Apple is moving production of its high-end iPhones from China to India, where the tech giant's top manufacturer Foxconn is investing $356 million to expand its plant in Tamil Nadu. Upending its production line and heading 2,300 miles west from Longhua to the outskirts of Chennai is a risky play, yet necessary to avoid the fallout of President Donald Trump's trade war.
Trump said in November he could slap a 10% tariff on iPhones coming out of China "and people could stand that very easily," but he's got the wrong end of the stick if he thinks anyone but Apple's competitors support him there.
Just weeks before his remark, Apple had cut its plan to produce 70 million iPhone XRs by one-third. It then cut production orders early the next month for all three of its new iPhone models. Partly, this was because of competition from China. In July, Huawei passed Apple to become the world's No. 2 smartphone maker. But another issue is that consumers are simply growing tired of increasingly high prices, a problem CEO Tim Cook acknowledged as early as 2016.
"I recognize the prices are high,” he said. “We want to do things that lower that over time to the degree that we can, so we’re looking into a number of things.”
Little has changed since. The iPhone 7 debuted that year starting at $649, while the new 512GB iPhone XS Max starts at $1,449. Sure, the XS Max is a better phone, but even mid-tier models are going up in cost, with the "affordable" iPhone XR priced 7% percent more than last year's iPhone 8 and 15% more than the iPhone 7. And Cook is, still, aware of the problem.
In a January 2 letter to investors, he slashed guidance on first-quarter results from an initial projection of up to $93 billion down to $84 billion. Among other things, Cook blamed China's "economic deceleration" and customers replacing their iPhone batteries instead of buying new iPhones — Apple replaced 11 million batteries last year, up from the typical 1 or 2 million.
"Of course, there's no one reason why Apple's making less money," Raymond Wong wrote at Mashable. "But it mostly boils down to pricing ... Maybe Apple pushed its 'Apple tax' a bit too far this time around."
Last week, 38% of tech workers surveyed said they've been negatively affected by the September 11 decision to extend and expand the suspension of premium processing for H-1B visas, which let U.S. employers temporarily hire foreign workers in specialty occupations. This move, Partnerships OKcoin director Alex Feinberg told TechRepublic, is crushing U.S. innovation.
If you dig into some of the claims the United States has made against China with respect to IP infringement, you can expect the higher-ups in the United States government believe the Chinese government is placing Chinese nationals at American tech-firms to then steal some IP and relay it back to China. Now, if our government believes this to be the case, the most logical move for our government would then be to restrict the amount of H1-B visas that are available for nationals of certain jurisdictions."
He added, "If you can't bring in that rock-star engineer from Shanghai who you've been interviewing for the last six weeks, because you can't get him a visa, yeah, that can certainly put a damper on innovation."
All this is made worse by the fact that Trump has no idea the impact his trade war is having on Apple. On January 4, Trump took questions in the Rose Garden, where he was asked about the trade war's impact on the company, which had just issued its revenue warning two days before and subsequently seen its stock go down, and the rest of the market with it.
"Are you concerned about that?" Trump was asked.
"No, I’m not," he replied. "I mean, look, they’ve gone up a lot. You know, they’ve gone up hundreds of percent since I’m president. Apple was at a number that was incredible. And they’re going to be fine."
This, others have noted, just isn't true. Apple shares opened at $120.45 when Trump took office on January 20, 2017, and closed at $148.26 on the day he made this remark. That's an increase of 23%. For his statement to be true, we'd need at least 200%.
"Don’t forget," Trump added, "don’t forget this. Apple makes their product in China. I told Tim Cook, who’s a friend of mine, who I like a lot, 'Make your product in the United States. Build those big, beautiful plants that go on for miles, it seems, build those plants in the United States.' I like that even better. Apple makes its product in China. China is the biggest beneficiary of Apple, more than us, because they build their product mostly in China."
