Apple CEO Tim Cook ought to be respiratory a sigh of reduction.
The White House on Wednesday ratcheted tariffs on Indian imports up by a further 25%, elevating the whole levies on one of many United States’ most important buying and selling companions to 50% after they kick in later this month.
But smartphones are exempt from President Donald Trump’s new levies on India, marking a essential win for the tech big because it approaches its most necessary time of the 12 months: its annual September iPhone launch adopted by the vacation season. Apple may even dodge incoming new tariffs on semiconductors, because it’s dedicated to constructing iPhone elements in the United States, Trump mentioned Wednesday.
That’s to not say tariffs received’t harm; CEO Tim Cook mentioned tariffs will seemingly value the corporate $1.1 billion this quarter. But analysts say Apple has bigger concerns, comparable to its future product technique and method to synthetic intelligence, a burgeoning area that the tech behemoth is perceived to be behind in.
Under totally different circumstances, such excessive tariffs might have spelled bother for Apple. The iPhone is Apple’s most necessary product, making up nearly all of its income. Most iPhones offered in America come from India. And the Americas, which incorporates the United States, is Apple’s largest market.
“In terms of the longer-term issues, more than a year out, I would say tariffs are probably 20% of it,” mentioned Gene Munster, managing accomplice at Deepwater Asset Management, who has lined Apple for many years. “I think what’s going on the regulatory environments (is) probably 25%, and 55 is related to how they’re going to capitalize on AI.”
Tariffs are a problem for Apple, however one which analysts appear assured the corporate can handle. A mix of Apple’s diversified provide chain – which it partially shifted to areas like India and Vietnam round 5 years in the past to scale back reliance on China throughout COVID – together with its excessive margins and Cook’s operations experience put the corporate in a robust place.
Supply chain resilience is “supposed to allow you to adjust tactically to any major changes that comes unexpected,” mentioned Runar Bjørhovde, a analysis analyst for market analysis agency Canalys.
That held true even earlier than Apple dedicated to investing a further $100 billion in the United States to fabricate iPhone elements domestically on Wednesday.
While strikes like these don’t straight influence tariff coverage, they do seemingly assist Apple curry favor with the administration, particularly as Trump has pressed Apple to construct its iPhones domestically.
“Look, he’s not making this kind of an investment anywhere in the world, not even close,” Trump mentioned. “He’s coming back. I mean, Apple is coming back to America.”
Some analysts already anticipated that the iPhone could be exempt from the upcoming levies on India forward of Wednesday’s tariff announcement. But the back-and-forth tariff insurance policies, which have modified a number of instances all year long, make it difficult to foretell what might occur in the long run.
“Because (smartphones are) such an important category, the relationship that Apple has with both administrations, and specifically, even the US administration, we do think that they will be able to maneuver against this threat,” mentioned Nabila Popal, senior director with the International Data Corporation’s knowledge and analytics group. “But it is important, of course. It does present a risk.”
That mentioned, analysts largely consider India and China are Apple’s solely two choices for producing US-bound iPhones at scale. And since iPhone fashions out there in the United States don’t exactly match these offered elsewhere, Apple can’t just redirect iPhones supposed for various markets. New iPhones offered in America, for instance, don’t have bodily SIM card slots anymore, and so they help millimeter wave 5G, the form of connection that gives quicker, low-latency speeds however normally solely at a quick distance.
“It’s a massive tactical nightmare to deal with,” mentioned Bjørhovde. “Because you have to try and find a sweet spot and figure out what comes next.”
Cook mentioned iPhones will proceed to be assembled exterior of the United States for “a while” throughout an occasion on the Oval Office saying the brand new $100 billion funding on Wednesday. But he pointed to the corporate’s technique of as an alternative producing iPhone elements stateside.
“Well, if you look at the bulk of it, we’re doing a lot of the semiconductors here, we’re doing the glass here, we’re doing the Face ID module here, and so there’s a ton of it, and we’re doing these for products sold elsewhere in the world,” Cook mentioned. “And so there’s a lot of content in there from United States.”
The narrative that Apple is behind in AI has been looming over the corporate all 12 months – and a few analysts see it as a more difficult challenge to beat than tariffs. Apple delayed a high-profile improve to its Siri assistant that may have enabled it to offer extra personalised solutions and act throughout apps, bringing it up to the mark with the agent-like capabilities that Google and OpenAI are pursuing with their digital helpers.
And the corporate’s rivals are nonetheless utilizing that setback as ammunition to advertise their very own merchandise over Apple’s. Just this week, Google posted an ad for its upcoming Pixel 10 cellphone that mentioned: “If you buy a new phone because of a feature that’s coming soon, but it’s been coming soon for a full year, you could change your definition of soon.” Apple’s preliminary batch of AI options additionally didn’t launch in time for the iPhone 16’s arrival final September.
At the identical time, a lot of Apple’s friends are seeing booming returns from their AI investments. Nvidia (NVDA) and Microsoft (MSFT) each hit $4 trillion in market capitalization in July, a milestone Wall Street beforehand thought Apple (AAPL) may attain first.
That’s partially due to their basically totally different merchandise and enterprise fashions. Apple is a shopper {hardware} firm. In distinction, Microsoft, Meta (META) and Nvidia additionally present the instruments that companies depend on to help AI-powered companies and options, like cloud computing, chips and AI fashions.
Still, Apple noticed stellar earnings results for the June quarter, surpassing expectations for iPhone gross sales – together with in China – and total income.
But throughout Apple’s earnings name, analysts pressed Cook about his perspective on AI and what it means for the corporate’s merchandise. Those questions ranged from whether or not AI companies is perhaps consuming into search engine utilization, whether or not the forthcoming Siri improve might drive future new merchandise and whether or not Apple would take into account buying AI firms to additional its product roadmap.
“Taking a step back, we see AI as one of the most profound technologies of our lifetime,” Cook mentioned in his opening remarks through the earnings name. “We are embedding it across our devices and platforms and across the company. We are also significantly growing our investments.”
But Apple can’t danger falling too far behind relating to the iPhone’s AI capabilities. By doing so, it might create a chance for Samsung, Google and Qualcomm – the three of which dominate the Android cellphone house – to drag forward, says Ted Mortonson, managing director and expertise sector strategist at monetary companies firm Baird.
“What’s more important with investors is, after the iPhone 17, what do they really do?” he mentioned. “I mean, as far as generative AI and AI functionality, that that’s the real focus on Apple right now.”