back to article Apple might be 'collateral damage' in US and China trade dust-up

Apple could be the “collateral damage” in the escalating trade war between Donald Trump’s US administration and China's government, a Wall Street analyst has warned. Ahead of Apple reporting Q4 fiscal ’19 financial results on 1 November, Bernstein briefed investors on what to expect for the trading period and beyond into the …

  1. Anonymous Coward
    Anonymous Coward

    collateral damage?

    My company hasn't seen a single order from China since the tariff war started - our representatives are apologetic and promise that it will change eventually but it's looking bad, sales inquiries have dropped to zero.

    1. Anonymous Coward
      Anonymous Coward

      Re: collateral damage?

      My company hasn't seen a single order from China since the tariff war started

      Can't say I'm surprised. But the economic system as was, was non-sustainable. The US (and several other Western economies) running vast trade deficits with China, buying a shit-load of Chinese goods whilst China chose to buy little or nothing in return. In the long term that doesn't work for either side, particularly when there's not a free float currency for China, unless there's some other trading parties to form a net trade balance.

      Running a vast trade surplus has worked for Germany in the Eurozone, but that is a very unusual and is only possible by Southern European economies taking the pain of a exchange rate that is both too high for them, and they can't devalue.

      Whilst nobody has a good word to say for the Donald, his actions here might actually push China to run a more balanced trade programme, and for manufacturers to consider that offshoring everything isn't just a risk free boost to profits. Whilst a bumpy ride for companies is certain, this may lead to some change that means the West having to pay more for goods (due to less imported from China) but equally we might actually be able to sell things back to China.

      1. imanidiot Silver badge

        Re: collateral damage?

        I've yet to see any good explanation why the trade surplus is actually a problem for China. They won't care. The world is dumping bucketfuls of cash over it's borders allowing them to expand infrastructure at a massive pace. The US is fucking itself over with it's enormous trade deficit, but the question remains open whether this is because China is operating below cost (arguable). It's also possible the US is just living WAY past it's means and is spending way too much cash, accruing massive debt in the process (which, with a national debt of over $21.4 trillion is a given, and with a debt to GDP of over 100% is unsustainable by any economic theory to boot). I doubt the trade war is going to bring any more export towards China.

      2. bombastic bob Silver badge
        Devil

        Re: collateral damage?

        the thing is, the value ADDED to things made in China typically makes up a LOT more of the cost of goods sold than does the price of things they make.

        So if there's a 25% increase in cost of things made in China, it won't translate to a 25% increase in the PRICE of that item. It's more likely going to be a lot less, maybe 5%. Apple's branding has MORE value than the price of the unit made by Foxconn, in other words. And there's the software, etc. which [as I understand it] is done within the USA. Without _THAT_ the iGoods are nothing more than expensive paperweights.

        Also imports to China should increase if they STOP VIOLATING OUR PATENTS AND COPYRIGHTS as part of any future 'trade deal'.

        1. Anonymous Coward
          Anonymous Coward

          Re: collateral damage?

          Understand the differences in how each country works, China does not care for patents etc and manages to get products to market in 18 months,, the USA cares for patents and wlll you are still waiting 5 years later for approval to move forward......

          Not trying to inflame your comment but understanding how country's people think is a good start to working with them

          See silicon valley hardware on youtube to see what I mean and how the patent system is owning the USA for time to delivery (well lawers are making money)

  2. Anonymous Coward
    Anonymous Coward

    Pour encourager les autres ?

    wrote the author and philosopher Voltaire, upon hearing of the execution of Adminal Byng for not committing suicide when in command of a ship.

    The actual passage that quote comes from suggests that the English executed the odd admiral now and then - to keep their navy on it's toes. The conclusion being that a shake up now and then isn't such a bad thing.

    Maybe, up until this age, the only real way to achieve that "shake-up" in business across the board has been war ? However, now with a will-he/won't-he president that almost no one can second guess in change, that shake-up is happening without war (so far !).

    Either way, I suspect a lot of companies that prioritised profits over political engagement are now starting to shift nervously as they try and take the temperature of the wind blowing from Donnie. T. Even if he doesn't stiff them directly, he has the power to trigger a lot of boycotts and reprisals.

    1. Jason Bloomberg Silver badge
      Mushroom

      Re: Pour encourager les autres ?

      The way Trump is approaching it; it could well escalate and end in real war.

      Trump's strategy seems to be to push it to the brink, take some small concession, then step back and claim a comprehensive and decisive victory - USA! USA! MAGA!

      But that only works if the other side does blink first. If China or others are themselves willing to take it to the brink, won't back down, that creates a difficult and dangerous situation.

      1. wolfetone Silver badge

        Re: Pour encourager les autres ?

        "The way Trump is approaching it; it could well escalate and end in real war."

        War is always good for business.

        1. BebopWeBop Silver badge

          Re: Pour encourager les autres ?

          Some business anyway.....

        2. Raphael

          Re: Pour encourager les autres ?

          Rule of Acquisition #34.

      2. Anonymous Coward
        Anonymous Coward

        Re: Pour encourager les autres ?

        China have so much more to lose than the US in a trade war...it just depends if the EU apply the same tariffs...China has been dumping cheap tat for decades...a global trade war with China will hurt China the most.

  3. The Man Who Fell To Earth Silver badge
    FAIL

    Shooting onself in the head

    My company is moving a lot more manufacturing from the US to our China facility to avoid retaliatory tariffs as China has become our largest market and we can't remain price competitive unless we avoid those tariffs.

    1. Anonymous Coward
      Anonymous Coward

      Re: Shooting onself in the head

      If China is the largest market, then longer term it would make sense anyway to do as much as possible in China, since that reduces transportation costs, avoids the pre-existing duty framework, and avoids foreign exchange risk that the company either takes as a continuing risk, or pays to hedge.

      1. Peter2 Silver badge

        Re: Shooting onself in the head

        If China is the largest market, then longer term it would make sense anyway to do as much as possible in China

        Up until a local copycat product (that's copied to such a point as including your copyright marks) goes on sale for less than your product (no R&D costs for direct copies!) and your Chinese sales promptly then go splat. The Chinese court systems then declare that no infringement of anything has taken place, leaving your company with no legal recourse, no market and looming bankruptcy.

        1. Gordan

          Re: Shooting onself in the head

          "Up until a local copycat product (that's copied to such a point as including your copyright marks) goes on sale for less than your product"

          Cost of doing business in China, it seems. The only winning move is not to play.

          For what it's worth, some headway toward addressing that had been made at some point, as short lived it may have been:

          https://www.wired.com/story/us-china-cybertheft-su-bin/

        2. Anonymous Coward
          Anonymous Coward

          Re: Shooting onself in the head

          Up until a local copycat product (that's copied to such a point as including your copyright marks) goes on sale for less than your product

          A fair point, but lets face it, at the moment somebody in China would copy your product anyway if there's a significant domestic market. Compare a Landwind X7 with a Range Rover Evoque. They aren't from the same moulds and patterns, but the Landwind X7 is fundamentally a less well specified, less well made copycat product. And there's plenty of other examples across multiple markets.

          1. Gordan

            Re: Shooting onself in the head

            "A fair point, but lets face it, at the moment somebody in China would copy your product anyway if there's a significant domestic market."

            Similarly with Zotye SR9 (Porsche Macan clone). Interestingly, the Porsche dealers in China aren't at all concerned, and for a very good reason - anybody who can afford even a used Porsche won't be buying a Zotye knock-off.

            The thing to take away from this is that competing on the cheap end of the market in a place where labour is much cheaper is a foolish thing to be attempting at the first place. If you can't compete on quality first, at least earn some good karma by not expending more of the finite planet on making yet more worthless tat.

        3. murrby

          Re: Shooting onself in the head

          https://www.abc.net.au/news/2016-09-16/lucas-mill-family-fight-to-stop-chinese-copies-of-sawmill/7848394

    2. bombastic bob Silver badge
      Meh

      Re: Shooting onself in the head

      well, unfortunately it seems your company has (apparently) invested in infrastructure inside China. I suggest looking at Mexico instead.

  4. deadlockvictim Silver badge

    Trump & Apple

    If I believed D.J. Trump to be a shrewd businessman, I'd be thinking now that this up-and-coming trade war was to put pressure on Apple to hurry up re-patriating her hundreds of billions of dollars to the U.S. Tim Cook has said that Apple will do this, but it happens is anyone's guess.

    I'm not altogther sure now that even that would stop the impending tit-for-tat.

  5. James 51 Silver badge
    Childcatcher

    So, how long before 3D printing makes trade wars moot?

    1. BugabooSue
      Thumb Up

      3D Printing reply

      @James 51

      Sadly, quite a few years yet. BUT, it is coming...

      I have been involved in 3D-printing since 2012 (hobby), and now professionally for over two years.

      Despite the continual hype and nay-saying, in the past couple of years I have watched the price of low-end printers tumble, while all the time the capabilities are creeping up and up.

      3D printing is not yet truly at the print-and-go for anything other than PLA plastic, but I have seen SLA printers start to become cheap enough for consumers to own (despite the high cumulative toxicity of the resin) and print incredibly detailed objects, and now the prices of laser sintering printers are coming down too.

      There's always the "in five years" quote being bandied about, but I think in this case, it is correct.

      There are no cheap printers available for the general public at the moment that are capable of making functioning engineering parts out of more durable plastics (nylon, polycarbonate, PMMA, ABS, PEEK, etc) *without* some tweaking and messing about with the print settings, but it is coming my friends, I swear, it is coming - within the next 5 years.. :)

      Susi xx

      1. Anonymous Coward
        Anonymous Coward

        Re: 3D Printing reply

        I have to be honest, from the perspective of somebody having all sorts of random things made for historical reenactment I find the increasing proliferation of CNC machines more interesting than 3D printing.

        It's now possible to get a decent size high quality mould made for as little as £60, and you just pay a few quid per casting. I doubt that 3D printing is going to massively improve on the economics of this.

        1. Anonymous Coward
          Anonymous Coward

          Re: 3D Printing reply

          I doubt that 3D printing is going to massively improve on the economics of this.

          I can't see 3D printing competing with any conventional techniques for conventional parts, ever.

          What 3D printing can and is doing is enabling small volume parts at lower cost, fast prototyping and mould making, and its real party trick is making things that simply cannot be made by conventional techniques, or that could be made by conventional techniques but couldn't physically be assembled.

          I've seen military aircraft parts made with a metal 3D printer, and the resulting components could not have been machined or cast. That sort of capability is hugely expensive, but the trick is to use the appropriate method according to design, materials and volume. I think the main limit is actually design - engineers are still learning what can be achieved, and to make the best of 3D printing, it sometimes requires a completely different approach with a radically different design concept.

        2. bombastic bob Silver badge
          Devil

          Re: 3D Printing reply

          yeah 3D printing has costs involving nozzles and filament, plus the time it takes to 3D print something vs molding. building 10's of units, 3D printing is reasonable. Building thousands, molding makes more sense.

          And if it's under $100 to make a mold, the cost viability point is even smaller than I thought.

        3. Chairman of the Bored Silver badge

          Re: 3D Printing reply

          "... I doubt that 3D printing is going to massively improve on the economics of this."

          My firm is heavily invested in 3D for rapid prototyping. But what really amazes me is what happened when we put a 3D machine in the machine shop:

          Productivity and quality of the conventional shop shot upwards. With the 3D machine the guys print all sorts of jigs and rigs to make their production, build, and inspection processes more effective. Need a bespoke tool? Draw and print rather than 'make do' with a standard but less optimal tool.

      2. cynic56

        Re: 3D Printing reply

        Upvote for the kisses. Don't get many kisses from El Reg - or anywhere else for that matter. After all, I am in IT.

  6. BebopWeBop Silver badge

    Not just Apple

    The way things have worked out with investment, I suspect that many US companies will be effected in the medium-long term

    1. Dan 55 Silver badge
      Trollface

      Re: Not just Apple

      I notice nobody is particularly worried about Surface.

  7. steviebuk Silver badge

    Nothing will change there then....

    ....“We believe that only the Mac Mini, Airport routers, tech accessories like Magic Mouse and various chargers, and leader accessories are thus far impacted by the tariff,”

    As the official Apple Chargers are already so overpriced its shocking. It's why people end up with bad knocks off, ironically, from China that then burn their homes down.

  8. InsaneGeek

    Oh no, the richest company in the world surely couldn't absorb this

    The wealthiest company in the world, sitting with billions of dollars in cash on the sidelines might get slightly impacted by this.... oh nnoooossssss. I truly cares so much about Apple having to raise the price of their phones by half a cent to cover it.

  9. Yet Another Anonymous coward Silver badge

    Confused

    Components from China and raw materials from Canada for products assembled in the USA are taxed.

    Products, like the iPhone, entirely manufactured in China are tariff-free

    This is to encourage American companies to move factories to the USA ?

    Not seeing the subtle econometrics of this is obviously why I'm not a billionaire business leader

    1. Tom 35 Silver badge

      Re: Confused

      I expect brown envelops stuffed with cash have a role in keeping them tariff-free.

  10. Dave White
    Facepalm

    Bernstein

    Who is this "Bernstein", referenced throughout the story? There's a "Wall Street analyst", mentioned once, but nothing more about him.

    d'oh because I don't have a clue!

    1. Anonymous Coward
      Anonymous Coward

      Re: Bernstein

      Alliance Bernstein is a private wealth management firm..... not our level....for the 1% types

  11. DougS Silver badge

    Might cause them to speed up their timetable for automation

    Apple has already been working with Foxconn behind the scenes to automate a lot of the production tasks currently done by Chinese workers. There's no reason to locate a highly automated iPhone production plant in China, versus elsewhere like Taiwan or the US.

    The reason they haven't already done this is that human labor is still better (i.e. some combination of cheaper, faster, higher quality) than robotic assembly for all the tiny fiddly bits that go into an iPhone. A trade dispute that upsets Apple's ability to deliver iPhones is going to change the numbers in the spreadsheet a LOT. Apple has unlimited resources to bring the timetable forward a lot more quickly if they decide it is time to pull the trigger on this.

    Even if not everyone is selling products at Apple levels so automation still doesn't make sense for them, moving production to a cheaper country with fewer trade issues like Vietnam begins to look good. It would be ironic if China faced the prospect of losing tens of millions of jobs to automation and offshoring like the US and EU already have. That would leave a big dent in their schedule for bringing the rest of their citizens into the middle class.

    1. Yet Another Anonymous coward Silver badge

      Re: Might cause them to speed up their timetable for automation

      The reason they make it in China is that the rest of the supply chain is local.

      Corning make the gorilla glass next door, 90% of Siemens production of pick and place robots are in the city, the CNC machine shops for the case are local.

      Apple could follow Foxconn to Wisconsin, but even if they sourced all the components in the USA they would have a complex supply chain of chips from Oregon, glass from NY, cases from Texas etc.

      With all the raw materials and all the machine tools subject to tariffs, delays and politics

      1. DougS Silver badge

        Re: Might cause them to speed up their timetable for automation

        That's why I listed Taiwan as a possible site for the factory, which would avoid the tariffs but also avoid the supply chain worries. And given that Foxconn is a Taiwanese company...

        But once they had it figured out it would be doable to set up multiple smaller factories, so US iPhones could be "made in America" and Indian iPhones could be made there, etc.

  12. JWLong
    Alert

    Tat Shat

    Both countries governments are loving this shit because all it's doing is raising the cost of imports on both shores, and those added costs are going into the governments coffers. Just more money for both to waste.

    If DumpTrump wanted to hurt China all he would have to do is stop the exports of all paper/wood products to China. These are low value exports, and we supply over 90% of them to the zipperheads.

    Can you imagine CrApple screaming and crying about they can't sell their over priced shit in a south American paper product box "because it's lower quality".

    Chinese toilet paper isn't worth wiping your ass with, let alone their cardboard and other paper products are typical Chinese garbage that only the cheapest of suppliers use.

  13. GrapeBunch Bronze badge
    Coat

    The King of Damage is as Important as the Almond of Damage

    Apple could be in for colorectal damage. In the palace, that's right next to the Doge's bullocks.

    Mine's the one with the atholetic protector.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019