As the trade war between the U.S. and China sees no signs of abating, investment banking firm Goldman Sachs says Apple’s earnings could take as much as a 29% hit if China decides to retaliate against well-known American companies like Apple. As Bloomberg reports:
Goldman believes Intel Corp.’s latest XMM modems for the iPhone are made in the U.S., while Apple’s A-series chips are made in Taiwan and memory and display components also originate from outside China. Most of the rest of the iPhone supply chain is in mainland China, and if China were to restrict iPhone production in any way, Goldman does not expect Apple would be able to move much volume outside the country on short notice.
Like many U.S. tech giants, Apple is increasingly reliant on overseas markets for growth, and the Chinese market is pretty much the most important overseas market for said growth. However, Goldman’s concern isn’t primarily about China banning Apple’s products in the country; it’s about Chinese companies being banned from supplying Apple with parts and manufacturing, which could hit Apple’s global bottom line–not just sales in China.
With Trump banning U.S. companies from supplying to Huawei (although that ban has been suspended for three months) and China knowing it can’t put tariffs on as many goods as the U.S. can, the country’s government may decide to hinder operations of the biggest American companies out there instead. If not an economic win, it would at least be a PR win as the optics would show that China can seriously impact the fortunes of the largest American tech companies if it so chooses.