Apple could take a 29% earnings bite if China threatened retaliatory ban

Posted:
in AAPL Investors
Though there's no sign of such action on the horizon, a Chinese ban on Apple business would decimate the company, knocking 29% percent off earnings, according to a Goldman Sachs analyst.

iPhone XS Max


That's factoring in savings on sales and marketing, Rod Hall said in a Wednesday investor memo. Goldman Sachs is lowering its stock price target for Apple from $184 to $178, making it one of the more pessimistic Wall Street firms.

Hall did note that several of the iPhone's core parts come from outside mainland China. Intel's 4G iPhone modems are reportedly made in the U.S., while Taiwan's TSMC manufactures A-series processors, and firms like Samsung and LG are responsible for screen components. The issue however is that much of Apple's supply chain is still based in China, and it would be hard to shift manufacturing elsewhere in time to avoid a serious financial blow -- even putting aside the matter of local sales.

Assembly partners Foxconn and Pegatron are working on expanding Indian production, and could potentially move into countries like Vietnam. India would likely be Apple's best bet for replacing China given not just an existing footprint, but government incentives, the size of its market and workforce, and a democratic government less prone to censorship and spying.

The fears stoked by Goldman Sachs derive from the White House's recent actions against Huawei. Last week the Trump administration leveled a dual attack, blocking Huawei from acquiring American technology while simultaneously preventing American telecoms firms from using Huawei equipment. That immediately jeopardized its status as a smartphone giant, since several of its suppliers are American and Google decided to suspend the company's Android license. The administration temporarily eased off on Monday.

While Apple is a minor player in the Chinese smartphone market, the sheer size of the country currently makes its revenues vital. In the March quarter alone Apple reaped $10.22 billion there, the bulk of that from iPhones even though shipments have declined.

Comments

  • Reply 1 of 18
    JFC_PAJFC_PA Posts: 323member
    While the head of Huawei says good things about Apple....
  • Reply 2 of 18
    KuyangkohKuyangkoh Posts: 328member
    JFC_PA said:
    While the head of Huawei says good things about Apple....
    Not only that, they also used Apple products....remember that exec lady who was arrested in canada? She have ipad, macbook and iphone. Chinese loved high end products that they copy them every inch
    racerhomie3
  • Reply 3 of 18
    JFC_PAJFC_PA Posts: 323member
    Kuyangkoh said:
    JFC_PA said:
    While the head of Huawei says good things about Apple....
    Not only that, they also used Apple products....remember that exec lady who was arrested in canada? She have ipad, macbook and iphone. Chinese loved high end products that they copy them every inch
    He readily admits that in a Chinese media interview. 

    “As America wages war on his company, Huawei CEO Ren Zhengfei has made an unlikely intervention in support of one of his biggest rivals. In an interview with Chinese state TV on Tuesday, Ren confirmed he is a fan of Apple. 

    "iPhone has a good ecosystem and when my family are abroad, I still buy them iPhones, so one can't narrowly think love for Huawei should mean loving Huawei phones," Ren said, according to The South China Morning Post.

    gatorguy
  • Reply 4 of 18
    crfcomcrfcom Posts: 13member
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    hmurchisonJWSC
  • Reply 5 of 18
    The point for me is Huawei has been caught spying for China (actually caught). Not just by the United States, but several countries on this side of the ocean. The States were not the first to catch them. To me that is the biggest problem. 
  • Reply 6 of 18
    DAalsethDAalseth Posts: 620member
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    macplusplusjony0
  • Reply 7 of 18
    maestro64maestro64 Posts: 4,564member
    JFC_PA said:
    While the head of Huawei says good things about Apple....
    As the US turns off supply of parts to Huawei from US companies. China could hurt Apple, which in turns hurts Foxconn which in turn hurts lots of other Chinese companies and the people who work for them. Huawei can not pick up the void left by going after Apple since Huawei is unable to produce a phones and other products, which hurts other Chinese companies and all the workers who work for them. This is what happens when China does not play nice, but they do not care if they hurt the people in their country, they do not vote and people are depending on the government for everything. 

    Wait we have people in the US running for president who are saying the Government should supply everything to everyone. 
  • Reply 8 of 18
    maestro64maestro64 Posts: 4,564member
    DAalseth said:
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    One slight correcting, they are not Chinese products they are US company products made in China. Yes Chinese products like TCL TV which are truly a Chinese company product are showing up in the US. Most of what we buy in the US is actually made elsewhere for US or Multi-national companies. Very few Chinese companies are selling products in the US. 

    Keep in mind the US is the largest consumer market in the world, China needs products sourced on China in order to grow they will not see the growth elsewhere.

  • Reply 9 of 18
    DAalsethDAalseth Posts: 620member
    maestro64 said:
    DAalseth said:
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    One slight correcting, they are not Chinese products they are US company products made in China. Yes Chinese products like TCL TV which are truly a Chinese company product are showing up in the US. Most of what we buy in the US is actually made elsewhere for US or Multi-national companies. Very few Chinese companies are selling products in the US. 

    Keep in mind the US is the largest consumer market in the world, China needs products sourced on China in order to grow they will not see the growth elsewhere.

    Very true. China makes things for companies in the US and all over the world. 
    However the US, while is the largest consumer market now, likely won't be for long, 
    https://asia.nikkei.com/Economy/China-to-surpass-US-as-world-s-biggest-consumer-market-this-year
    And even then, it comprises only something like 20% of the world market. China is pushing very hard to gain ground in the other 80%. This will replace the falling US share. In the long run, China won't need the US.
    macplusplus
  • Reply 10 of 18
    bushnycbushnyc Posts: 1unconfirmed, member
    The bright side is that Apple lost their main new competition for mid price phones. Huawei will, with the absence of Google android and forbidding their sale in US and Europe, be shut out of this market. Huawei has evolved many of the best iphone features at $400 to $500. less. This eliminates a real marketshare threat and will increase sales in the west. A real plus for investors.
  • Reply 11 of 18
    dewmedewme Posts: 2,065member
    DAalseth said:
    maestro64 said:
    DAalseth said:
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    One slight correcting, they are not Chinese products they are US company products made in China. Yes Chinese products like TCL TV which are truly a Chinese company product are showing up in the US. Most of what we buy in the US is actually made elsewhere for US or Multi-national companies. Very few Chinese companies are selling products in the US. 

    Keep in mind the US is the largest consumer market in the world, China needs products sourced on China in order to grow they will not see the growth elsewhere.

    Very true. China makes things for companies in the US and all over the world. 
    However the US, while is the largest consumer market now, likely won't be for long, 
    https://asia.nikkei.com/Economy/China-to-surpass-US-as-world-s-biggest-consumer-market-this-year
    And even then, it comprises only something like 20% of the world market. China is pushing very hard to gain ground in the other 80%. This will replace the falling US share. In the long run, China won't need the US.
    Glad to see a couple of folks brought up the reality of Chinese-sourced goods sold as US branded products. It's not just China either, it's Singapore, Malaysia, Viet Nam, the Philippines, and a host of other Asian countries that now serve as the manufacturing base for the global economy. The so called US-vs-China trade war is a proxy for what is really a rapidly spreading war between nationalism vs globalization. It's been going on for decades, and arguably centuries. It's always been fueled by one-sided incentives where the dominant economy wants to exploit the cheap resources of another economy so the dominator can sell their expensive shit to the rest of the world or internally at great profit. As soon as China started opening up its economy to trade with the US the very first cries you heard from big US manufacturers, e.g., mining, construction machinery, automotive, etc., was "why won't the Chinese buy our (expensive) shit?" Apparently the Chinese had the audacity to ask "What's in it for us?" How dare they. Since then the US and other first world economies have found creative ways to make the arrangement kind-of sort-of work by tapping into other Chinese resource like labor and manufacturing capacity (and even capability no longer available at-scale or low enough cost in the US) to reap massive profits. Those at the top of the food chain are seriously digging the cheap TVs, clothes, electronic gadgets, and most of what's sold in Walmart. The US manufacturers who couldn't cut mutually beneficial deals with China in the 1980s have largely dried up or shriveled to unrecognizably small proportions. Take a gander at the heavy equipment being used to scrape the earth for the new Foxconn factory in Wisconsin. I bet you won't see a whole lot of US made equipment. The Chinese flipped the script on us and we have little to show for it, other than the massive profits in the coffers of those who helped facilitate the whole deal. Good luck trying to turn back time. 
    DAalseth
  • Reply 12 of 18
    kenaustuskenaustus Posts: 904member
    While Apple was soaring and started paying dividends I was concerned about ensuring a large cash holding that could last through another Great Recession, allowing Apple to gain in strength instead of struggling.  Now it is not a great recession that is a concern, but the actions of the idiot in the White House.  Hopefully his rational advisors will reign him in before more damage is done in China.

    Right now I believe that it is time to slow dividends down in order to maintain operations at current levels. Basically we need to hold out until January 2021 when hopefully there will be a new President who can get to work rebuilding international relations,
  • Reply 13 of 18
    wonkothesanewonkothesane Posts: 1,364member
    The point for me is Huawei has been caught spying for China (actually caught). Not just by the United States, but several countries on this side of the ocean. The States were not the first to catch them. To me that is the biggest problem. 
    Could you please point to a source for Huawei actually being caught? I do not refer to the arrest in Poland, as that’s still an allegation. 
  • Reply 14 of 18
    acejax805acejax805 Posts: 74member
    Zero sympathy for Apple or any other American company doing business in China. You dance with the devil, you're bound to get burned. China is a communist country. They require all companies to share their IP in order to do business there. They subsidize products from Huawei, Oppo, ZTE, etc. while everyone else in China pays more for non-Chinese products. Apple, like other American companies, were blinded by opportunity and felt the benefits outweighed the risks. Sometimes I think I'm the only person in the US that actually paid attention in my Business 101 class when they spoke of business risks.
    edited May 22
  • Reply 15 of 18
    lkrupplkrupp Posts: 7,079member
    A China ban on Apple products would mean hundreds of thousands of Chinese workers being laid off. I don’t think they would go that route.
  • Reply 16 of 18
    JWSCJWSC Posts: 436member
    DAalseth said:
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    I don’t think he said that the U.S. would not be hurt.  The pain will be substantial.  But it will be even worse for China.  And they know that.
    crfcom
  • Reply 17 of 18
    JWSCJWSC Posts: 436member

    Apple has always been at risk by basing so much of their manufacturing in China.  There was a time when the conventional wisdom had it that China would grow out of its corruption, thievery and autocratic ways.  But membership in the WTO and adoption of market economics haven’t had the effect people thought they would.

    And so, Apple is in a tough spot that I have no doubt Tim Cook wishes the company were not in.  So far he has maintained a balance of good relations with political entities in both countries.  But forces he has no control over may upset that balance, and Apple could become an unfortunate casualty.

    Apple will have to diversify its manufacturing base more and more.  This is an expensive proposition as it is less efficient.  But putting so many eggs in the Chinese basket could have catastrophic consequences for its business if the trade war goes south.

    I don’t like trade wars.  They are generally lose/lose situations.  But something has to change with how China operates with the rest of the world.  If Tim has any influence with the Chinese leadership, now would be a good time to start bending ears.

    tmay
  • Reply 18 of 18
    crfcomcrfcom Posts: 13member
    DAalseth said:
    China won't issue an official ban. But you are already seeing "spontaneous" boycotts springing up. 
    Throughout this whole thing China has always tried to portray itself as the calm, upstanding, victim. 
    crfcom said:
     Part of the Chinese frustration is they realize the US has much less to lose and much more to gain from this situation than they do. Any electronics production jobs that are moved to India will be permanent losses for the Chinese and the sales losses for Huawei will also be permanent. China needs to settle up on the best terms they can, and then focus on their own internal problems, which are considerable.
    Could not disagree more. The US has a huge amount of things, right down to rare earth materials, and up to cheap consumer products like clothing that they only get from China. Walk into a Target, or Walmart, or any of the other common stores. They are full of Chinese products. Much of the US economy is based on selling Chinese products. China on the other hand can sell to anyone. They are pushing very hard to become dominant in SE Asia, Africa, central Asia, and more. Within a few years they won't need the US at all. 
    So, what's the problem? If they're so self-sufficient why all the hand-wringing? Walk away and dominate those key economies you list there like Africa and Asia. That they have no credibility anywhere politically or morally shouldn't matter, right? Just ask Tibet. Ask all the US manufacturers who have and are pulling out of China now and over the last 5 years due to extreme technology theft. Don't pretend it isn't happening b/c I worked for one of them. You wake up one day and find your own product, made in your own molds in China, for sale in your own market for half-price from some Chinese distributor you never heard of, and local and national Chinese law enforcement do nothing. Its kind of funny that you're such an apologist for them. You know what's really funny? Try to sell Chinese product to any Asian person in any of the larger Asian communities in the US like San Fransisco and Houston. Good luck with that. They want "Made in USA", or "Made in E.U."They appear to disagree with your assessment of the Chinese manufacturing machine. When you have as definitive  and universal an image as China does, there's a reason.
Sign In or Register to comment.