SAN FRANCISCO: Apple says it could lose $900 million this quarter because of US trade tariffs announced by US President Donald Trump, although the tech giant reported first-quarter profit above expectations on Thursday.
The tech giant warned that the rising costs are linked to shifting its iPhone production from China to India. Chief executive Tim Cook said most iPhones sold in the US will soon be made in India, but the move comes with higher expenses due to trade tensions.
Cook said on an earnings call that he expected “a majority of iPhones sold in the US will have India as their country of origin,” adding that Apple’s products were exempt from Trump’s most severe reciprocal tariffs for now.
“We are not able to precisely estimate the impact of tariffs, as we are uncertain of potential future actions prior to the end of the quarter,” Cook said.
“Assuming the current global tariff rates, policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add $900 million to our costs.”
Tit-for-tat exchanges have seen hefty US levies imposed on China, with Beijing setting retaliatory barriers on US imports.
High-end tech goods such as smartphones, semiconductors and computers received a temporary reprieve from US tariffs.
“Apple proactively built up inventory ahead of anticipated tariff policies,” said Canalys research manager Le Xuan Chiew. “With ongoing fluctuations in reciprocal tariff policies, Apple is likely to further shift US-bound production to India to reduce exposure to future risks.”
While iPhones produced in mainland China still account for the majority of US shipments, production in India ramped up toward the end of the quarter, according to Canalys.
Cook said Vietnam would be the country of origin for almost all iPad, Mac, Apple Watch and AirPod products sold in the US.
China will continue to be where most Apple products are made for sale outside the US, he insisted.
Apple’s revenue of $95.4 billion in the recently ended quarter was driven by iPhone sales, with the company taking in $17 billion in the China market, according to the earnings report. Profit for the quarter was $24.8 billion.
Apple shares slipped more than 3 percent in after-market trading.
“The real story is in Tim Cook’s plans to navigate these unprecedented trade challenges,” said Emarketer analyst Jacob Bourne.
Apple’s plan to shift manufacturing to India “raises pressing questions about execution timeline, capacity limitations, and potentially unavoidable cost increases that will shrink margins, be passed to consumers, or have a mix of consequences,” Bourne added.
