Apple ‘Mulls’ iPhone Price Rises – Without Citing Tariffs

Apple is considering price increases for its autumn iPhone range, but is determined to avoid any appearance of relating the increases to US tariffs on Chinese imports, instead potentially attributing them to new features and design changes, the Wall Street Journal reported.

Most Apple products are assembled in China and some US levies remain on imports from the country, even after China and the US agreed to pause further “reciprocal” tariffs on Monday.

The White House is to lower “reciprocal” tariffs on Chinese imports from 125 percent to 10 percent for 90 days under the agreement.

Tariffs

The administration earlier said smartphones and some other electronics would be exempted from those tariffs.

But there remains a separate 20 percent tariff imposed earlier this year that the White House said was punishment for China’s role in the fentanyl trade, and this levy covers smartphones.

In response to the levies Apple chief executive Tim Cook has shifted production of iPhones destined for the US to India, saying earlier this month that the majority of iPhones shipped to the US in the April to June quarter would be produced in India.

But Chinese factories will continue to produce Apple’s most profitable, high-end handsets, such as the Pro and Pro Max models, the Journal reported, citing unnamed sources.

Indian factories can produce Pro models, but the country’s infrastructure and technical capabilities can’t yet support the same scale as China, the report said.

Apple sold around 36 million to 39 million Pro or Pro Max iPhones in the US last year, out of a total of about 65 million devices in the country, according to figures from investment bank Jeffries.

Apple would find it difficult to make up for ongoing China tariff costs by seeking savings from suppliers, meaning a threat to its profit margins unless it raises prices, the Journal report said.

Rising costs

Cook has said Apple expects current tariff policies to lead to $900 million (£683m) in additional costs this quarter, with costs continuing to rise.

Apple is considering moving production to the US but this is expected to take years, according to previous reports.

People involved in supply-chain planning believe tariff costs on Chinese goods will ultimately be higher than on those form India and Vietnam, Apple’s two other main production bases, the Journal reported.

The White House accused Amazon of engaging in a hostile political act after its low-cost Haul unit was reported to be considering listing extra fees due to US tariffs.

A similar policy had already been implemented by some other e-commerce sites such as Alibaba’s AliExpress.