The recent surge in US tariffs on imports from China and Vietnam has placed significant pressure on major electronics companies like Apple, potentially leading to increased prices for consumers, particularly for the iPhone. With import tariffs set at 54% for goods from China and 26% for those from India, Apple’s global supply chain is directly impacted, as the majority of iPhones are still assembled in China.
Cost to Make iPhones
According to a report from The Wall Street Journal, utilizing data from iFixit and TechInsights, the estimated cost for Apple to produce a 256 GB iPhone 16 Pro is around $580, which includes both parts and assembly. The most costly components are the rear camera system ($126.95), the A18 Pro chip ($90.85), and the display ($37.97). With the new 54% tariff in place, Apple’s production cost could rise to approximately $847, marking a $267 increase, not accounting for profit margins.
Surge in Retail Prices?
Currently, Apple retails the 256 GB iPhone 16 Pro in the US for $1,100. While the tariff applies to manufacturing costs rather than retail prices, an increase in internal expenses can squeeze profit margins. Historically, Apple has managed to absorb minor tariff hikes, such as the previous 10% duty, without raising prices. However, given that the new tariff is over five times greater, it is unlikely that Apple will shoulder the entire burden.
If Apple opts to absorb half of the increased costs, the retail price could still exceed $1,230.
How Apple is Responding
In anticipation of these changes, Apple has been building up its inventory in the US, aiming to postpone price increases until at least the launch of the iPhone 17 in September. The company is also accelerating its production shift to India and expanding its operations in Brazil. Nevertheless, with the majority of iPhones still being produced in China, Apple remains significantly exposed to tariffs.
In summary, the era of stable iPhone prices in the US may soon come to an end, with the upcoming iPhone 17 likely to be the first model to reflect this new economic landscape.
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