If Apple could charge EXTRA 100 dollars for each iPhone NOW and still sell the same amount of phones they would do it since it would be pure profits and lift Apple's stock price.

The current price of iPhones is MAXIMIZED based on what is the price where Apple gets most total profits when multiplying the profit per phone with the number of phones sold.

Companies are NOT charities, therefore companies ALWAYS maximize the profit they get from selling a product with the highest price per individual products that gives the highest sell through rate to maximize the total profit.

IF Apple would move assembly to USA the price of iPhones would be about the same as now and the only thing that would change is that the Apple profit margin would drop and therefore Apple stock would drop to compensate for the lower profit margin of the company.

Companies LOVE offshoring because they get more profit margin per product sold but offshoring of production in this current mass scale only works if the consumption is kept up and since the consumption has been kept up with continually increasing debt levels everywhere the current offshoring is unsustainable because the debt carrying capacity will hit a wall no matter what the idiots at Fed do sooner or later.

Offshoring of production and importation of millions of illegals and millions of low wage legals to drop wages while getting government benefits has only been possible due to Fed and the continually increasing debt levels by consumers, companies, states and federal government.

In a system where money would not be magically conjured out of thin air by Fed and banks the offshoring of production and importation of millions of illegals and millions of low wage legal immigrants to take away jobs from Americans and lower wages would have led to a crash of consumption levels and therefore crash of profits by companies so the current levels of offshoring and importation of illegals could have NEVER happened without the Fed...