Days after Google indicated it would comply with the US government’s intended ban on Chinese technology company Huawei, economists have predicted Apple could be hit the hardest if an all-out trade war proceeds.
Goldman Sachs is estimating that Apple’s total profits could take a 30 per cent hit if China was to place a ban on the American tech giant in retaliation to Donald Trump’s latest trade tariffs.
In a note to clients, Goldman Sachs analyst warned that any serious action from China could have dire consequences for Apple.
“Should China restrict iPhone production in any way we do not believe the company would be able to shift much iPhone volume outside of China on short notice,” Hall said.
“We believe that Apple is near its annual rapid ramp of new iPhone production to prepare for new device launches in the Fall so even a short term action affecting production could have longer term consequences for the company.”
The Chinese market now making up 17 per cent of Apple’s global sales and 29 per cent of profits due to the sale of high-margin products.
Hall made no clear judgement on the likelihood of Apple actually being banned in China, rather he spoke of ” the possibility of a ban on Apple’s products there in retaliation for the US licence requirements for Huawei that were announced last Friday”.
And the fracturing relationship between China and the US could harm Apple beyond sales.
Apple disclosed last year that Chinese makers now account for 13.5 per cent of the company’s total suppliers.
Hall suggested Apple would be forced to scramble if restrictions were to be put in place.
“Should China restrict iPhone production in any way we do not believe the company would be able to shift much iPhone volume outside of China on short notice, though actions that would push Apple production outside of China could have negative implications for the China tech ecosystem as well as for local employment,” he said.
China has been a sore point for Apple of late, with locals turning away from the iPhone in favour of other options.
Speaking in January, Apple CEO Tim Cook (pictured) said that tensions between China and the US were hurting sales.