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Apple will find it increasingly difficult to fully manufacture iPhones in America, believes Bank of America. In a fresh analyst note released today, BofA outlines that Apple can most likely assemble its iPhones in America, but the smartphone’s supply chain complexity means that the smartphone’s sub-assemblies will likely have to be imported into the US. Apple will take years to develop a domestic iPhone supply chain, says BofA, as it keeps a $250 price target for Apple and a Buy rating for the firm.
Apple Unlikely To Shift iPhone Manufacturing To US, Says Bank of America
Apple’s shares underwent a bloodbath yesterday after the White House confirmed that the US would levy 104% tariffs on Chinese imports starting today. While the shares stabilized immediately after the White House’s confirmation, they reversed course yet again and ended up closing the day after losing nearly 5%. The drop also forced Apple to lose its crown as the world’s most valuable company and give out the title to software giant Microsoft.
Apple’s stock ended lower as investors factored in the hit to its US market share for smartphones since the iPhone is primarily manufactured in China. Following yesterday’s drop, BofA is out with a fresh investor note analyzing the odds of Apple shifting iPhone production to the US. The bank keeps its $250 price target and a Buy rating for the shares, adding that a complete shift to the US is unlikely and will likely take years due to the complexity of the iPhone supply chain.
BofA shares that while Apple will find it easy to recruit labor to manufacture iPhones in the US, it will find it difficult to manufacture the phone’s sub-assemblies here. The iPhone is made of various components, such as its camera module and logic boards. These components are sourced from firms worldwide as part of a highly complex supply chain that converges in China.
As a result, BofA believes “a significant portion of the sub-assemblies would still be manufactured elsewhere, assembled in China, and imported to the U.S.” It adds that “moving the entire iPhone supply chain would be a much bigger undertaking and would likely take many years, if even possible.”
However, the bank maintains its price target and rating on Apple’s shares due to stable cash flows and the potential to introduce edge AI use cases through the iPhone. BofA also maps out impacts on the iPhone’s price in case Apple shifts production to the US. It speculates that without tariffs but with higher US labor costs, the price could rise by 25% while if Apple was impact by reciprocal tariffs, then it go increase by more than than 90%.
As a result, BofA concludes that Apple “would need tariff waivers on components/sub-assemblies manufactured globally to make the manufacturing shifts viable.” It adds that since Apple’s plans are formed for the long term, it doesn’t”expect Apple to take the step of moving manufacturing into the U.S.”
Source: wccftech.com
